SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13E-3
RULE 13e-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
WANDEL & GOLTERMANN TECHNOLOGIES, INC.
(Name of the Issuer)
<TABLE>
<CAPTION>
<S> <C>
WANDEL & GOLTERMANN TECHNOLOGIES, INC. WANDEL & GOLTERMANN MANAGEMENT HOLDING GmbH
(Name of Persons Filing Statement)
Common Stock, par value $0.01 per share
(Title of Class of Securities)
933692105
(CUSIP Number of Class of Securities)
(Name, Address and Telephone Number of Persons Authorized to Receive Notices
and Communications on Behalf of Persons Filing Statement.)
Gerry Chastelet Peter Wagner
President and Chief Executive Officer President and Chief Executive Officer
Wandel & Goltermann Technologies, Inc. Wandel & Goltermann
1030 Swabia Court Management Holding GmbH
Research Triangle Park, North Carolina 27709-3585 Arbachstrasse 6
(919) 941-5730 D-72800 Eningen, Federal
Republic of Germany
49-7121-86-1700
with copies to:
Barney Stewart, III, Esq. G. William Speer, Esq. Alan C. Leet, Esq.
Moore & Van Allen, PLLC Powell, Goldstein, Frazier & Rogers & Hardin
NationsBank Corporate Center Murphy LLP 2700 International Tower
100 North Tryon Street, Floor 47 16th Floor 229 Peachtree Street, N.E.
Charlotte, North Carolina 28202-4003 191 Peachtree Street, N.E. Atlanta, Georgia 30303
Atlanta, Georgia 30303
</TABLE>
This statement is filed in connection and with (check the appropriate
box):
a.[X] The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C, or Rule
13e-3(c) under the Securities Exchange Act of 1934.
b.[_] The filing of a registration statement under the Securities Act
of 1933.
c.[_] A tender offer.
d.[_] None of the above.
Check the following box if the soliciting materials are preliminary copies. [X]
CALCULATION OF FILING FEE
<PAGE>
===============================================================================
Transaction Value* Amount of Filing Fee
- -------------------------------------------------------------------------------
$31,848,526 $6,370
===============================================================================
[X] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting
fee was previously paid. Identify the previous filing by
registration statement number, or the form or schedule and the
date of its filing.
(1) Amount previously paid: $6,370
(2) Form or Registration No.: Preliminary Proxy Statement, Schedule 14A
(3) Filing party: Wandel & Goltermann Technologies, Inc.
(4) Date filed: June 1, 1998
--------------------------------------
* For purposes of calculating the fee only. Assumes purchase of 2,003,052
shares of Common Stock, par value $0.01 per share, of Wandel &
Goltermann Technologies, Inc., a North Carolina corporation ("WGTI"),
at $15.90 per share.
2
<PAGE>
This Rule 13e-3 Transaction Statement (the "Statement") is being filed
in connection with the filing by WGTI with the Securities and Exchange
Commission (the "Commission") on June 1, 1998 of the Preliminary Proxy Statement
on Schedule 14A (and any and all amendments thereto, the "Proxy Statement") in
connection with a special meeting of the shareholders of WGTI. At such meeting,
the shareholders of WGTI will vote upon, among other things, the adoption of an
Agreement and Plan of Merger dated as of March 28, 1998 (the "Merger
Agreement"), by and among WGTI, Wandel & Goltermann Management Holding GmbH, a
German limited liability company ("WG Holding"), and WG Merger Corp., a
newly-formed North Carolina corporation that is a wholly-owned subsidiary of WG
Holding ("WGMC"), pursuant to which WGMC will be merged with and into WGTI.
The following cross reference sheet is being supplied pursuant to
General Instruction F to Schedule 13E-3 and shows the location in the Proxy
Statement of the information required to be included in response to the items of
this Statement. The information in the Schedule 14A which is attached hereto as
Exhibit (d)(3), including all exhibits thereto, is hereby expressly incorporated
herein by reference and the responses to each item are qualified in their
entirety by the provisions of the Proxy Statement.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
<S> <C>
Item of
Schedule 13E-3 Caption or Location in Proxy Statement
- -------------- ---------------------------------------
Item 1. Issuer and Class of Security Subject to the Transaction.
(a) Outside Front Cover Page;
"Summary -- Parties to the Merger Transaction."
(b) Outside Front Cover Page;
"Summary -- Record Date and Quorum;"
"Summary -- Market Prices for Common Stock and
Dividends;"
"Special Factors -- Market Prices for Common Stock
and Dividends;"
"General Information about the Special
Meeting -- Record Date and Quorum Requirement."
(c) "Summary -- Market Prices for Common Stock and Dividends;"
"Special Factors -- Market Prices for Common Stock and Dividends."
(d) "Summary -- Market Prices for Common Stock and Dividends;"
"Special Factors -- Market Prices for Common Stock and Dividends."
(e) Not applicable.
(f) "Summary -- Purchases of Common Stock by the Company and
WG Holding;"
"Special Factors -- Purchases of Common Stock by
the Company and WG Holding."
Item 2. Identity and Background.
(a) - (b) "Summary -- Parties to the Merger Transaction."
(c) - (d) "Summary -- Parties to the Merger Transaction;"
"Business of the Company."
Item 3. Past Contacts, Transactions or Negotiations.
(a)(1) "Special Factors -- Certain Relationships."
(a)(2) "Special Factors -- Background of the Merger;"
3
<PAGE>
<CAPTION>
<S> <C>
"Special Factors -- Interests of Certain Persons in the Merger."
(b) "Summary -- Parties to the Merger Transaction;"
"Special Factors -- Background of the Merger;"
"Business of the Company."
Item 4. Terms of the Transaction.
(a) "Summary -- The Merger;"
"Summary -- Certain Effects of the Merger;"
"Summary -- Conditions to the Merger; Termination; Expenses;"
"Summary -- Rights of Dissenting Shareholders;"
"Summary -- Financing of the Merger;"
"The Merger;"
"Rights of Dissenting Shareholders."
(b) "Summary -- Purpose of the Special Meeting;"
"Summary -- Certain Effects of the Merger;"
"Summary -- Rights of Dissenting Shareholders;"
"Special Factors -- Interests of Certain Persons in the Merger;"
"The Merger;"
"Rights of Dissenting Shareholders;"
Appendix A to the Proxy Statement.
Item 5. Plans or Proposals of the Issuer or Affiliate.
(a) "Summary -- Parties to the Merger Transaction;"
"Special Factors -- Background of the Merger;"
"Special Factors -- Conduct of the Company's Business after the Merger."
(b) "Special Factors -- Conduct of the Company's Business after the Merger."
(c) "Special Factors -- Conduct of the Company's Business after the Merger;"
"Special Factors -- Interests of Certain Persons in the Merger."
(d) "Summary -- Financing of the Merger;"
"The Merger -- Source of Funds for the Merger."
(e) "Summary -- Certain Effects of the Merger;"
"Special Factors -- Certain Effects of the Merger."
(f)- (g) "Summary -- Certain Effects of the Merger;"
"Special Factors -- Certain Effects of the Merger."
Item 6. Sources and Amount of Funds or Other Consideration.
(a) "Summary -- Financing of the Merger;"
"The Merger -- Source of Funds for the Merger."
(b) "The Merger -- Expenses of the Transaction;"
4
<PAGE>
<CAPTION>
<S> <C>
(c) "Summary -- Financing of the Merger;"
"The Merger -- Source of Funds for the Merger;"
(d) Not applicable.
Item 7. Purpose(s), Alternatives, Reasons and Effects.
(a) - (c) "Summary -- Purpose and Reasons for the Merger;"
"Special Factors -- Background of the Merger;"
"Special Factors -- The Special Committee's and the Board's Recommendation;"
"Special Factors -- Purpose and Reasons for the Merger;"
"Special Factors -- Opinion of the Special Committee's Financial Advisor;"
"Special Factors -- Position of WG Holding as to Fairness of the Merger."
(d) "Summary -- The Merger;"
"Summary -- Purpose and Reasons for the Merger;"
"Summary -- Certain Effects of the Merger;"
"Summary -- Rights of Dissenting Shareholders;"
"Summary -- Federal Income Tax Consequences;"
"Summary -- Financing of the Merger;"
"Special Factors -- Background of the Merger;"
"Special Factors -- Purpose and Reasons for the Merger;"
"Special Factors -- Interests of Certain Persons in the Merger;"
"Special Factors -- Certain Effects of the Merger;"
"Special Factors -- Conduct of the Company's Business after the Merger;"
"The Merger -- Source of Funds for the Merger;"
"Rights of Dissenting Shareholders;"
"Federal Income Tax Consequences;"
"Certain Forward Looking Information."
Item 8. Fairness of the Transaction.
(a) - (b) "Summary -- The Special Committee's and the Board's Recommendation;"
"Summary -- Opinion of the Special Committee's Financial Advisor;"
"Summary -- Interest of Certain Persons in the Merger;"
"Special Factors -- Background of the Merger;"
"Special Factors -- The Special Committee's and the Board's Recommendation;"
"Special Factors -- Opinion of the Special Committee's Financial Advisor;"
"Special Factors -- Position of WG Holding as to Fairness of the Merger;"
"Special Factors -- Interests of Certain Persons in the Merger."
(c) "Summary -- Vote Required;"
"Special Factors -- The Special Committee's and the Board's Recommendation;"
"General Information about the Special Meeting -- Voting Procedures;"
"The Merger -- Conditions."
(d) "Summary -- The Special Committee's and the Board's Recommendation;"
"Summary -- Opinion of the Special Committee's Financial Advisor;"
"Special Factors -- Background of the Merger;"
"Special Factors --The Special Committee's and the Board's Recommendation;"
"Special Factors -- Opinion of the Special Committee's Financial Advisor;"
5
<PAGE>
<CAPTION>
<S> <C>
"Special Factors -- Interests of Certain Persons in the Merger."
(e) "Summary -- The Special Committee's and the Board's Recommendation;"
"Summary -- Interests of Certain Persons in the Merger;"
"Special Factors -- The Special Committee's and the Board's Recommendation;"
"Special Factors -- Interests of Certain Persons in the Merger."
(f) None.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
(a) - (b) "Summary -- Opinion of the Special Committee's Financial Advisor;"
"Special Factors -- Background of the Merger;"
"Special Factors -- The Special Committee's and the Board's Recommendation;"
"Special Factors -- Opinion of the Special Committee's Financial Advisor;"
"Special Factors -- Position of WG Holding as to Fairness of the Merger;"
Appendix B to the Proxy Statement.
(c) "Special Factors -- Background of the Merger;"
"Special Factors -- Position of WG Holding as to Fairness of the Merger."
Item 10. Interest in Securities of the Issuer.
(a) "Special Factors -- Interests of Certain Persons in the Merger;"
"Principal Shareholders and Stock Ownership of Management."
(b) None.
Item 11. Contracts, Arrangements or Understandings With Respect to the Issuer's Securities.
"Summary -- Vote Required;"
"Special Factors -- Interests of Certain Persons in the Merger;"
"General Information About the Special Meeting -- Proxy Solicitation;"
"General Information About the Special Meeting -- Voting and Revocation of Proxies;"
"The Merger -- Source of Funds for the Merger."
Item 12. Present Intention and Recommendation of Certain Persons With Regard to the Transaction.
(a) - (b) "Summary -- Vote Required;"
"Summary -- The Special Committee's and the Board's Recommendation;"
"Special Factors -- The Special Committee's and the Board's Recommendation;"
"Special Factors -- Position of WG Holding as to Fairness of the Merger."
Item 13. Other Provisions of the Transaction.
(a) "Summary -- Rights of Dissenting Shareholders;"
"Rights of Dissenting Shareholders;"
Appendix C to the Proxy Statement.
(b) - (c) Not applicable.
6
<PAGE>
<CAPTION>
<S> <C>
Item 14. Financial Information.
(a) Company's Financial Statements accompanying the Proxy Statement;
"Summary -- Summary of Selected Financial Data;"
"Selected Financial Data."
(b) Not applicable.
Item 15. Persons and Assets Employed, Retained or Utilized.
(a) "Special Factors -- Interests of Certain Parties in the Merger;"
"General Information about the Special Meeting -- Proxy Solicitation;"
"The Merger -- Expenses of the Transaction."
(b) Not applicable.
</TABLE>
Item 16. Additional Information.
The Proxy Statement and the Financial Statements and
Appendices attached thereto.
Item 17. Materials to be Filed as Exhibits.
(a) Loan Agreement between Wandel & Goltermann Management
Holding GmbH and a syndicate of banks of which
Commerzbank AG, Frankfurt, Germany serves as agent.
(b)(1) Investment Banking Presentation to the Special
Committee of the Board of Directors of Wandel &
Goltermann Technologies, Inc., dated March 28, 1998,
by The Robinson- Humphrey Company.
(b)(2) Opinion of The Robinson-Humphrey Company, LLC, dated
March 28, 1998 (included as Appendix B to the
Preliminary Proxy Statement, which is filed herewith
as Exhibit (d)(3)).
(b)(3) Discussion Materials Relative to Wandel & Goltermann
Technologies, Inc. dated December 23, 1997 by
Broadview Associates.
(b)(4) Discussion Materials: Valuation of Wandel & Goltermann
Technologies, Inc. dated March 11, 1998 by Broadview
Associates.
(c) Agreement and Plan of Merger by and among Wandel &
Goltermann Technologies, Inc., Wandel & Goltermann
Management Holding GmbH and WG Merger Corp., dated
March 28, 1998 (included as Appendix A to the
Preliminary Proxy Statement, which is filed herewith
as Exhibit (d)(3)).
(d)(1) Preliminary copy of Letter to Shareholders.
(d)(2) Preliminary copy of Notice of Special Meeting of
Shareholders.
(d)(3) Preliminary Proxy Statement.
(d)(4) Form of Proxy.
(e) Chapter 55, Article 13 of the General Statutes of
North Carolina (included as Appendix C to the
Preliminary Proxy Statement, which is filed herewith
as Exhibit (d)(3)).
(f) Not applicable.
Item 1. Issuer and Class of Security Subject to the Transaction.
7
<PAGE>
(a) The information set forth on the outside front cover page
to the Proxy Statement and in the section entitled "Summary -- Parties
to the Merger Transaction" of the Proxy Statement is incorporated
herein by reference.
(b) The information set forth on the outside front cover page
to the Proxy Statement and in the sections entitled "Summary -- Record
Date and Quorum," "-- Market Prices of Common Stock and Dividends,
"Special Factors -- Market Prices of Common Stock and Dividends" and
"General Information about the Special Meeting -- Record Date and
Quorum Requirement" of the Proxy Statement is incorporated herein by
reference.
(c) The information set forth in the sections entitled
"Summary -- Market Prices of Common Stock and Dividends" and "Special
Factors -- Market Prices of Common Stock and Dividends" of the Proxy
Statement is herein incorporated by reference.
(d) The information set forth in the sections entitled
"Summary -- Market Prices of Common Stock and Dividends" and "Special
Factors -- Market Prices of Common Stock and Dividends" of the Proxy
Statement is herein incorporated by reference.
(e) Not applicable.
(f) The information set forth in the sections entitled
"Summary -- Purchases of Common Stock by the Company and WG Holding"
and "Special Factors -- Purchases of Common Stock by the Company and WG
Holding" of the Proxy Statement is herein incorporated by reference.
Item 2. Identity and Background.
(a) - (b) This statement is being filed by WGTI and WG
Holding. The information set forth in the sections entitled "Summary --
Parties to the Merger Transaction" of the Proxy Statement is herein
incorporated by reference.
(c) - (d) The information set forth in the sections entitled
"Summary -- Parties to the Merger Transaction" and "Business of the
Company" of the Proxy Statement is incorporated herein by reference.
(e) - (f) None of WGTI, WG Holding or any of the directors and
executive officers of WGTI and WG Holding during the past five years
(i) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) was a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining further violations of, or
prohibiting activities subject to, federal or state securities laws or
finding any violation of such laws.
Item 3. Past Contacts, Transactions or Negotiations.
(a)(1) The information set forth in the section entitled
"Special Factors -- Certain Relationships" of the Proxy Statement is
incorporated herein by reference.
(a)(2) The information set forth in the sections entitled
"Special Factors -- Background of the Merger" and "-- Interests of
Certain Persons in the Merger" of the Proxy Statement is incorporated
herein by reference.
(b) The information set forth in the sections entitled
"Summary -- Parties to the Merger Transaction," "Special Factors --
Background of the Merger" and "Business of the Company" of the Proxy
Statement is incorporated herein by reference.
8
<PAGE>
Item 4. Terms of the Transaction.
(a) The information set forth in the sections entitled
"Summary -- The Merger," "-- Certain Effects of the Merger;" "--
Conditions to the Merger; Termination; Expenses," "-- Rights of
Dissenting Shareholders," "-- Financing of the Merger," "The Merger"
and "Rights of Dissenting Shareholders" of the Proxy Statement and in
Appendix A to the Proxy Statement is incorporated herein by reference.
(b) The information set forth in the sections entitled
"Summary -- Purpose of the Special Meeting," "-- Certain Effects of the
Merger," "-- Rights of Dissenting Shareholders," "Special Factors --
Interests of Certain Persons in the Merger," "The Merger" and "Rights
of Dissenting Shareholders" of the Proxy Statement is incorporated
herein by reference.
Item 5. Plans or Proposals of the Issuer or Affiliate.
(a) The information set forth in the sections entitled "
Summary -- Parties to the Merger Transaction," "Special Factors --
Background of the Merger" and "-- Conduct of the Company's Business
after the Merger" of the Proxy Statement is incorporated herein by
reference.
(b) The information set forth in the section entitled "Special
Factors -- Conduct of the Company's Business after the Merger" of the
Proxy Statement incorporated herein by reference.
(c) The information set forth in the sections entitled
"Special Factors -- Conduct of the Company's Business after the Merger"
and "-- Interests of Certain Persons in the Merger" of the Proxy
Statement is incorporated herein by reference.
(d) The information set forth in the sections entitled
"Summary -- Financing of the Merger" and "The Merger -- Source of Funds
for the Merger" of the Proxy Statement is incorporated herein by
reference.
(e) The information set forth in the sections entitled
"Summary -- Certain Effects of the Merger" and "Special Factors --
Certain Effects of the Merger" of the Proxy Statement is incorporated
herein by reference.
(f) - (g) The information set forth in the sections entitled
"Summary -- Certain Effects of the Merger" and "Special Factors --
Certain Effects of the Merger" of the Proxy Statement is incorporated
herein by reference.
Item 6. Source and Amount of Funds or Other Consideration.
(a) The information set forth in the sections entitled
"Summary -- Financing of the Merger" and "The Merger -- Source of Funds
for the Merger" of the Proxy Statement is incorporated herein by
reference.
(b) The information set forth in the section entitled "The
Merger -- Expenses of the Transaction" of the Proxy Statement is
incorporated herein by reference.
(c) The information set forth in the sections entitled
"Summary -- Financing of the Merger" and "The Merger -- Source of Funds
for the Merger" of the Proxy Statement is incorporated herein by
reference.
(d) Not applicable.
9
<PAGE>
Item 7. Purpose(s), Alternatives, Reasons and Effects.
(a) - (c) The information set forth in the sections entitled
"Summary -- Purpose and Reasons for the Merger," "Special Factors --
Background of the Merger," "-- The Special Committee's and the Board's
Recommendation," "-- Purpose and Reasons for the Merger," "-- Opinion
of the Special Committee's Financial Advisor" and "-- Position of WG
Holding as to Fairness of the Merger" of the Proxy Statement is
incorporated herein by reference.
(d) The information set forth in the sections entitled
"Summary -- The Merger," "-- Purpose and Reasons for the Merger," "--
Certain Effects of the Merger," "-- Rights of Dissenting Shareholders,"
"-- Federal Income Tax Consequences," "-- Financing of the Merger,"
"Special Factors -- Background of the Merger," "-- Purpose and Reasons
for the Merger," "-- Interests of Certain Persons in the Merger," "--
Certain Effects of the Merger," " -- Conduct of the Company's Business
after the Merger," "The Merger -- Source of Funds for the Merger,"
"Rights of Dissenting Shareholders," "Federal Income Tax Consequences"
and "Certain Forward Looking Information" of the Proxy Statement is
incorporated herein by reference.
Item 8. Fairness of the Transaction.
(a) - (b) The information set forth in the sections entitled
"Summary -- The Special Committee's and the Board's Recommendation,"
"-- Opinion of the Special Committee's Financial Advisor," "-- Interest
of Certain Persons in the Merger," "Special Factors -- Background of
the Merger," "-- The Special Committee's and the Board's
Recommendation," "-- Opinion of the Special Committee's Financial
Advisor," "-- Position of WG Holding as to Fairness of the Merger" and
"-- Interests of Certain Persons in the Merger" of the Proxy Statement
is incorporated hereby reference.
(c) The information set forth in the sections entitled
"Summary -- Vote Required," "Special Factors -- The Special Committee's
and the Board's Recommendation," "General Information about the Special
Meeting -- Voting Procedures" and "The Merger -- Conditions" of the
Proxy Statement is incorporated herein by reference.
(d) The information set forth in the sections entitled
"Summary -- The Special Committee's and the Board's Recommendation,"
"-- Opinion of the Special Committee's Financial Advisor," "Special
Factors -- Background of the Merger," "-- The Special Committee's and
the Board's Recommendation," "-- Opinion of the Special Committee's
Financial Advisor" and "-- Interests of Certain Persons in the Merger"
of the Proxy Statement is incorporated herein by reference.
(e) The information set forth in the sections entitled
"Summary -- The Special Committee's and the Board's Recommendation,"
"-- Interests of Certain Persons in the Merger," "Special Factors --
The Special Committee's and the Board's Recommendation" and "--
Interests of Certain Persons in the Merger" of the Proxy Statement is
incorporated herein by reference.
(f) None.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
(a) - (b) The information set forth in the sections entitled
"Summary -- Opinion of the Special Committee's Financial Advisor,"
"Special Factors -- Background of the Merger," "-- The Special
Committee's and the Board's Recommendation," "-- Opinion of the Special
Committee's Financial Advisor" and "-- Position of WG Holding as to
Fairness of the Merger" of the Proxy Statement and in Appendix B to the
Proxy Statement is incorporated herein by reference.
10
<PAGE>
(c) The information set forth in the sections "Special Factors
-- Background of the Merger" and "-- Position of WG Holding as to
Fairness of the Merger" of the Proxy Statement is incorporated herein
by reference.
Item 10. Interest in Securities of the Issuer.
(a) The information set forth in the sections entitled
"Special Factors -- Interests of Certain Persons in the Merger" and
"Principal Shareholders and Stock Ownership of Management" of the Proxy
Statement is incorporated herein by reference.
(b) None.
Item 11. Contracts, Arrangements or Understandings With Respect to the Issuer's
Securities.
The information set forth in the sections entitled "Summary --
Vote Required," "Special Factors -- Interests of Certain Persons in the
Merger," "General Information about the Special Meeting -- Proxy
Solicitation," "-- Voting and Revocation of Proxies" and "The Merger --
Source of Funds for the Merger" of the Proxy Statement is incorporated
herein by reference.
Item 12. Present Intention and Recommendation of Certain Persons With Regard to
the Transaction.
(a) - (b) The information set forth in the sections entitled
"Summary -- Vote Required," "--The Special Committee's and the Board's
Recommendation," "Special Factors -- The Special Committee's and the
Board's Recommendation" and "--Position of WG Holding as to Fairness of
the Merger" of the Proxy Statement is incorporated herein by reference.
Item 13. Other Provisions of the Transaction.
(a) The information set forth in the sections entitled
"Summary -- Rights of Dissenting Shareholders" and "Rights of
Dissenting Shareholders" of the Proxy Statement and in Appendix C to
the Proxy Statement is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
Item 14. Financial Information.
(a) The information set forth in the sections entitled
"Summary -- Selected Financial Data" and "Selected Financial Data" of
the Proxy Statement and in the Consolidated Financial Statements
included in the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1997 and the Unaudited Consolidated Financial
Statements included in the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 1997, which are incorporated by
reference in the Proxy Statement, is incorporated herein by reference.
(b) Not applicable.
Item 15. Persons and Assets Employed, Retained or Utilized.
11
<PAGE>
(a) The information set forth in the sections entitled
"Special Factors -- Interests of Certain Persons in the Merger,"
"General Information about the Special Meeting -- Proxy Solicitation,"
and "The Merger -- Expenses of the Transaction" of the Proxy Statement
is incorporated herein by reference.
(b) Not applicable.
Item 16. Additional Information.
The entirety of the Proxy Statement, including the Financial
Statements and Appendices attached thereto, is incorporated herein by
reference.
Item 17. Material to be Filed as Exhibits.
(a) Loan Agreement between Wandel & Goltermann Management
Holding GmbH and a syndicate of Banks of which Commerzbank AG,
Frankfurt, Germany, serves as agent.
(b)(1) Investment Banking Presentation to the Special
Committee of the Board of Directors of Wandel & Goltermann
Technologies, Inc., dated March 28, 1998, by The Robinson Humphrey
Company.
(b)(2) Opinion of The Robinson-Humphrey Company, LLC dated
March 28, 1998 (included as Appendix B to the Preliminary Proxy
Statement, which is filed herewith as Exhibit (d)(3)).
(b)(3) Discussion Materials Relative to Wandel & Goltermann
Technologies, Inc. dated December 23, 1997 by Broadview Associates.
(b)(4) Discussion Materials: Valuation of Wandel & Goltermann
Technologies, Inc. dated March 11, 1998 by Broadview Associates.
(c) Agreement and Plan of Merger by and among Wandel &
Goltermann Technologies, Inc. Wandel & Goltermann Management Holding
GmbH and WG Merger Corp., dated March 28, 1998 (included as Appendix A
to the Preliminary Proxy Statement, which is filed herewith as Exhibit
(d)(3)).
(d)(1) Preliminary copy of Letter to Shareholders.
(d)(2) Preliminary copy of Notice of Special Meeting of
Shareholders.
(d)(3) Preliminary Proxy Statement.
(d)(4) Form of Proxy.
(e) Chapter 55, Article 13 of the General Statutes of North
Carolina (included as Appendix C to the Preliminary Proxy Statement,
which is filed herewith as Exhibit (d)(3)).
(f) Not applicable.
12
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: June 1, 1998
WANDEL & GOLTERMANN TECHNOLOGIES, INC.
By: /s/ Gerry Chastelet
President and Chief Executive Officer
WANDEL & GOLTERMANN MANAGEMENT HOLDING GmbH
By: /s/ Peter Wagner
Managing Director
<PAGE>
SUMMARY OF LOAN AGREEMENT
FOR WANDEL & GOLTERMANN MANAGEMENT HOLDING GmbH
The following is a loan agreement between Commerzbank AG (Filiale
Reutlingen), Baden-Wurttembergische Bank AG (Filiale Reutlingen), Deutsche Bank
AG (Filiale Reutlingen), Kreissparkasse Reutlingen, Landesgirokasse Stuttgart,
Stuttgarter Bank AG and Wandel & Goltermann Management Holding GmbH ("WG
Holding"). This loan agreement sets forth the terms of the Existing Credit
Facility as described in the Preliminary Proxy Statement in the "The Merger -
Source of Funds for the Merger" section. The credit facility is in the total
amount of DM 170,000,000. Borrowings under the credit facility bear interest
at approximately 6% per annum and are due and payable (subject to certain
prepayment obligations) on December 31, 1999. Borrowings are secured by
substantially all WG Holding's assets located in Germany.
<PAGE>
[LOGO]
SICHERHEITEN-POOLVERTRAG
Zwischen
1. Commerzbank AG, Filiale Reutlingen
- nachstehend auch "Poolfuhrerin" genannt
2. Baden-Wurtlembergische Bank AG, Filiale Reutlingen
3. Deutsche Bank AG, Filiale Reutlingen
4. Kreissparkusse Reutlingen
5. Landesgirokasse Stuttgart
6. Stuttgarter Bank AG
- nachstehend insgasami "Banken" und jede von ihnen auch "Bank" genannt -
wird lolgende Vereinbarung getroffen:
ss. 1
Kredite
(1) Die Banken stehen mit den Firmen
Wandel & Goltermann Management Holding GmbH, Eningen - nachstehend
auch "Firma" oder "WGMH" genannt -
und
Wandel & Goltermann GmbH & Co. Elektronische MeBtechnik, Eningen -
nachstehend auch "Firma" oder "WGR" genannt -
- beide auch nachstehend "Firmen" genannt -
in Geschaftsverbindung und haben/werden beiden Firmen unter deren
gosamtschuldenerischer Haftung aber selbst jeweils unabhangig voneinander
auf der Grundlage ihrer jeweiligen Allgemeinen Geschaftsbedingungen die
nachstehend aufgefuhrten Barkreditlinien eingeraumVeinraumen:
Commerzbank DM 50.000.000,--
BW-Bank DM 30.000.000,--
Deutsche Bank DM 30.000.000,--
Kreissparkasse DM 10.000.000,--
Lendesgirokasse DM 25.000.000,--
Stuttgarter Bank DM 25.000.000,--
---------------------------------------
gesamt DM 170.000.000,--
Bei der vorstehend genannten Kreditlinie der Landesgirokasse handelt es
sich um einen Rahmenkredit. der - ausgehend vor, Ziffer 2. des den Banken
bekannten Schreibens der Landesgirokasse an die WGMH vom 08.07.1997 in zwei
Tranchen in Hohe von OM 16.000.000,-- und DM 7.000.000,-- zur Verfugung
gestellt wird. Fur die Durchfuhrung von Saldenausgleich (ss. 7) und
Erlosverteilung (ss. 8) - und nur insoweit - gelten als maBgebliche
Kreditlinie der Landesgirokasse die der Firma zum betreffenden Zeipunkt
bereits zur Verfugung stehenden Tranchen des Rahmenkredits.
-3-
<PAGE>
Die innerhalb des vorstehend aufgefuhrten Kreditrahmens ausgereichten
Kreditmittel sind ausschliaBlich zur Betriebsmittelfinanzlerung und nicht
fur Akqulsitionen - falls sie den cash flow des Vorjahres uberschreiten -
zu verwenden.
(2) Die vorstehend unter (1) aufgefuhrten Barkreditlinien konnen von den Firmen
auch als Aval-Diskont-. Akzept- und Eurokredite in Anspruch genommen
werden, Soweit die Kreditvereinbarungen dies vorsehen. Eine solche
Inanspruchnahme der Barkreditlinien durch Eurokredite kann auch mittels
Kredit-/Avalauftrag bei den auslandischen Filialen oder
Tochtergesellschaften der Banken bzw. bei anderen vermittelten Instituten
(nachstehend gemeinsam "vermittelte Kreditinstitute" genannt) erfolgen. Die
zwischen den Banken hinsichtlich der Poolsicherheiten getroffenen
Vereinbarungen sollen in diesen Fallen auch fur die vermittelten
Kreditinstitute mit der MaBgabe gelten. daB deren Rechte und Pflichten von
der jeweiligen Bank treuhandensch wahrgenommen werden.
Die vorstehend unter (1) aufgefuhrten Barkreditlinien konnen weiterhin auch
dadurch ausgenutzt werden, daB gegen Kredit./Avalauftrag der Firmen bei den
in- und auslandischen Filialen und Tochtegesellschaften der Banken
Abzweiglinien zu Gunsten von Konzemgesellschaften der Wandel &
Goltemann-Gruppe eingerichtet werden. Die Banken werdert sich uber ihre
Filialen/Tochlergesellschaften, bei denen solche Abzweiglnien eingerichtet
werden, um eine eigenstandige Absicherung ihrer Anspruche gegenuber den
WG-Konzemgesellschaften aus den jeweiligen ADzweiglinlen Bemohen. Soweit
eine solche Absicherung erfolgt, werden im Rahmen einer Eriosverteilung
gem. ss. 8 die der Jeweiligen Bank aus solchen Abzweiglinien gegenuber der
betreffenden WG-Konzemgesellschaft zustehenden Anspruche endgultig nur in.
Hohe des Ausfalls berucksichtigt, der nach Verwertung der von den
WG-Konzemgesellschaften gestellten Sicherhelten verbleit. Soweit ein
solcher Ausfall erst nach Durchfuhrung einer Ertosverteilung nach ss. 8
feststeht, ist gem. ss. 8 (S) zu verfahren.
(3) Die Firmen konnen uber Kreditlinier und Kredite - unter Beachtung der
Regelung in Ziffer (5) - selbstandig verfugen. Den Banken stehen die
Forderungen aus den von ihnen zugesagten Krediten allein und unmiittelbar
zu.
(4) Die Banken verpflichten sich untereinander, die Kreditlinien fur die Dauer
dieses Vertrages -aufrechtzuermalten und Reduzierungen oder Streichungen
nur in gegenseitigem Einvemehmen vorzunehman. Dies gilt nicht fur auBerhalb
des Pools gewahrye Kredite.
(5) Daneben steht die Commerzbank der WGR gemaB Kredilvertrag vom 24.03.1994
mit einem Tilgungsdarlehen uber ursprunglich DM 15.000.000,-- zur
Verfugung, das von der LAKRA Larideskreditbank Baden-Wurttemberg im Auftrag
des Landes Baden-Wurttemberg mit Erklarung vom 01.12.1993 in Hohe von
66.66% verburgt worden ist (Ausfallburgschaft). Es besteht Einigkeit
daruber, daB das von dieser Ausfallburgschaft nicht abgedeckte Kreditnsiko
in Hohe von 33.34% (entspricht ursprunglich DM 5.000.000,--) zwischen den
Banken wie folgt aufgeteilt wird:
Commerzbank 29.42% (entspr. ursprunglich DM 1.471.000,--)
BW-Bank 17.85% (entspr. ursprunglich DM 882.500,--)
Deutsche Bank 17.65% (entspr. ursprunglich DM 862.500,--)
Kreissparkasse 5.88% (entspr. ursprunglich DM 294.000,--)
Landesgirokasse 14.70% (entspr. ursprunglich DM 735.000,--)
Stuttgarter Bank 14.70% (entspr. ursprunglich DM 735.000,--)
========================================================================
100.00% (entspr. ursprunglich DM 5.000.000,--)
-3-
<PAGE>
Die ubrigen Banken verburgen sich hiermit im Auftrag der WGR gegenuber der
Commerzbank fur den nicht durch die LAKRA verburgten Teil der Anspruche der
Commerzbank gegenuber der WGR aus dem oben genannten Tilgungsdarlehen. Und
zwar jeweils in Hohe ihres vorstehend genannten Risikoanteils und unter
AusschluB der gesamtschuldnenschen Haftung. Diese Burgschaftsubernahm
erfolgen in Anrechnung auf die in ss. 1(1) aufgefuhrten Kreditlinien bei
der jeweiligen sich verburgenden Bank.
Die BurgschaftserkLarung vom 01.12.1993 nebst Zusageschreiben der LAKRA vom
01.02.1993 (einschileBlich der dortigen besonderen Burgschaftsbestimmungen)
sowie die Allgemeinen Bestimmungen fur Burgschaften des Landes
Baden-Wurttemberg sind allen Poolbanken bekkannt.
ss. 2
Sicherheften
(1) Die WGMH hat gleichranglg zugunsten der PooldQhrenin sowie jeder einzelnen
Bank die nachstehenden Sicherheiten bestellt bzw. wird die genannten
Sicherheiten unverzugrich bestellen:
a) Positiverklarung und auf besondere Anrolderung der PoolfQhrenin
Verprandung samtlicher Kommariditanteile an der Wandel & Goltermann
GmbH & Co. Elektronische MeBtechnik in Hohe von nominal DM
13.000.000,-- (entspricht 100%).
b) Positiverklarung und auf besondere Anforderung der PoolfQhrenin
Verptandung samtlicher Geschaftsanteille an der Wandel & Gollerrnann
CTS S. A. (Frankreich) in Hohe von nominal FRF 11.930.O0O,--
(entspricht 100%).
c) Bankenubliche Negativerklarung bezuglich samtlicher gegenwartig
gehattenen sowie aller kunftig noch zu erwerbenden weiteren
Geschaftsanteile an der Wandel & Goltermann Technologies Inc. (USA).
d) Positiverklarung und auf besondere Anforderung der Poolfuhrerin
Verplandung samtlicher Geschaftsanteile an der Wandel & Goltermann
Management Lid. (GroBbritannien) in Hohe von nominal GBP 3.000.000,--
(entspricht 100%).
e) Positiverklarung und auf besondere Anforderung der Poolfuhrerin
Verandung samtlicher Geschaltsanweile an der Wandel & Goltermann
Vertriebsholding GmbH in Hohe von nominal DM 50.000,-- (entspricht
100%).
f) Verpfandung der gegenwartig und kunftig gehaltenen Warenzeichen.
(2) Die WGMM hat der Poolfuhrerin nachtehande Sicherheiton beetellt bzw. wird
die genannten Sicherheiten unverzuglich bestellen:
a) Abtretung der Anspruche gegenuber den Lizenznehmarn aus Lizenzen. die
aufgrund der verpfandeten Warenzeichen (siehe vorstehend (1) 1))
erteilt wurden/werden.
(3) Die WGFI hat der Poolfuhrerin nachslohende Sicherheiten bestellt bzw. wird
die genannten Sicherheiten unverzuglich bestellen:
a) DM 30.000.000,-- Grundschulden auf diversen Anweseri in Eningen
(Grundbuch von Eningen. Heft 13, BV Nr. 3, 7, 9, 19, 22 und 30; Heft
4224, BV Nr. 2, 6-9; Heft 5334, BV Nr.1-3, 5, 6).
b) Abtretung dar Ruckgewahranspruche bezuglich vorrangiger Grundschulden.
-4-
<PAGE>
c) Sicherungsubereignung des gesamten Warenlagers einschlieBlich der
Roh-. Hilfs- und Betriebsstolfe gemaB Vertrag vom 28.04.1994.
d) Abtretung aller bestehenden und kunftigen Forderungen aus
Warenlieferungen und Leistungen gemaB Vortrag vom 24.08.1993.
e) Abtretung der Anspruche gegenuber den Lizenznehmern aus Lizenzen, die
aufgrund der verpfandeten Patente (siehe nachstehend (4) a)) ertellt
wurden/werden.
(4) Die WGR hat gleichrangig zugunsten der Poolfuhrerin sowie jeder einzelnen
Bank nachstehende Sicherheieten bestellt bzw. wird die genannten
Sicherheiten unverzglich bestellen:
a) Verpfandung der gegenwartig und kunftig gehaltenen in- und
auslandischen Patente.
(5) Ethalt eine Bank kunftig fur eine der in ss. 1 (1) aufgefuhrten
Kreditlinien weitere Sicherheiten, so besteht bereits jetzt Einigkeit, daB
diese in den Poolvertrag elnbezogen sind.
(6) Gewahrt eine Bank den Firmen Zusalzliche Kredite und erhalt sie hierfor
wehere Sicherheiten, so besteht bereits jetzt Einigkeit, daB diese in den
Poolvetrag einbezogen sind. Ein Verwertungserlos dient vorrangig zur
Rucktuhrung dieser zusatzlichen Kredite.
(7) WGMH und WGR verpflichten sich, Dritten erst nach Unterrichtung der Banken
Sicherheiten zu stellen. Dies gilt nicht fur branchenubliche verlangerte
Eigentumsvorbehalte von Lieferanten und die aufgrund der Allgemeinen
Geschaftsbedingungen der Kreditinstitute bestellten Pfand- und
Sicherungsrechle.
ss. 3
Sicherungszwack
(1) Die von der WGMH gestellten Sicherheiten gemaB ss. 2 (1) und (2) sowie
eventuelle weitere gemaB ss. 2 (5) und (6) in diesen Poolvertrag
einbezogene, von der WGMH gestellte Sicherheiten dienen zur Sicherung a11er
bestehenden, kunftigen und badingten Anspruche. die den Banken mit ihren
samtlichen in- und auslandischen Geschaftsstellen aus der jewelligen
bankmaBigen Geschafteverbindung sowie den vermittelten Kreditinstituten aus
der Gewahrung von Krediten gemaB ss. 1 (1, 2) gegen die Firmen zustehen,
sowie zur Sicherung der Anspruche, die der LAKRA aus der in ss. 1 (5)
erwahnten Ausfallburgschalt gegen die WGR zustehen.
(2) Die von der WGR gestellten Sicherheiten gemaB ss. 2 (3) a). b). c). d), e).
(4) a) sowie eventuelle weitere gemaB ss. 2 (5) und (6) in diesen
Poolvertrag. einbezogene von der WGR gestellte Sicherheiten dienen zur
gleichrangigen Sicherung aller bestehenden, kunftigen und bedingten
Anspruche, die
- den Banken aus den Kreditgewahrungen gemaB ss. 1 (1.2) gegen die
Firmen,
- der Poolfuhrerin aus dem Tilgungsdartehert gemaB ss. 1 (5) gegen die
WGR.
- der LAKRA aus der in ss. 1 (5) erwahntert Ausfallburgschalt gegen die
WGR,
- den ubrigen Banken aus deren SorgschaltsObernahmen gemaB ss. 1 (5)
gegen die WGR, zustehen.
(3) Die Sicherheiten gemaB ss. 2 (3) a). b). c). d). e), (4) a) dienen sodann
zur Sicherung aller bestehenden. kunhigen und bedingten Anspruche, die den
Banken aus Uberschreitungen der Kreditlinien gemaB ss. 1 (1) gegen die
Firmen sowie aus der sonstigen bankmaBigen Geschaftsverbindung gegen die
WGR zustehen.
-5-
<PAGE>
(4) Haben WGMH und/oder WGR die Haltung fur Verbindlichkeiten eines anderen
Kunden der jeweiligen Bank ubernommen (z. B. als Burge), so sichert die
jeweilige Sicherheit die aus der Haltungsobernahme folgende Schuld erst eb
deren Falligkeit und nur, wenn die WGMH und/oder WGR zugleich der
Sicherungsgeber ist.
ss. 4
Sicherheitenlrelgabe
(1) Nach Befriedigung ihrer gemaB ss. 3 gesicherten Anspruche haben die Banken
die in diesen Poolvertrag einbezogenen Sicherheiten an den jeweiligen
Sichenjngsgeber zuruckzuubertragen und einen etwaigen Cibererlos
herauszugeben, soweit die Sicherheiten nicht in Anspruch genommen worden
sind. Dies gilt nicht, wann die Barikeh verpilichtet sind,
Sicherheiten/Verwertungserlose an einen Dritten (z. B. einen Burgen, der
eine oder mehrere Banken befriedigt hat) zu ubertragen.
(2) Die Banken sind auf Verlangen schon vorher verpflichtet. Poolsicherheiten
ganz oder teilweise freizugeben, wenn und soweit der realisierbare Wert der
Poolsicherheiten 120% der gesicherten Anspruche der Banken nicht nur
vorubergehend ubersteigt. Der tealisierbare Wen der Sicherheiteri wird nach
den Regelungen der einzelnen Sicherungsvereinbarungen bestimmt: bei deren
Fehlen ergibt er sich aus der Art der jeweiligen Sicherheit.
(3) Die in den einzelnen Sicherungsvereinbaningen eruhattenen Abreden uber
Deckungsgrenzen und Freigabevorpflichtungen worden fur die Dauer dieses
Poolvertrages durch die voreiehenden Regelungen erganzt.
ss. 5
Treuhandverhaltnls/Sicherheitenverwaltung
(1) Die Poolfuhrerin wird die in diesen Vertrag einbezogenen Sicherheiten
zugleich treuhanderisch fur die ubrigen Banken verwalten und
erforderlichenfalls verwerten. Die in ss. 2 (1) a), b), c), d), e), f), (4)
a) als Poqtaicherheit genannten akresaorischen Rechte (Pfandrechte)
verwaltet und verwertet die Poolfuhrerln auch namens und im Auftrag der
Obrigen Banken. Die Poolfuhrerin ist neben den die Sicherheiten haltendsn
Banken berechtigt, aber nicht verpflichtet, alle sich aus den
Sicherungsvertragen ergebenen Konlrollund Verwallungsrechte im eigenen
Namen auszuuben. Die Freigabe oder Teilfreigabe von Sicherheiten bedarf der
Zustimmung der Banken. Im Rahmen einer Freigabeverpflichtung gem. ss. 4 (2)
ist diese Zustimmung nur fur die Auswahl der freizugebenden Sicherheiten
erforderlich.
(2) Die Poolfuhrerin wird auf Anforderung den anderen Banken Kopien der
Vertrage der von ihr gehaltenen Sicherheiten -zur eigenverantwortlichen
Prufung zusenden. Etwaige Einwendungen werden die anderen Banken
unverzugllch gegenuber der Poolluhrerin geltend machen, so daB eine
eirwernehmliche Regelung unter den Banken herbeigefuhrt werden kann. Soweit
Sicherheiten von einer anderen Bank als der Poolfuhrerin gehalten werden,
gilt die vorstehende Regelung entsprechend.
(3) Die Banken bevoflrn4chtigen die Poolfuhrerin. alle fur die Bestellung.
Verwaltung und Verwertung der Sicherheiten notwendigen Erklarungen auch
irrt eigenen Namen abzugeben und entgegenzunehmen sowie alle erforderlichen
oder zweckmaBigen Handlungen vorzunehmen. Die Poolfuhrerin wird fur alle
von ihr auf der Grundlage dieses Vertrages ergriffenen MaBnahmen von den
Beschrankungen des ss. 181 BGB befreit.
-6-
<PAGE>
(4) Die Poolfuhrerin bzw. jede eine Sicherheit hallende Sank wird nur mit
Zustimmung der anderen Sanken die Sicherheitenves-waltung auf einen anderen
Treuhander ubertragen Der jeweilige Teuhander ist von den Beschrankungen
des ss. 181 BGB freigestellt.
ss. 6
Verwertung
(1) Die Poolfuhrerin wird die in ss. 2 genannten Sicherheiten im eigenen Namen,
jedoch fur Rechnung der Banken verwerten. Soweit Sicherheiten nicht von der
Poolfuhrerin gehaiten werden, sind diese in Abstimmung mit der Poolfuhrerin
von der jeweils haltenden Bank fur Rechnung der ubvrigen Banken zu
verwerten.
(2) Uber die Frage, ob und wann Sicherhelten verwertet werden, entscheiden die
Banken im gegenseitigen Einvernehmen. In eiligert Falten entscheidet die
Poolfuhrerin hieruber allein nach eigenem pflichtgemaBen Ermessen; in
diesem Fall wird die Poolfuhrerin die anderen Banken uber die getroffenen
MaBnahmen unverzuglich unterrichten.
(3) Die Banken werden die in den einzelnen Sicherungsveitragen enthaltenen
Verwertungsvoraussetzungen beachten.
ss. 7
Saldenausgleich
(1) Die Firmen werden die Banken nach Moglichkeit im Verhaltnis der in ss. 1
(1) genannten Kreditlinien gleichmaBig in Anspruch nehmen.
(2) Die Banken verpflichten sich im unwiderruflichen Auftrag der Firmen
untereinander, fur den Verwertungsfall gern. ss. 6 ihre die Barkreditlinien
gem. ss. 1 (1) nicht ubersteigenden Kreditforderungen durch entsprechende
Ubertrage auf einen solchen Stand zu bringen, daB fur samtliche Banken eine
Kreditinanspruchnahme nach dem Verhaltnis der genannten Barkredittinien
entsteht. Die einzelnen Banken haben dabei eventuelle Guthaben auf nicht
zweckgebundenen Konten beider Firmen zunachst mit ihren Kreditforderungen
zu verrechnen, die sich im Rahmem der in ss. 1 (1) genannten
Barkreditlinien bewegen. Belastungen aus aufzunehmenden aus Lastschrift und
Scheckruckgaben werden im Rahmen des Saldenausgleichs den
berucksichigungslahigen Forderungen zugeschlagen. Dies gilt nicht, wenn uns
soweit hierdurch die in ss. 1 (1) aufgefuhrten Barkreditlinien
uberschritten werden.
(3) Sofern eine Barkreditlinie als Mischlinie eingeraumt ist, gelten dareuf
angerechnete Forderungen aus Wechseldiskontierungen nur insoweit als
inanspruchnahme, als ein Ausfall feststehr. Forderungen aus Akzept- und
Avalkrediten sowie aus eroffneten Akkreditiven werden nur als
inartspruchnahmen barucksichtigt. als hierauf von den Poolbanken Zahlungen
geleistet wurden.
(4) Stichtag fur den Saldenausgleich ist das Zustandekommen eines Beschlusses
uber die Einleitung von VenvertungsmaBnahmen gem. ss. 8 (2) Satz 1 bzw. in
Eilfalten der fruheste Zugang der Mitteilung der Poolfuhrerin uber die
Einleitung von VenvertungsmaBnahmen gem. ss. 8 (2) Satz 2 bei einer der
anderen Banken.
-7-
<PAGE>
(5) Wenn sich nach Durchfuhrung eines Saldenausgleichs dessen
Berechnungsgrund1agen andern (z.B. durch Verrechnung weiterer Guthaben oder
Zahlungen aus Avalen) sind die Salden erneut auszugleichen.
(6) Soweit der vorgenannte Saldenausgleich aus Rechtsgrunden nicht mit Wirkung
gegenuber den Firmen oder Dritten vorgenommen werden kann, sind die Banken
mit Innenverhaltnis zur Herbeifuhrung eines entsprechenden Ergebnisses
verpflichtet, wobei zum Beispiel unbeachtlich ist, welche der Firmen die
Kreditmittel unter ihrer gesamtschuldnerischen Haftung genommen hat.
ss. 8
Erlosvertailung
(1) Der Elos aus der Verwertung der von der WGMH gestellten Sicherheiten (ss. 2
(1), (2), (5), (6)) ist nach folgender Rangordnung zu verwanden:
a) zur Begleichung der Kosten, etwalger Steuern und sonstiger
Aufwendungen, die durch Verwaltung und Verwertung der Sicherheiten
entstehen, sowle des Entgelts der Poolfuhrerin (ss. 9);
b) zur Tilgung der Anspruche, die
- den Banken aus ihren Kreditgewahrungen gemaB ss. 1 (1,2) gegen
die Firmen,
- der Cammerzbank aus dem Tilgungsdarlehen gemaB ss. 1 (5) gegen
die WGA.
- der LAKRA aus der in ss. 1 (5) erwahnten Auslaflburgschatt gegen
die WGR,
- den ubrigen Banken aus deren Burgschaftsubernahmen gemaB ss. 1
(5) gegen die WER,
zustehen, und zwar gleichrangig im Verhaltnis der jeweiligen
Anspruche. Fur die Anspruche aus den Kreditgewahrungen gemaB ss. 1 (1,
2) ist dabei die Hohe der jeweiligen Kreditinanspruchnahrrten nach
Durchfuhrung des Saldenausgleichs gemaB ss. 7 maBgeblich, wobei nur
diejenigen Forderungen der Berechnung des Verteilungsschlussels
zugrunde zu legen sind, welche die in ss. 1 (1) genannten Kreditlinien
nicht uberschreiten.
c) zur Tilgung der Forderungen der Banken, deren Kreditlinien gemaB ss. 1
(1) ubenichritton sind, und zwar gleichrangig im Verhallnis der
Uberschreitungen:
d) zur Tilgung der Forderungen der Banken aus zusatzlich gewahrten
Krediten, und zwar gleichrangig im Verhaltnis der Inanspruchnahmen der
zusalzlichen Kredite, soweit sie nicht aus den Verwertungserlosen der
fur sie gesondert bestellten Sicherheiten (ss. 2 (6)) zuruckgefuhrt
sind:
e) zur Erfullung der sonstigen Anspruche der Banken gegenuber WGMK aus
der bankmaBigen Geschaltsverbindung, und zwer gleichrangig im
Verhaltnis der sonstigon Anspruche;
(2) Der Erlos aus der Verwertung der von der WGR gestellten Sicherheiten gemaB
ss. 2 (3) a), b), c), d), e), (4) a), (5), (6) ist nach folgender
Rangordnung zu verwenden:
a) zur Beglelchung der Kosten, etwaiger Steuern und sonstiger
Aufwendungen, die durch Verwaltung und Verwertung der Sicherheiten
entstehan, sowie des Entgelts der Poolfuhrerin (ss. 9):
-8-
<PAGE>
b) zur Tilgung der Anspruche, die
- den Banken aus ihren Kreditgewahrungen gemaB ss. 1 (1,2) gegen
die Firmen
- der Commerzbank aus dem Tilgungsdarlehen gemaB ss. 1 (5) gegen
die WGR,
- der LAKRA aus der in ss. 1 (5) erwahnten Austallburgschaft gegen
die WGB,
- den ubrigen Banken aus deren Burgschsftsubemahrnen gemaB ss. 1
(5) gegen die WGR.
zustehen, und zwar gleichrangig im Verhaltnis der jeweiligen
Anspruche. Fur die Anspruche aus den Kreditgewahrurtgen gemaB ss. 1
(1, 2) ist dabei die Hohe der jeweiligen Kreditinanspruchnahmen nach
Durchluhrung dec Saldenausgleichs gemaB ss. 7 maBgeblich, wobei nur
diejenigen Forderungen der Berechnung des Verieilungsschlussels
zugrunde zu legen eind, welche die in ss. 1 (1) genannten Kreditlinien
nicht uberschreiten.
(c) zur Tilgung der Anspruche, die den Banken aus Glberschreitungen der
Kreditlinien gemaB ss. 1 (1) gegen die Firmen sowie aus der sonstigen
bankmaBigen Geschaftsverbindung gegen, die WGR zustehen, ud zwar
gleichrangig im Verhaltnis der jeweiligen Anspruche.
(3) Ein nicht mehr benotigler Erlos ist an den jeweiligen Sicherungsgeber
abzuluhren, es sei denn, die Banken sind verpflichtet, diesen Erlos an
einen Dritten, der eine oder mehrere Banken befriedigt hat (z. B. einen
Burgen), zu ubenragen.
(4) Das Vorliegen einer Inanspruchnahme aus Diskont-, Aval- und Akzeptkrediten,
aus eroffneten Akkreditiven bestimmt sich entsprechend der Rege1ung in ss.
7 (3).
(5) Steht die Hohe der zu berucksichtigenden Forderungen im Zeitpunkt der
Erlosverteilung noch nicht fest, bleiben sie zunachst bei der Ermittlung
des Beteiligungsverhahnisses am Veiwertungserlos unberucksichtigt. Erst
wenn diese Betrage endgultig feststehen, erfolgt eine abschlieBende
Berechnung des Beteifigungsverhalnisses. Die sich hieraus eventuell
ergebenden Veranderungen des auf die einzelnen Vertragsparteien
enttallenden Erloses sind - auch soweit bereits Zahlungen erfolgt sind
untereinander auszugleichen.
(6) Die Banken sind berechtigt, den vorgenannten Verteilungsschlussel jederzeit
zu andern.
ss. 9
Kosten, Steuern, Vergutung
(1) Samtliche Kosten und Steuern, die der Poolfuhrerin bzw. jeder eine
Sicherheit haltenden Bank aus diesem Sicherheiten-Poolvertrag, insbesondoro
im Zusammenhang mit der Verwaltung sowie der etwaigen Verwertung der
Sicherheiten. entstehen, gehen zu Lasten der Firmen.
Die Poolfuhrerin hat gegenuber der Firma fur die Wahrnehmung ihrer Aulgaben
aus desem Vertrag Anspruch auf ein jahrliches Entgelt in Hohe eines
Betrages von 0.25% der Kreditlinien gemaB ss. 1 (1) und (5) zuzuglich der
hierauf anfallenden gesetzlichen Umsatzsteuer. Dieses Entgelt wird fur das
bei VertragsabschluB laufende Kalenderjahr in Hohe eines vollen
Jahresbetrages mit VertragsabschluB, fur die nachlolgenden Kalenderjahre
jeweils im voraus zum ersten Werklag des betreuenden Kalenderjahres fallig.
(2) Soweit die Koslan und Steuern von der WGMH nicht bezahlt werden, tragen sie
die Banken im Verhaltnis der in ss. 1 genannten Kreditlinien.
-9-
<PAGE>
ss. 10
Unterrichtung/Auskunft
(1) Die Poolfuhrerin wird die anderen Banken nach pflichtgemaBem Ermessen uber
den Stand der Abwicklung unterrichten. Die Banken werden ihr die hierfur
erforderlichen informationen zur Verfugung stellen.
(2) Die Banken werden sich gegenseitig unterrichten, wenn Tatsachen bekannt
Werden, die eine Ruckfuhrung der in ss. 1 genannten Kredite nachhaltig
gefahrden konnen.
(3) Jede Bank ist auf Verlangen einer Bank verpflichtet, den anderen Banken
Auskunft uber ihre Forderungen gegen die Firma und die Sicherheiten zu
geben, soweit sie diesen Vertrag und seine Abwicklung betreffen.
(4) Die Firma und die weiteren Sicherungsgeber befreien insoweit die Banken vom
Bankgeheimnis.
ss. 11
Befristung und Kundlgung
(1) Dieser Poolvertag wird auf unbestimmte Zeit abgeschlossen.
(2) Jede Poolbank ist berechtigt, den Vertrag unter Einhaltung einer Frist von
3 Monaten zum Ende eines Kalendervierteljahres zu kundigen, erstmals jedoch
zum 31.12.1999. Fur die Einhaltung der Frist ist der Zugang des
Kundigungsschreibens bei der Poolfuhrerin maBgebend. Kundigt die
Poolfuhrerin , so ist fur die Einhaltung der Frist der Zugang des
Kundigungsschreibens bei den anderen Banken maBgeblich. MaBgeblich ist
dabei der jeweils fruheste Zugang. Mit dem Wirksamwerden der Kundigung
scheidet die betreffende Bank aus dem Pool aus. Dieser wird von den ubrigen
Banken fortgesetzt.
(3) Im Falle einer Kundigung nach Absatz (2) bleibt die Aufteilung der
Sicherheiten besonderen Absprachen unter den Banken vorbehalten. Die Firmen
und jeder Drittsicherungsgeber sind verpfflchtet, bei einer
Sicherheitenubertragurtg mitzuwirken, soweit dies rechtlich erforderlich
ist. Auf Verlangen auch nur einer der Banken ist zum Zeitpunkt des
Ausscheidens der kundigenden Bank unter deren Beteiligung ein
Saldenausgleich entsprechend der Regelung des ss. 7 durchzufuhren.
ss. 12
Ertullungsort, Gerichtsstand und anzuwendendes Recht
(1) Als Erfullungsort und Gerichtsstand aller aus diesem Vertrag erwachsendon
Verptlichtungen wird Stuttgart vereinbart.
(2) Dieser Verirag unterliegt dem Recht der Bundesrepublik Deutschland.
ss. 13
Anderungen und Erganzungen des Vertrages
(1) Anderungen und Erganzungen dieses Vertrages bedurfen zu ihrer Wirksamkeit
der Schriftform. Gleiches gilt fur den Verzicht auf dieses Formerfordernis.
Nebenabreden sind nicht getroffen.
(2) Dieser Vertrag gilt auch fur den Fall eines Wechsels der Gesellschafter
oder der Anderung der Rechtsform der Firmen.
-10-
<PAGE>
ss. 14
Salvatorische Klausel
Soweit sich eine der Bestimmungen oder mehrere Bestimmungen dieses Vertrages als
nicht rechtswirksam oder nicht durchfuhrbar erweisen solten, wird die
Wirksamkeit der ubrigen Bestimmungen hiervon nicht beruhrt. Die Vertragsparteien
werden alwa unwirksame oder undurchfuhrbare Bestimmungen durch eine Regelung
ersetzen, die dem wirtschaftllch Gewollten entspricht und dem inhalt der zu
ersetzenden Bestimmungen maglichst nahe kommt. Entsprechendes gilt, wenn
erganzungsbedurftige Lucken hervortretan.
- ------------------------ ------------------------
(Ort/Datum) (CommerzBank)
- ------------------------ ------------------------
(Ort/Datum) (BW-Bank)
- ------------------------ ------------------------
(Ort/Datum) (Deutsche Bank)
- ------------------------ ------------------------
(Ort/Datum) (Kreissparkasse)
- ------------------------ ------------------------
(Ort/Datum) (Landesgirokasse)
- ------------------------ ------------------------
(Ort/Datum) (Stuttgarter Bank)
Wir, die Wanfel & Goltermann Management Holding GmbH unde die Wandel &
Goltermann GmbH & Co. Elektronsiche MeBtechnik, ubernehmen samtliche uns
batreffenden Verpflichtungen dieses Vertrages und stimmen ihm im ubrigen zu;
insbesondere auch den Regelungen in ss. 3 (Sicherungezweck), ss. 7
(Saldenausgleich), ss. 9 (Kosten) und ss. 10 (Unterrichtung).
- ------------------------ ------------------------
(Ort/Datum) (Wandel & Goltermann
Management Holding GmbH)
- ------------------------ ------------------------
(Ort/Datum) (Wandel & Goltermann GmbH
& Co. Elektr. MeBtechn
-11-
<PAGE>
Investment Banking Presentation
to
The Board of Directors of
Wandel & Goltermann Technologies, Inc.
March 28, 1998
The Robinson-Humphrey Company
Investment Bankers Since 1894
<PAGE>
- --------------------------------------------------------------------------------
Table of Contents
================================================================================
I. Transaction Overview
II. Historical Financial Review
III. Historical Stock Price Performance and Trading Range
IV. Ownership Analysis
V. Projected Financial Review
VI. Market Comparison of Selected Public Companies and Implied Valuation
Analysis
VII. Discounted Cash Flow Analysis
VIII. Analysis of Selected Merger and Acquisition Transactions and Implied
Valuation Analysis
IX. Analysis of Premiums for Minority Interest Acquisitions in Going
Private Transactions and Implied Valuation Analysis
<PAGE>
<TABLE>
The Robinson-Humphrey Company, LLC
Page 1
Wandel & Goltermann Technologies, Inc.
Analysis of Proposed Transaction
<CAPTION>
- -------------------------------------------------------------------------------------
Purchase Fully-Diluted Transaction Pro Forma Total
Price Per Shares Equity Net Transaction
Share Outstanding (1) Value Debt (2) Value
- ------------- --------------- ----------- --------- -----------
<S> <C> <C> <C> <C>
$15.90 x 5,437 = $86,455 + ($7,395) = $79,060
- -------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Transaction Equity Value as a Multiple of: Total Transaction Value as a Multiple of:
- -------------------------------------------------------------------------------------------------------------------------
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
1997 1998 (3) 1999 1997 1998 (3) 1999
<S> <C> <C> <C> <C> <C> <C>
Net Income NM x 68.9 x 21.9 x Revenues 1.45 x 1.19 x 0.92 x
EBITDA 44.7 24.0 10.8
Pro Forma
Book Value (4) 3.6 x EBIT NM 54.4 16.4
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Transaction Equity Value as a Multiple of: Total Transaction Value as a Multiple of:
- -------------------------------------------------------------------------------------------------------------------------
Calendar Calendar Calendar Calendar Calendar Calendar
1997 1998 (3) 1999 1997 1998 (3) 1999
<S> <C> <C> <C> <C> <C> <C>
Net Income NM x 44.8 x 18.3 x Revenues 1.48 x 1.31 x 0.86 x
EBITDA NM 18.4 9.1
EBIT NM 34.4 13.5
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Stock Price Prior To 11/19/97
---------------------------------------------------------
1 Day 1 Week 4 Weeks
<S> <C> <C> <C>
Actual Value $10.00 $9.50 $10.50
Premium at $15.90 per Share 59.0% 67.4% 51.4%
</TABLE>
Footnotes:
(1) Includes 5,287,778 shares outstanding plus common stock equivalents
resulting from 799,025 options at a weighted average exercise price of
$12.922 calculated using the treasury stock method. The options used in the
calculation are the total amount of options whose exercise price was below
the $15.90 offer.
(2) Net debt equals debt plus preferred stock less cash and marketable
securities. Assumes cash outlay of $6.0 million for acquisitions to be
completed in the quarter ended March 31, 1998.
(3) Excludes $6.3 million in purchased technology write-downs.
(4) Adjusted by $6.3 million for contemplated write-downs of purchased
technology in the first quarter of calendar 1998.
(5) Assumes announcement date on November 19, 1997.
<PAGE>
The Robinson-Humphrey Company, LLC
Wandel & Goltermann Technologies, Inc. Page 1
Historical Income Statement Information
(In Thousands, Except for Per Share Amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
------------------------------------------------------------
1989 1990 1991 1992 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Nonaffiliates $ 7,485 $ 10,421 $ 11,387 $ 14,438 $ 18,005
Affiliates 6,881 6,659 9,211 12,768 15,080
-------- -------- -------- -------- --------
Total Revenues 14,366 17,080 20,598 27,206 33,085
% Revenue Growth -- 18.9% 20.6% 32.1% 21.6%
Cost of Revenues 10,300 9,977 10,440 10,569 12,176
-------- -------- -------- -------- --------
Gross Profit 4,066 7,103 10,158 16,637 20,909
Gross Profit Margin % 28.3% 41.6% 49.3% 61.2% 63.2%
Selling, General, and Administrative Expenses 4,216 5,166 5,633 8,506 10,603
Product Development Expenses 2,963 3,414 3,504 5,033 6,545
Restructuring Charge 0 0 0 0 0
-------- -------- -------- -------- --------
Operating Income (Loss) (3,113) (1,477) 1,021 3,098 3,761
Operating Income Margin % (21.7%) (8.6%) 5.0% 11.4% 11.4%
Interest Expense (626) (834) (1,032) (688) (779)
Interest Income 0 63 16 0 274
Foreign Currency Gains (Losses) (74) (614) 491 34 498
-------- -------- -------- -------- --------
Income from Continuing Operations
Before Income Taxes (3,813) (2,862) 496 2,444 3,754
Benefit from (Provision for) Income Taxes 89 188 0 1,103 867
-------- -------- -------- -------- --------
Income (Loss) from Continuing Operations (3,724) (2,674) 496 3,547 4,621
Income (Loss) from Discontinued Operations 856 314 (3,885) (1,795) 135
-------- -------- -------- -------- --------
Net Income ($ 2,868) ($ 2,360) ($ 3,389) $ 1,752 $ 4,756
======== ======== ======== ======== ========
Net Income Margin % (20.0%) (13.8%) (16.5%) 6.4% 14.4%
Per Share Data:
Income (Loss) from Continuing Operations ($ 1.47) ($ 0.82) $ 0.15 $ 0.95 $ 1.23
======== ======== ======== ======== ========
Net Income ($ 1.13) ($ 0.72) ($ 1.04) $ 0.47 $ 1.27
======== ======== ======== ======== ========
Weighted Average Number of Common Shares
Outstanding 2,537 3,264 3,265 3,750 3,750
======== ======== ======== ======== ========
<CAPTION>
Fiscal Year Ended September 30,
-----------------------------------------------
1994 1995 1996 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Nonaffiliates $ 21,785 $ 23,658 $ 33,186 $ 29,001
Affiliates 18,387 21,604 25,900 25,454
-------- -------- -------- --------
Total Revenues 40,172 45,262 59,086 54,455
% Revenue Growth 21.4% 12.7% 30.5% (7.8%)
Cost of Revenues 12,731 16,576 23,234 24,381
-------- -------- -------- --------
Gross Profit 27,441 28,686 35,852 30,074
Gross Profit Margin % 68.3% 63.4% 60.7% 55.2%
Selling, General, and Administrative Expenses 12,984 15,872 18,934 19,360
Product Development Expenses 9,059 10,469 9,804 10,712
Restructuring Charge 0 1,279 0 0
-------- -------- -------- --------
Operating Income (Loss) 5,398 1,066 7,114 2
Operating Income Margin % 13.4% 2.4% 12.0% 0.0%
Interest Expense (460) 0 0 0
Interest Income 295 313 350 639
Foreign Currency Gains (Losses) 213 (245) (104) (217)
-------- -------- -------- --------
Income from Continuing Operations
Before Income Taxes 5,446 1,134 7,360 424
Benefit from (Provision for) Income Taxes (2,124) (98) (2,208) 0
-------- -------- -------- --------
Income (Loss) from Continuing Operations 3,322 1,036 5,152 424
Income (Loss) from Discontinued Operations 204 0 0 0
-------- -------- -------- --------
Net Income $ 3,526 $ 1,036 $ 5,152 $ 424
======== ======== ======== ========
Net Income Margin % 8.8% 2.3% 8.7% 0.8%
Per Share Data:
Income (Loss) from Continuing Operations $ 0.76 $ 0.20 $ 0.98 $ 0.08
======== ======== ======== ========
Net Income $ 0.80 $ 0.20 $ 0.98 $ 0.08
======== ======== ======== ========
Weighted Average Number of Common Shares
Outstanding 4,398 5,245 5,231 5,359
======== ======== ======== ========
</TABLE>
<PAGE>
The Robinson-Humphrey Company, LLC
Wandel & Goltermann Technologies, Inc. Page 2
Historical Quarterly Income Statement Information
(In Thousands, Except for Per Share Amounts)
<TABLE>
<CAPTION>
Fiscal 1995
-----------------------------------------------
First Second Third Fourth
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Nonaffiliates $ 6,420 $ 5,735 $ 5,278 $ 6,225
Affiliates 5,396 5,881 5,106 5,221
-------- -------- -------- --------
Total Revenues 11,816 11,616 10,384 11,446
Cost of Revenues 3,683 3,451 3,995 5,447
-------- -------- -------- --------
Gross Profit 8,133 8,165 6,389 5,999
Gross Profit Margin % 68.8% 70.3% 61.5% 52.4%
Selling, General, and Administrative Expenses 3,660 3,941 3,717 4,554
Product Development Expenses 2,379 2,519 2,642 2,929
Restructuring Charge 0 0 0 1,279
-------- -------- -------- --------
Operating Income (Loss) 2,094 1,705 30 (2,763)
Operating Income Margin % 17.7% 14.7% 0.3% (24.1%)
Interest Income 93 80 68 72
Foreign Currency Gains (Losses) 83 (338) (24) 34
-------- -------- -------- --------
Income Before Income Taxes 2,270 1,447 74 (2,657)
Benefit from (Provision for) Income Taxes (726) (463) (23) 1,114
-------- -------- -------- --------
Net Income $ 1,544 $ 984 $ 51 ($ 1,543)
======== ======== ======== ========
Net Income Margin % 13.1% 8.5% 0.5% (13.5%)
Earnings Per Share $ 0.30 $ 0.19 $ 0.01 ($ 0.29)
======== ======== ======== ========
Weighted Average Number of Common Shares
Outstanding 5,226 5,243 5,260 5,237
======== ======== ======== ========
<CAPTION>
Fiscal 1996
-----------------------------------------------
First Second Third Fourth
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Nonaffiliates $ 7,172 $ 8,154 $ 8,895 $ 8,965
Affiliates 6,291 6,342 6,528 6,739
-------- -------- -------- --------
Total Revenues 13,463 14,496 15,423 15,704
Cost of Revenues 5,412 5,649 6,243 5,930
-------- -------- -------- --------
Gross Profit 8,051 8,847 9,180 9,774
Gross Profit Margin % 59.8% 61.0% 59.5% 62.2%
Selling, General, and Administrative Expenses 4,631 4,667 4,528 5,108
Product Development Expenses 2,621 2,413 2,445 2,325
Restructuring Charge 0 0 0 0
-------- -------- -------- --------
Operating Income (Loss) 799 1,767 2,207 2,341
Operating Income Margin % 5.9% 12.2% 14.3% 14.9%
Interest Income 53 60 79 158
Foreign Currency Gains (Losses) (21) (93) (46) 56
-------- -------- -------- --------
Income Before Income Taxes 831 1,734 2,240 2,555
Benefit from (Provision for) Income Taxes (266) (553) (719) (670)
-------- -------- -------- --------
Net Income $ 565 $ 1,181 $ 1,521 $ 1,885
======== ======== ======== ========
Net Income Margin % 4.2% 8.1% 9.9% 12.0%
Earnings Per Share $ 0.11 $ 0.23 $ 0.29 $ 0.36
======== ======== ======== ========
Weighted Average Number of Common Shares
Outstanding 5,218 5,155 5,275 5,273
======== ======== ======== ========
<CAPTION>
Fiscal
Fiscal 1997 1998
First Second Third Fourth First
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Nonaffiliates $ 6,482 $ 7,247 $ 8,581 $ 6,691 $ 7,809
Affiliates 8,973 7,095 4,639 4,747 6,542
-------- -------- -------- -------- --------
Total Revenues 15,455 14,342 13,220 11,438 14,351
Cost of Revenues 6,112 6,260 5,587 6,422 7,477
-------- -------- -------- -------- --------
Gross Profit 9,343 8,082 7,633 5,016 6,874
Gross Profit Margin % 60.5% 56.4% 57.7% 43.9% 47.9%
Selling, General, and Administrative Expenses 5,134 4,673 4,937 4,616 4,997
Product Development Expenses 2,450 2,482 2,686 3,094 2,604
Restructuring Charge 0 0 0 0 0
-------- -------- -------- -------- --------
Operating Income (Loss) 1,759 927 10 (2,694) (728)
Operating Income Margin % 11.4% 6.5% 0.1% (23.6%) (5.1%)
Interest Income 148 172 155 164 188
Foreign Currency Gains (Losses) (7) (263) (19) 72 26
-------- -------- -------- -------- --------
Income Before Income Taxes 1,900 836 146 (2,458) (513)
Benefit from (Provision for) Income Taxes (570) (251) (44) 865 103
-------- -------- -------- -------- --------
Net Income $ 1,330 $ 585 $ 102 ($ 1,593) ($ 411)
======== ======== ======== ======== ========
Net Income Margin % 8.6% 4.1% 0.8% (13.9%) (2.9%)
Earnings Per Share $ 0.25 $ 0.11 $ 0.02 ($ 0.30) ($ 0.08)
======== ======== ======== ======== ========
Weighted Average Number of Common Shares
Outstanding 5,361 5,427 5,285 5,274 5,277
======== ======== ======== ======== ========
</TABLE>
<PAGE>
The Robinson-Humphrey Company, LLC
Wandel & Goltermann Technologies, Inc. Page 3
Historical Balance Sheet Information
(In Thousands, Except for Per Share Amounts)
<TABLE>
<CAPTION>
As of September 30, December 31, 1997
------------------------------------ ----------------------
1995 1996 1997 Actual Pro Forma
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 5,374 $ 10,286 $ 13,329 $ 13,395 $7,395 [1]
Accounts Receivable:
Nonaffiliates 5,378 8,148 7,038 5,870 5,870
Affiliates 3,934 5,068 3,964 6,226 6,226
Income Tax Receivable 1,464 720 1,367 363 363
Inventories 6,616 4,695 5,596 5,630 5,630
Deferred Tax Assets 1,946 1,079 1,448 1,585 1,585
Other Current Assets 395 349 927 849 849
-------- -------- -------- -------- --------
Total Current Assets $ 25,107 $ 30,345 $ 33,669 $ 33,918 $ 27,918
Property and Equipment
Machinery and Equipment 4,189 4,401 4,614 4,667 4,667
Furniture and Fixtures 5,764 5,186 5,993 6,151 6,151
-------- -------- -------- -------- --------
9,953 9,587 10,607 10,818 10,818
Accumulated Depreciation (6,213) (6,323) (7,721) (8,008) (8,008)
-------- -------- -------- -------- --------
3,740 3,264 2,886 2,810 2,810
Other Assets 497 689 737 718 1,018 [1]
-------- -------- -------- -------- --------
Total Assets $ 29,344 $ 34,298 $ 37,292 $ 37,446 $ 31,746
======== ======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable:
Nonaffiliates $ 1,579 $ 1,327 $ 1,530 $ 1,085 $ 1,085
Affiliates 258 950 1,789 2,856 2,856
Accrued Compensation 1,683 1,855 1,467 1,412 1,412
Other Accrued Liabilities 1,470 1,344 1,847 1,843 1,843
-------- -------- -------- -------- --------
Total Current Liabilities $ 4,990 $ 5,476 $ 6,633 $ 7,196 $ 7,196
Shareholders' Equity:
Common Stock 52 52 53 53 53
Additional Paid-in Capital 25,740 25,056 26,468 26,470 26,470
Retained Earnings (Accumulated Deficit) (1,438) 3,714 4,138 3,727 (2,573)[1]
-------- -------- -------- -------- --------
24,354 28,822 30,659 30,250 23,950
-------- -------- -------- -------- --------
Total Liabilities and Shareholders' Equity $ 29,344 $ 34,298 $ 37,292 $ 37,446 $ 31,146
======== ======== ======== ======== ========
</TABLE>
[1] Assumes $6.0 million paid in cash for technology acquisitions with a
purchased technology write-off of $6.3 million with the difference going
into goodwill under other assets.
<PAGE>
Page 1
Wandel & Goltermann Techs
High-Low-Close Volume
Weekly: 4/8/94 to 03/24/98
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
(in Millions)
4/8/94 11.5 10.25 10.875
5/13/94 11.25 10.75 10.75
6/24/94 10.75 10 10.375
7/22/94 9.875 9.625 9.625
8/26/94 10.5 9 9.875
9/30/94 12.125 11.75 12
11/4/94 13.875 13.125 13.375
12/9/94 14.25 13.5 13.5
1/13/95 13.25 12.625 12.75
2/17/95 14.375 12.75 14.375
3/24/95 16.875 16.375 16.5
4/28/95 14.625 14.25 14.25
6/2/95 18.75 17.5 17.5
7/7/95 11 10.5 10.625
8/11/95 13.5 12.25 12.25
9/15/95 12.875 11.5 12.125
10/20/95 10.5 9.75 10
11/24/95 10 9.5 9.5
12/29/95 11.5 10.5 10.625
2/2/96 12.75 9 9.625
3/8/96 13.125 11.75 12.75
4/12/96 16.25 14.875 15.25
5/17/96 18.25 16.875 18
6/21/96 16.25 15 15.75
7/26/96 15.25 13.75 14.125
8/30/96 15.75 14.25 15.625
10/4/96 22 18.5 21.75
11/8/96 21 17.25 20.25
12/13/96 29.75 23 29.75
1/17/97 30.25 27.25 28.5
2/21/97 24.75 23.5 23.5
3/28/97 22.5 18.75 21.375
5/2/97 13.25 10.75 13.25
6/6/97 12.75 12 12.375
7/11/97 9.875 9.0625 9.75
8/15/97 11.875 10.75 11.375
9/19/97 12.375 11 11.75
10/24/97 10.625 10 10.3125
11/28/97 12.75 11.875 12.25
1/2/98 13.375 13.125 13.125
2/6/98 12.875 12.6875 12.8125
3/13/98 13.125 12.875 12.875
<PAGE>
Page 2
Wandel & Goltermann Techs
High-Low-Close Volume
Daily: 1/1/97 to 03/24/98
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
(in Millions)
1/1/97 30 29.25 29.25
1/13/97 29 27.25 29
1/23/97 28.25 26.25 27.5
2/4/97 27 26 27
2/17/97 24.75 24 24.75
2/26/97 24 22.75 23.5
3/10/97 23.5 22.75 22.875
3/20/97 22.5 21.25 22
4/1/97 22.5 21.375 21.375
4/11/97 11.25 10.75 11
4/23/97 11.5 10.75 11.5
5/5/97 13.75 13.375 13.75
5/15/97 12.875 12.25 12.5
5/27/97 12.5 11.5 12.0625
6/6/97 12.375 12 12.375
6/18/97 11.875 11.375 11.375
6/30/97 9.375 8.875 9.125
7/10/97 9.75 9.375 9.625
7/22/97 9.75 9.375 9.375
8/1/97 10 9.875 10
8/13/97 11.875 10.875 11.5
8/25/97 12.25 11.625 12
9/4/97 11.75 11.625 11.625
9/16/97 12.375 11.75 11.75
9/26/97 10.375 10.0625 10.0625
10/8/97 10.375 9.875 10.375
10/20/97 10.5 10.25 10.25
10/30/97 10.125 9.875 9.875
11/11/97 10.375 9.75 9.9375
11/21/97 13.25 12.375 12.75
12/3/97 12.5 12.125 12.5
12/15/97 12.5 12.125 12.5
12/25/97 13.375 13.125 13.25
1/6/98 13.25 13.125 13.125
1/16/98 12.8125 12.75 12.75
1/28/98 12.8125 12.625 12.8125
2/9/98 12.8125 12.75 12.75
2/19/98 12.75 12.6875 12.6875
3/3/98 12.875 12.75 12.8125
3/13/98 12.875 12.875 12.875
<PAGE>
Wandel & Goltermann Techs
Close Price Index Comparison
Weekly: 4/8/94 to 03/24/98
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Close Price as a Percent of Start Period
Network
Wandel & Nasdaq Analysis
Golterman National Comps
--------- -------- --------
4/8/94 1 1 1
5/13/94 0.988506 0.940381 0.973683
6/17/94 0.954023 0.942059 0.913465
7/22/94 0.885057 0.92439 0.942213
8/26/94 0.908046 0.977396 1.053499
9/30/94 1.103448 0.992301 1.124936
11/4/94 1.229885 0.997532 1.282624
12/9/94 1.241379 0.920344 1.192636
1/13/95 1.172414 0.97325 1.36339
2/17/95 1.321839 0.995854 1.429951
3/24/95 1.517241 1.025466 1.507163
4/28/95 1.310345 1.042641 1.439265
6/2/95 1.609195 1.070674 1.392112
7/7/95 0.977011 1.183891 1.580074
8/11/95 1.126437 1.217846 1.54656
9/15/95 1.114943 1.274109 1.675852
10/20/95 0.91954 1.224163 1.724744
11/24/95 0.873563 1.21449 1.650463
12/29/95 0.977011 1.242326 1.517105
2/2/96 0.885057 1.262067 1.607439
3/8/96 1.172414 1.263646 1.514987
4/12/96 1.402299 1.332741 1.506896
5/17/96 1.655172 1.518014 1.816866
6/21/96 1.448276 1.415754 1.66609
7/26/96 1.298851 1.276182 1.45955
8/30/96 1.436782 1.356332 1.405531
10/4/96 2 1.442997 1.527432
11/8/96 1.862069 1.402428 1.595815
12/13/96 2.735632 1.420492 1.729745
1/17/97 2.62069 1.487612 1.867071
2/21/97 2.16092 1.437469 1.655309
3/28/97 1.965517 1.334419 1.572882
5/2/97 1.218391 1.334123 1.532005
6/6/97 1.137931 1.485836 1.640366
7/11/97 0.896552 1.586911 1.835419
8/15/97 1.045977 1.620077 2.012873
9/19/97 1.08046 1.777021 2.321749
10/24/97 0.948276 1.724904 2.188693
11/28/97 1.126437 1.630737 2.127325
1/2/98 1.206897 1.599941 2.09493
2/6/98 1.178161 1.651268 2.152202
3/13/98 1.183908 1.742868 2.222544
<PAGE>
Wandel & Goltermann Techs
Close Price Index Comparison
Weekly: 1/1/97 to 03/24/98
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Close Price as a Percent of Start Period
Network
Wandel & Nasdaq Analysis
Golterman National Comps
--------- -------- --------
1/1/97 1 1 1
1/13/97 0.991453 1.027281 1.038809
1/23/97 0.940171 1.05249 1.018228
2/4/97 0.923077 1.033497 1.024481
2/14/97 0.846154 1.032875 0.912651
2/26/97 0.803419 1.004213 0.920252
3/10/97 0.782051 0.999033 0.886896
3/20/97 0.752137 0.947925 0.863093
4/1/97 0.730769 0.908488 0.842947
4/11/97 0.376068 0.901996 0.82533
4/23/97 0.393162 0.883763 0.803367
5/5/97 0.470085 0.963672 0.884216
5/15/97 0.42735 0.98377 0.95588
5/27/97 0.412393 1.020305 0.906056
6/6/97 0.423077 1.039644 0.908339
6/18/97 0.388889 1.051454 0.910737
6/30/97 0.311966 1.07542 0.949763
7/10/97 0.32906 1.097244 0.989157
7/22/97 0.320513 1.124663 1.087488
8/1/97 0.34188 1.151184 1.155573
8/13/97 0.393162 1.143933 1.147621
8/25/97 0.410256 1.166724 1.141111
9/4/97 0.397436 1.194005 1.156762
9/16/97 0.401709 1.232406 1.258551
9/26/97 0.344017 1.241868 1.263709
10/8/97 0.354701 1.286139 1.319468
10/20/97 0.350427 1.244561 1.254386
10/30/97 0.337607 1.140756 1.14732
11/11/97 0.339744 1.154292 1.180653
11/21/97 0.435897 1.163893 1.230357
12/3/97 0.42735 1.142551 1.185243
12/15/97 0.42735 1.076663 1.068261
12/25/97 0.452991 1.066648 1.050697
1/6/98 0.448718 1.116997 1.127255
1/16/98 0.435897 1.088749 1.102503
1/28/98 0.438034 1.104772 1.061178
2/9/98 0.435897 1.155536 1.151812
2/19/98 0.433761 1.183369 1.175257
3/3/98 0.438034 1.194696 1.172967
3/13/98 0.440171 1.21949 1.174061
<PAGE>
Page 5
- --------------------------------------------------------------------------------
Wandel & Goltermann Techs
Volume Distribution by Price Range
Weekly: 4/8/94 to 03/24/98
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Percent
Traded
-------
8 to 12.4 49.13%
12.4 to 16.8 30.37%
16.8 to 21.2 10.99%
21.2 to 25.6 4.46%
25.6 to 30 5.05%
- --------------------------------------------------------------------------------
<PAGE>
Page 6
- --------------------------------------------------------------------------------
Wandel & Goltermann Techs
Volume Distribution by Price Range
Daily: 1/1/97 to 03/24/98
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Percent
Traded
-------
8 to 12.4 61.35%
12.4 to 16.8 21.85%
16.8 to 21.2 0.60%
21.2 to 25.6 7.52%
25.6 to 30 8.635
<PAGE>
The Robinson-Humphrey Company, LLC
Wandel & Goltermann Technologies, Inc. Page 1
Shareholder Ownership Analysis
- --------------------------------------------------------------------------------
Number of As a Percent
Shares of Total
--------- ------------
Total Shares Outstanding 5,287,778 100.0%
Institutional Ownership:
WELLINGTON MANAGEMENT 471,100 8.9%
HATHAWAY & ASSOCIATES 250,000 4.7%
DIMENSIONAL FUND ADVS. 175,400 3.3%
ARDEN GROUP INC 24,050 0.5%
TRAVELERS INC 14,450 0.3%
BRANDYWINE ASSET MGMT. 12,700 0.2%
WORLD ASSET MANAGEMENT 4,400 0.1%
--------- -----
Total Institutional Holdings 952,100 18.0%
Insider Ownership:
RICHARD E. POSPISIL 3,500 0.1%
GERRY CHASTELET 32,458 0.6%
SIDNEY TOPOL 12,467 0.2%
E. JAY BOWERS 8,883 0.2%
JOHN T. GOEHRKE 7,850 0.1%
ADELBERT KUTHE 9,375 0.2%
--------- -----
Total Insider Holdings 74,533 1.4%
WG Holding 3,285,600 62.1%
Total Retail Holdings ("Float") 975,545 18.4%
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
WGTI
----
Institutions 18.0%
Insiders 1.4%
Retail Float 18.4%
WG Holding 62.1%
- ----------
SOURCE: CDA SPECTRUM CORP. AND 10-K.
<PAGE>
The Robinson-Humphrey Company, LLC
Wandel & Goltermann Technologies, Inc. Page 1
Projected Income Statement Information
With Technology Acquisitions
High Scenario
(In Thousands, Except for Per Share Amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
---------------------------------------------------------------------
1998 1999 2000 2001 2002
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Nonaffiliates $ 39,700 $ 56,000 $ 74,400 $ 96,700 $ 116,040
Affiliates 29,100 34,500 44,200 53,500 64,200
--------- --------- --------- --------- ---------
Total Revenues 68,800 90,500 118,600 150,200 180,240
% Revenue Growth 26.3% 31.5% 31.0% 26.6% 20.0%
Cost of Revenues 30,700 40,200 52,800 66,200 79,440
--------- --------- --------- --------- ---------
Gross Profit 38,100 50,300 65,800 84,000 100,800
Gross Profit Margin % 55.4% 55.6% 55.5% 55.9% 55.9%
Selling, General, and Administrative Expenses 23,300 28,500 35,900 45,000 54,000
Product Development Expenses 12,300 15,500 18,500 20,300 24,360
Purchased Technology Write-off 6,300 0 0 0 0
--------- --------- --------- --------- ---------
Operating Income (Loss) (1) (3,800) 6,300 11,400 18,700 22,440
Operating Income Margin % (5.5%) 7.0% 9.6% 12.5% 12.5%
Interest Income 300 500 800 1,200 1,400
--------- --------- --------- --------- ---------
Income (Loss) Before Income Taxes (3,500) 6,800 12,200 19,900 23,840
Provision for Income Taxes (500) (1,700) (3,300) (5,400) (6,469)
--------- --------- --------- --------- ---------
Net Income ($ 4,000) $ 5,100 $ 8,900 $ 14,500 $ 17,371
========= ========= ========= ========= =========
Net Income Margin % (5.8%) 5.6% 7.5% 9.7% 9.6%
Per Share Data:
Net Income ($ 0.76) $ 0.96 $ 1.68 $ 2.46 $ 2.95
========= ========= ========= ========= =========
Net Income Excluding
Purchased Technology Write-off $ 0.44 $ 0.96 $ 1.68 $ 2.46 $ 2.95
========= ========= ========= ========= =========
</TABLE>
- ----------
(1) Excludes $6.3 million for contemplated write-downs of purchased technology
in the second quarter of fiscal 1998.
<PAGE>
The Robinson-Humphrey Company, LLC
Wandel & Goltermann Technologies, Inc. Page 2
Projected Balance Sheets
High Scenario
(Dollars in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Sept. Sept. Sept. Sept. Sept. Sept.
BALANCE SHEET DATA 1997 1998 1999 2000 2001 2002
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Current Assets less Cash and Equivalents
Receivables $11,002 $13,500 $16,000 $20,000 $27,000 $32,400
Inventories 5,596 5,900 6,500 7,300 9,500 11,400
Other Current Assets 3,742 2,600 3,000 3,200 4,200 4,700
------- ------- ------- ------- ------- -------
20,340 22,000 25,500 30,500 40,700 48,500
Current Liabilities less Current Debt
Accounts Payable 3,319 4,000 4,700 5,500 8,500 10,200
Accrued Compensation 1,467 2,300 2,500 3,000 3,000 3,600
Other Current Liabilities 1,847 2,400 3,000 3,500 4,000 4,800
------- ------- ------- ------- ------- -------
6,633 8,700 10,200 12,000 15,500 18,600
Working Capital Less Cash and Equivalents and Current Debt $13,707 $13,300 $15,300 $18,500 $25,200 $29,900
Depreciation and Amortization 1,766 1,779 2,500 3,700 4,300 5,160
Capital Expenditures 1,144 2,779 3,000 4,000 4,600 5,520
</TABLE>
<PAGE>
The Robinson-Humphrey Company, LLC
Wandel & Goltermann Technologies, Inc. Page 3
Projected Income Statement Information
With Technology Acquisitions
Low Scenario
(In Thousands, Except for Per Share Amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
---------------------------------------------------------------------
1998 1999 2000 2001 2002
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Nonaffiliates NA NA NA NA NA
Affiliates NA NA NA NA NA
--------- --------- --------- --------- ---------
Total Revenues $ 64,200 $ 80,575 $ 99,944 $ 121,913 $ 151,440
Cost of Revenues 30,264 37,677 46,050 55,287 67,530
--------- --------- --------- --------- ---------
Gross Profit 33,936 42,898 53,894 66,626 83,910
Gross Profit Margin % 52.9% 53.2% 53.9% 54.7% 55.4%
Selling, General, and Administrative Expenses 22,051 25,777 31,252 37,061 46,038
Product Development Expenses 11,477 13,778 16,091 18,896 21,959
--------- --------- --------- --------- ---------
Operating Income (Loss) (1) 408 3,343 6,551 10,669 15,913
Operating Income Margin % 0.6% 4.1% 6.6% 8.8% 10.5%
Interest Income 300 383 609 832 521
--------- --------- --------- --------- ---------
Income (Loss) Before Income Taxes 708 3,726 7,160 11,501 16,434
Provision for Income Taxes (500) (926) (1,933) (3,105) (4,437)
--------- --------- --------- --------- ---------
Net Income $ 208 $ 2,800 $ 5,227 $ 8,396 $ 11,997
========= ========= ========= ========= =========
Net Income Margin % 0.3% 3.5% 5.2% 6.9% 7.9%
Per Share Data:
Net Income Excluding
Purchased Technology Write-off $ 0.04 $ 0.53 $ 0.99 $ 1.42 $ 2.04
========= ========= ========= ========= =========
</TABLE>
- ----------
(1) Excludes $6.3 million for contemplated write-downs of purchased technology
in the second quarter of fiscal 1998.
<PAGE>
The Robinson-Humphrey Company, LLC
Wandel & Goltermann Technologies, Inc. Page 4
Projected Balance Sheets
Low Scenario
(Dollars in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Sept. Sept. Sept. Sept. Sept. Sept.
BALANCE SHEET DATA 1997 1998 1999 2000 2001 2002
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Current Assets less Cash and Equivalents
Receivables $11,002 $12,561 $14,245 $16,854 $21,915 $27,223
Inventories 5,596 5,868 6,095 6,370 7,929 9,685
Other Current Assets 3,742 2,600 3,000 3,200 4,200 5,513
------- ------- ------- ------- ------- -------
20,340 21,029 23,340 26,424 34,044 42,421
Current Liabilities less Current Debt
Accounts Payable 3,319 3,978 4,407 4,799 7,095 8,666
Accrued Compensation 1,467 1,789 2,234 2,582 2,545 3,138
Other Current Liabilities 1,847 1,867 2,680 3,013 3,394 4,185
------- ------- ------- ------- ------- -------
6,633 7,634 9,321 10,394 13,034 15,989
Working Capital Less Cash and Equivalents and Current Debt $13,707 $13,395 $14,019 $16,030 $21,010 $26,432
Depreciation and Amortization 1,766 1,908 2,500 3,700 4,300 4,300
Capital Expenditures 1,144 2,922 3,020 4,000 4,500 5,250
</TABLE>
<PAGE>
The Robinson-Humphrey Company, LLC
Wandel & Goltermann Technologies, Inc. Page 5
Projected Income Statement Information
Average Scenario
(In Thousands, Except for Per Share Amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
-------------------------------------------------------------------------------
1998 1999 2000 2001 2002
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Nonaffiliates NA NA NA NA NA
Affiliates NA NA NA NA NA
--------- --------- --------- --------- -----------
Total Revenues $ 66,500 $ 85,538 $ 109,272 $ 136,057 $ 165,840
30,482 38,939 49,425 60,744 73,485
--------- --------- --------- --------- -----------
36,018 46,599 59,847 75,313 92,355
Gross Profit Margin % 54.2% 54.5% 54.8% 55.4% 55.7%
22,676 27,139 33,576 41,031 50,019
11,889 14,639 17,296 19,598 23,160
--------- --------- --------- --------- -----------
Operating Income (Loss) (1) 1,454 4,822 8,976 14,685 19,177
Operating Income Margin % 2.2% 5.6% 8.2% 10.8% 11.6%
300 442 705 1,016 961
--------- --------- --------- --------- -----------
Income (Loss) Before Income Taxes 1,754 5,263 9,680 15,701 20,137
(500) (1,313) (2,617) (4,253) (5,453)
--------- --------- --------- --------- -----------
$ 1,254 $ 3,950 $ 7,064 $ 11,448 $ 14,684
========= ========= ========= ========= ===========
Net Income Margin % 1.9% 4.6% 6.5% 8.4% 8.9%
Net Income Excluding
Purchased Technology Write-off $ 0.24 $ 0.74 $ 1.33 $ 1.94 $ 2.49
========= ========= ========= ========= ===========
</TABLE>
- ----------
(1) Excludes $6.3 million for contemplated write-downs of purchased technology
in the second quarter of fiscal 1998.
<PAGE>
The Robinson-Humphrey Company, LLC
Wandel & Goltermann Technologies, Inc. Page 6
Projected Balance Sheets
Average Scenario
(Dollars in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Sept. Sept. Sept. Sept. Sept. Sept.
BALANCE SHEET DATA 1997 1998 1999 2000 2001 2002
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Current Assets less Cash and Equivalents
Receivables $11,002 $13,031 $15,123 $18,427 $24,458 $29,812
Inventories 5,596 5,884 6,298 6,835 8,715 10,543
Other Current Assets 3,742 2,600 3,000 3,200 4,200 5,107
------- ------- ------- ------- ------- -------
20,340 21,515 24,420 28,462 37,372 45,461
Current Liabilities less Current Debt
Accounts Payable 3,319 3,989 4,554 5,150 7,798 9,433
Accrued Compensation 1,467 2,045 2,367 2,791 2,773 3,369
Other Current Liabilities 1,847 2,134 2,840 3,257 3,697 4,493
------- ------- ------- ------- ------- -------
6,633 8,167 9,761 11,197 14,267 17,295
Working Capital Less Cash and Equivalents and Current Debt $13,707 $13,348 $14,660 $17,265 $23,105 $28,166
Depreciation and Amortization 1,766 1,844 2,500 3,700 4,300 4,730
Capital Expenditures 1,144 2,851 3,010 4,000 4,550 5,385
</TABLE>
<PAGE>
The Robinson-Humphrey Company, LLC
Wandel & Goltermann Technologies, Inc. Page 1
Market Comparison of Selected Public Network Solutions Companies
<TABLE>
<CAPTION>
Earnings Per Share [1]
-----------------------
52 Week Market Calendar
Latest ------- Price % of -----------------------
Ticker Exchange Company FYE Filing High Low 5/25/98 High 1997 1998 1999
- ------ -------- ------- --- ------ ---- --- ------- ---- ---- ---- ----
Network Analysis Companies
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ADAX OTC Applied Digital Access, Inc. DC 9/97 $11.87 $3.62 $8.00 67.4% ($0.22) ($0.08) $0.40
CCRD OTC Concord Communications Inc. DC 9/97 30.37 14.62 23.75 78.2% (0.02) 0.31 0.63
DIGL OTC Digital Lightwave Inc. DC 9/97 23.75 3.06 4.75 20.0% (0.23) 0.15 NA
HWP NYSE Hewlett-Packard OC 1/98 72.93 48.12 63.50 87.1% 2.94 3.47 3.37
NETA OTC Network Associates [2] DC 9/97 78.50 41.12 64.63 82.3% 1.75 2.43 3.17
RDCMF OTC RADCOM Ltd. DC 9/97 11.87 4.75 4.94 41.6% 0.11 0.28 0.52
TKLC OTC Tekelec DC 9/97 49.37 9.00 42.75 86.6% 0.70 0.90 1.19
TEK NYSE Tektronix Inc. MY 11/97 48.18 33.18 46.94 97.4% 2.48 2.86 NA
----------------------------------------------------------------------------------------------------------------------------
AVERAGE 70.1%
============================================================================================================================
Network Management Companies
DYT NYSE Dynatech Corp. [3] MR 12/97 48.56 27.87 26.75 55.1% 2.38 2.94 NA
FLK NYSE Fluke Corp. AP 1/98 29.93 21.12 23.88 79.8% 1.61 1.65 1.94
GEN NYSE GenRad, Inc. DC 9/97 34.00 13.62 27.50 80.9% 1.25 1.48 1.88
KEI NYSE Keithley Instruments, Inc. SP 12/97 12.37 7.50 8.13 65.7% 0.F0 0.F8 NA
MTST OTC MicroTest Inc. DC 9/97 8.12 3.37 5.50 67.7% 0.04 0.50 NA
OSII OTC Objective Systems Integrators Inc. JE 12/97 15.62 3.37 13.94 89.2% (0.96) 0.01 NA
RETX NYSE Retix DC 9/97 7.62 3.37 5.00 65.6% (0.21) NA NA
TCSI OTC TCSI Corporation DC 9/97 9.00 4.37 6.31 70.1% (0.09) 0.03 0.24
TER NYSE Teradyne Inc. DC 9/97 59.18 26.37 38.00 64.2% 1.50 2.55 3.21
Network Equipment Providers
BAY NYSE Bay Networks Inc. JE 12/97 41.87 15.37 29.31 70.0% 0.74 0.90 NA
CS NYSE Cabletron Systems Inc. FB 11/97 46.50 12.62 15.13 32.5% 1.34 0.33 1.14
CSCO OTC Cisco Systems Inc. JL 1/98 68.50 30.18 67.81 99.0% 1.54 1.94 2.34
COMS OTC 3COM Corp MY 11/97 59.68 24.00 37.25 62.4% 1.10 0.83 1.73
----------------------------------------------------------------------------------------------------------------------------
COMBINED AVERAGE 69.7%
============================================================================================================================
Wandel & Goltermann Technologies SP 12/97 $23.75 $8.50 $15.31 64.5% ($0.29) $0.63[4] $1.04
<CAPTION>
Price/Earnings Ratio
----------------------
5 Yr Calendar
Growth ----------------------- Shares Market Book Market/
Ticker Exchange Company Rate [1] 1997 1998 1999 Outstanding Cap'n Value Book
- ------ -------- ------- -------- ---- ---- ---- ----------- ------ ----- ------
(MM) ($MM) ($MM)
Network Analysis Companies
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ADAX OTC Applied Digital Access, Inc. 40.0% NMx NMx 20.0x 12.561 $100.5 $36.8 2.7x
CCRD OTC Concord Communications Inc. NA NM 76.6 37.7 11.941 283.6 25.6 11.1
DIGL OTC Digital Lightwave Inc. 50.0% NM 31.7 NA 26.372 125.3 46.6 2.7
HWP NYSE Hewlett-Packard 15.0% 21.6 18.3 16.4 1,030.000 65,405.0 16,384.0 4.0
NETA OTC Network Associates [2] 35.0% 36.9 26.6 20.4 68.923 4,454.2 418.2 10.7
RDCMF OTC RADCOM Ltd. NA 44.9* 17.6 9.5 9.596 47.4 24.1 2.0
TKLC OTC Tekelec 50.0% 61.1 47.5 35.9 25.784 1,102.3 92.6 11.9
TEK NYSE Tektronix Inc. 15.0% 18.9 16.4 NA 50.475 2,369.2 753.1 3.1
----------------------------------------------------------------------------------------------------------------------------
AVERAGE 34.2% 34.6x 33.5x 23.3x
============================================================================================================================
Network Management Companies
DYT NYSE Dynatech Corp. [3] 21.0% 11.2x 9.x NAx 16.863 451.1 191.7 2.4x
FLK NYSE Fluke Corp. 15.0% 14.8 14.5 12.3 18.389 439.0 222.3 2.0
GEN NYSE GenRad, Inc. NA 22.0 18.6 14.6 27.288 750.4 100.3 7.5
KEI NYSE Keithley Instruments, Inc. NA 81.3 14.0 NA 7.827 63.6 33.6 1.9
MTST OTC MicroTest Inc. 30.0% 137.5* 11.0 NA 8.202 45.1 31.5 1.4
OSII OTC Objective Systems Integrators Inc. 30.0% NM NM NA 34.251 477.4 77.0 6.2
RETX NYSE Retix 25.0% NM NA NA 22.664 113.3 10.1 11.2
TCSI OTC TCSI Corporation 30.0% NM 210.4* 26.3 21.942 138.5 74.3 1.9
TER NYSE Teradyne Inc. 22.0% 25.3 14.9 11.8 83.425 3,170.1 915.7 3.5
Network Equipment Providers
BAY NYSE Bay Networks Inc. 25.0% 39.6 32.6 NA 219.776 6,442.2 1,463.0 4.4
CS NYSE Cabletron Systems Inc. 20.0% 11.3 45.8 13.3 158.208 2,392.9 1,238.6 1.9
CSCO OTC Cisco Systems Inc. 30.0% 44.0 35.0 29.0 1,022.987 69,371.3 5,430.4 12.8
COMS OTC 3COM Corp 25.0% 33.9 44.9 21.5 354.562 13,207.4 2,476.5 5.3
----------------------------------------------------------------------------------------------------------------------------
COMBINED AVERAGE 28.1% 30.1x 27.9x 20.7x 5.3x
============================================================================================================================
Wandel & Goltermann Technologies 20.0% NM x 24.3x 14.7x 5.288 $81.0 $24.[4] 3.4x
</TABLE>
NA - Not Available
NM - Not Meaningful
* - excluded from average
F - Fiscal Year End Estimate
- ----------
[1] Earnings estimates are from First Call as of March 24, 1998 except for KEI
which is from Bloomberg and TroubleShooter which was provided by the
Company.
[2] Formerly McAfee Associates prior to merger with Network General.
[3] Valuation based on closing price (12/19/97) prior to the announcement of
the acquisition.
[4] Excludes $6.3 million contemplated write-off of purchased technology in
calendar 1998 estimate. Balance sheet data is pro forma for write-off.
<PAGE>
The Robinson-Humphrey Company, LLC
Wandel & Goltermann Technologies, Inc. Page 2
Market Comparison of Selected Public Network Solutions Companies
<TABLE>
<CAPTION>
LTM
Total Total Total ---------------------------------------
Company Debt Cash Firm Value [1] Revenues Op. Inc. EBITDA
- ------- ---- ---- -------------- -------- -------- ------
($MM) ($MM) ($MM) ($MM) ($MM) ($MM)
<S> <C> <C> <C> <C> <C> <C>
Network Analysis Companies
Applied Digital Access, Inc. $0.0 $13.6 $86.9 $29.6 ($5.4) ($2.6)
Concord Communications Inc. 1.4 28.9 256.1 16.2 (2.1) (1.6)
Digital Lightwave Inc. 0.1 33.5 91.9 18.2 1.0 1.4
Hewlett-Packard 4,540.0 4,910.0 65,035.0 44,416.0 4,362.0 5,994.0
Network Associates [2] 0.0 269.2 4,184.9 577.8 185.8 203.3
RADCOM Ltd. 0.8 8.7 39.5 17.4 (1.6) (1.1)
Tekelec 0.0 46.1 1,056.2 105.8 17.5 22.0
Tektronix Inc. 157.4 137.2 2,389.3 2,033.1 139.5 202.9
------------------------------------------------------------------------------------------------------
AVERAGE
======================================================================================================
Network Management Companies
Dynatech Corp. [3] 0.3 47.6 403.8 456.9 67.7 85.7
Fluke Corp. 0.8 37.5 402.3 441.0 46.5 62.1
GenRad, Inc. 8.7 22.6 736.5 221.1 33.5 41.6
Keithley Instruments, Inc. 14.3 2.4 75.6 127.0 5.9 10.0
MicroTest Inc. 0.0 7.7 37.4 49.1 2.2 4.1
Objective Systems Integrators Inc. 0.0 33.1 444.3 37.0 (51.8) (44.5)
Retix 0.0 10.2 103.1 25.8 (11.0) (9.0)
TCSI Corporation 0.0 51.6 86.9 39.2 (11.2) (6.4)
Teradyne Inc. 22.6 168.4 3,024.3 1,115.9 107.6 164.7
Network Equipment Providers
Bay Networks Inc. 98.7 773.4 5,767.5 2,302.1 215.9 374.5
Cabletron Systems Inc. 0.0 421.6 1,971.3 1,446.4 298.0 360.5
Cisco Systems Inc. 0.0 1,613.6 67,757.7 7,298.0 1,960.6 2,212.3
3COM Corp 156.7 1,135.8 12,228.3 3,296.5 328.9 486.2
------------------------------------------------------------------------------------------------------
COMBINED AVERAGE
======================================================================================================
Wandel & Goltermann Technologies $0.0 $7.[4] $73.6 $53.4 ($2.5) ($0.8)
3 Year CAGR
Firm Value to: -------------------
Operating EBITDA ------------------------------ Net
Company Margin Margin Revenues Op. Inc. EBITDA Revenue Income
- ------- ------ ------ -------- -------- ------ ------- ------
Network Analysis Companies
Applied Digital Access, Inc. NM NM 2.94x NMx NMx -17.2% NM
Concord Communications Inc. NM NM 15.85* NM NM 48.9% NM
Digital Lightwave Inc. 5.5% 7.6% 5.06 92.3* 66.9* NM NM
Hewlett-Packard 9.8% 13.5% 1.46 14.9 10.9 16.7% 13.2%
Network Associates [2] 32.2% 35.2% 7.24 22.5 20.6 48.0% 62.9%
RADCOM Ltd. NM NM 2.28 NM NM 108.9% NM
Tekelec 16.6% 20.8% 9.98* 60.2 47.9 8.6% NM
Tektronix Inc. 6.9% 10.0% 1.18 17.1 11.8 13.8% 18.6%
------------------------------------------------------------------------------------------------------
AVERAGE 14.2% 17.4% 3.36% 28.7x 22.8x 32.5% 34.6%
======================================================================================================
Network Management Companies
Dynatech Corp. [3] 14.8% 18.8% 0.x8 6.0x 4.7x 22.1% 52.0%
Fluke Corp. 10.5% 14.1% 0.91 8.7 6.5 6.1% 25.1%
GenRad, Inc. 15.2% 18.8% 3.33 22.0 17.7 11.4% 114.3%
Keithley Instruments, Inc. 4.7% 7.8% 0.59 12.8 7.6 6.1% -50.8%*
MicroTest Inc. 4.5% 8.3% 0.76 16.8 9.2 12.9% 23.2%
Objective Systems Integrators Inc. NM NM 12.00* NM NM 19.8% NM
Retix NM NM 4.00 NM NM -27.4% NM
TCSI Corporation NM NM 2.22 NM NM 22.2% NM
Teradyne Inc. 9.6% 14.8% 2.71 28.1 18.4 22.7% 10.7%
Network Equipment Providers
Bay Networks Inc. 9.4% 16.3% 2.51 26.7 15.4 22.1% -30.4%
Cabletron Systems Inc. 20.6% 24.9% 1.36 6.6 5.5 29.9% 24.2%
Cisco Systems Inc. 26.9% 30.3% 9.28 34.6 30.6 69.8% 51.6%
3COM Corp 10.0% 14.7% 3.71 37.2 25.2 40.5% 42.2%
------------------------------------------------------------------------------------------------------
COMBINED AVERAGE 13.1% 17.4% 2.79 22.6x 16.6x 24.3% 34.0%
======================================================================================================
Wandel & Goltermann Technologies NM NM 1.08x NMx NMx 9.7% -36.0%
</TABLE>
NA - Not Available
NM - Not Meaningful
* - excluded from average
[1] Firm value equals market capitalization plus debt minus cash.
[2] Pro forma for merger with Network General.
[3] Valuation based on closing price (12/19/97) prior to the announcement of
the recapitalization.
[4] Pro forma for contemplated $6.3 million in cash used to fund technology
acquisitions.
<PAGE>
The Robinson-Humphrey Company, LLC 5/27/98
Wandel & Goltermann Technologies, Inc. Page 3
Implied Valuation Analysis Utilizing Average of Network Analysis Companies
(Dollars in Thousands)
<TABLE>
<CAPTION>
Network Analysis Companies Average Multiple
----------------------------------------------------------
Price / Price / Price / Implied
Calendar Calendar Calendar Implied Equity
WGTI's 1997 1998 1999 Price / Equity Value Per
Valuation Parameter Value Net Income Net Income Net Income Book Value Value Share (4)
- --------------------------------- ------- ---------- ---------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Calendar 1997 Net Income ($1,317) 34.6 x NM NM
Calendar 1998 Net Income (1) 1,928 33.5 x $ 64,648 $11.89
Calendar 1999 Net Income 4,729 23.3 x 110,275 20.28
Pro Forma 12/31/97 Book Value (1) 23,950 6.0 x 144,098 26.50
<CAPTION>
Network Analysis Companies Average Multiple
-------------------------------------------
Firm Firm Firm Less
WGTI's Value(2)/ Value(2)/ Value(2)/ Net
Valuation Parameter Value LTM Revenues LTM EBITDA LTM EBIT Debt (3)
- --------------------------------- ------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Calendar 1997 Revenues $53,351 3.36 x ($7,395) $186,615 $34.72
Calendar 1997 EBITDA (783) 22.8 x (7,395) NM NM
Calendar 1997 EBIT (2,485) 28.7 x (7,395) NM NM
--------------------------------
Average $72,234 $13.28
Median $64,648 $11.89
High $186,615 $34.32
Low $0 $0.00
--------------------------------
</TABLE>
- ----------
* Excluded from the average.
(1) Based on projections including technology acquisitions and excludes $6.3
million in purchased technology write-downs for fiscal 1998. Book value is
adjusted for write-downs.
(2) Firm value equals market capitalization plus total debt and preferred stock
minus cash and marketable securities.
(3) Net debt equals debt plus preferred stock less cash and marketable
securities. Assumes cash outlay of $6.0 million for acquisitions (Tinwald
and Network Intelligence) to be completed in the second quarter of fiscal
1998.
(4) Assumes 5,437,432 shares outstanding (including options using the treasury
stock method).
<PAGE>
The Robinson-Humphrey Company, LLC 5/27/98
Wandel & Goltermann Technologies, Inc. Page 4
Implied Valuation Analysis Utilizing Combined Average
Of Network Solutions Companies
(Dollars in Thousands)
<TABLE>
<CAPTION>
Combined Average Multiple
----------------------------------------------------------
Price / Price / Price / Implied
Calendar Calendar Calendar Implied Equity
WGTI's 1997 1998 1999 Price / Equity Value Per
Valuation Parameter Value Net Income Net Income Net Income Book Value Value Share (4)
- --------------------------------- ------- ---------- ---------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Calendar 1997 Net Income ($1,317) 30.1x NM NM
Calendar 1998 Net Income (1) 1,928 27.9x $53,872 $9.91
Calendar 1999 Net Income 4,729 20.7x 97,769 17.98
Pro Forma 12/31/97 Book Value (1) 23,950 5.3x 125,973 23.17
<CAPTION>
Combined Average Multiple
-------------------------------------------
Firm Firm Firm Less
WGTI's Value(2)/ Value(2)/ Value(2)/ Net
Valuation Parameter Value LTM Revenues LTM EBITDA LTM EBIT Debt (3)
- --------------------------------- ------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Calendar 1997 Revenues $53,351 2.79x ($7,395) $156,066 $28.70
Calendar 1997 EBITDA (783) 16.6x (7,395) NM NM
Calendar 1997 EBIT (2,485) 22.4x (7,395) NM NM
--------------------------------
Average $61,954 $11.39
Median $53,872 $9.91
High $156,066 $28.70
Low $0 $0.00
--------------------------------
</TABLE>
- ----------
* Excluded from the average.
(1) Based on projections including technology acquisitions and excludes $6.3
million in purchased technology write-downs for fiscal 1998. Book value is
adjusted for write-downs.
(2) Firm value equals market capitalization plus total debt and preferred stock
minus cash and marketable securities.
(3) Net debt equals debt plus preferred stock less cash and marketable
securities. Assumes cash outlay of $6.0 million for acquisitions (Tinwald
and Network Intelligence) to be completed in the second quarter of fiscal
1998.
(4) Assumes 5,437,432 shares outstanding (including options using the treasury
stock method).
<PAGE>
<TABLE>
The Robinson-Humphrey Company, LLC
Page 1
Wandel & Goltermann Technologies, Inc.
Projected Cash Flows (Assumes Average Scenario)
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Sept. Sept. Sept. Sept. Sept. Sept. Terminal
Projections Used In Valuation: 1997 1998 1999 2000 2001 2002 Value
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Non-Affiliates $29,001 NA NA NA NA NA NA
Affiliates 25,454 NA NA NA NA NA NA
-------- -------- -------- -------- -------- -------- --------
Total Revenues 54,455 66,500 85,538 109,272 136,057 165,840 165,840
Costs of Sales 24,381 30,482 38,939 49,425 60,744 73,485 73,485
-------- -------- -------- -------- -------- -------- --------
Gross Profit 30,074 36,018 46,599 59,847 75,313 92,355 92,355
Gross Margin 55.2% 54.2% 54.5% 54.8% 55.4% 55.7% 55.7%
Expenses
Selling 9,000 NA NA NA NA NA NA
Marketing 5,700 NA NA NA NA NA NA
Administrative 3,300 NA NA NA NA NA NA
Corporate/Trademark 1,360 NA NA NA NA NA NA
-------- -------- -------- -------- -------- -------- --------
Total SG&A 19,360 22,676 27,139 33,576 41,031 50,019 50,019
Development 10,712 11,889 14,639 17,296 19,598 23,160 23,160
Total Operating Expenses 30,072 34,565 41,777 50,871 60,628 73,178 73,178
Operating Expenses 55.2% 52.0% 48.8% 46.6% 44.6% 44.1% 44.1%
Operating Income (EBIT) 2 1,454 4,822 8,976 14,685 19,177 19,177
Inc. Taxes 0 414 1,203 2,427 3,978 5,193 5,193
-------- -------- -------- -------- -------- -------- --------
After Tax Operating Income $2 $1,040 $3,619 $6,549 $10,707 $13,984 $13,984
Operating Margin 0.0% 1.6% 4.2% 6.0% 7.9% 8.4% 8.4%
CASH SOURCES
After Tax Operating Income $2 $1,040 $3,619 $6,549 $10,707 $13,984 $13,984
Depreciation and Amortization 1,766 1,844 2,500 3,700 4,300 4,730 4,730
Other Cash Sources 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- --------
TOTAL SOURCES $1,768 $2,884 $6,119 $10,249 $15,007 $18,714 $18,714
======== ======== ======== ======== ======== ======== ========
CASH USES
Capital Expenditures $1,144 $2,851 $3,010 $4,000 $4,550 $5,385 $5,385
Increase in Current Assets Except Cash 1,360 1,175 2,906 4,041 8,911 8,089 8,089
Increase in Current Liabilities Except Debt 1,157 1,535 1,593 1,437 3,070 3,027 3,027
Increase/(Decrease) in Net Working Capital 203 (360) 1,313 2,604 5,841 5,062 5,062
Other Cash Uses 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- --------
TOTAL USES $1,347 $2,491 $4,323 $6,604 $10,391 $10,447 $10,447
======== ======== ======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------------------
FREE CASH FLOW $393 $1,796 $3,645 $4,616 $8,267 $8,267
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Discount Rate (WACC) Present Value of Cash Flows
----------------------------------------------------------------------------------
<S> <C>
15.00% $11,632
17.50% $10,836
20.00% $10,115
22.50% $9,461
25.00% $8,867
27.50% $8,325
----------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
The Robinson-Humphrey Company, LLC
Page 2
Wandel & Goltermann Technologies, Inc.
Working Capital Assumptions (Assumes Average Scenario)
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Sept. Sept. Sept. Sept. Sept. Sept. Sept.
BALANCE SHEET DATA 1996 1997 1998 1999 2000 2001 2002
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Current Assets less Cash and Equivalents
Receivables (Total) 13,216 11,002 13,031 15,123 18,427 24,458 29,812
Inventories 4,695 5,596 5,884 6,298 6,835 8,715 10,543
Other Current Assets 1,069 3,742 2,600 3,000 3,200 4,200 5,107
------- ------- ------- ------- ------- ------- -------
18,980 20,340 21,515 24,421 28,462 37,373 45,462
Current Liabilities less Current Debt
Accounts Payable (Total) 2,277 3,319 3,989 4,554 5,150 7,798 9,433
Accrued Compensation 1,855 1,467 2,045 2,367 2,791 2,773 3,369
Other Current Liabilities 1,344 1,847 2,134 2,840 3,257 3,697 4,493
------- ------- ------- ------- ------- ------- -------
5,476 6,633 8,168 9,761 11,198 14,268 17,295
Working Capital Less Cash and Equivalents and Current Debt $13,504 $13,707 $13,347 $14,660 $17,264 $23,105 $28,167
------------------------------------------------------------------------------------------------------------
Change in Net Working Capital $203 ($360) $1,313 $2,604 $5,841 $5,062
------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
The Robinson-Humphrey Company, LLC
Page 3
Wandel & Goltermann Technologies, Inc.
EBIT Multiple Methodology for Discounted Cash Flow Analysis (Assumes Average Scenario)
(Dollars in Thousands)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted Average Cost of Capital (WACC) 15.00% 17.50% 20.00% 22.50% 25.00% 27.50%
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Present Value of Cash Flows: $11,632 $10,836 $10,115 $9,461 $8,867 $8,325
- -----------------------------------------------------------------------------------------------------------------------------------
Present Value of Terminal Value:
6.0 x $61,358 $55,698 $50,663 $46,174 $42,161 $38,566
7.0 $71,585 $64,981 $59,107 $53,869 $49,188 $44,994
Multiple 8.0 $81,811 $74,264 $67,551 $61,565 $56,215 $51,422
9.0 $92,037 $83,547 $75,995 $69,261 $63,242 $57,850
10.0 $102,264 $92,830 $84,439 $76,956 $70,268 $64,277
11.0 $112,490 $102,113 $92,883 $84,652 $77,295 $70,705
- -----------------------------------------------------------------------------------------------------------------------------------
Total Value:
6.0 x $72,991 $66,534 $60,778 $55,635 $51,028 $46,891
7.0 $83,217 $75,817 $69,222 $63,331 $58,055 $53,319
Multiple 8.0 $93,443 $85,100 $77,666 $71,026 $65,081 $59,747
9.0 $103,670 $94,383 $86,110 $78,722 $72,108 $66,175
10.0 $113,896 $103,666 $94,554 $86,417 $79,135 $72,602
11.0 $124,122 $112,949 $102,998 $94,113 $86,162 $79,030
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Value:
6.0 x $80,386 $73,929 $68,174 $63,030 $58,423 $54,287
7.0 $90,612 $83,212 $76,618 $70,726 $65,450 $60,715
Multiple 8.0 $100,839 $92,495 $85,062 $78,422 $72,477 $67,142
9.0 $111,065 $101,778 $93,505 $86,117 $79,504 $73,570
10.0 $121,292 $111,061 $101,949 $93,813 $86,531 $79,998
11.0 $131,518 $120,345 $110,393 $101,509 $93,557 $86,426
- -----------------------------------------------------------------------------------------------------------------------------------
Implied Total Value / Fiscal 1998 EBIT Multiple:
6.0 x 50.2 x 45.8 x 41.8 x 38.3 x 35.1 x 32.2 x
7.0 57.2 52.1 47.6 43.6 39.9 36.7
Multiple 8.0 64.3 58.5 53.4 48.8 44.8 41.1
9.0 71.3 64.9 59.2 54.1 49.6 45.5
10.0 78.3 71.3 65.0 59.4 54.4 49.9
11.0 85.4 77.7 70.8 64.7 59.3 54.4
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------
SUMMARY:
- --------------------------------------------------
WACC : 20.00%
Multiple: 8.00
EBIT Terminal Value: $19,177
Present Value of Cash Flows: $10,115
Present Value of Terminal Value: $67,551
------------
Total Value: $77,666
============
Plus: Cash (1) $7,395
Less: Debt $0
------------
Equity Value: $85,062
============
Equity Value per share: $15.64
- --------------------------------------------------
(1) Pro Forma as of 12/31/97.
<PAGE>
<TABLE>
The Robinson-Humphrey Company, LLC
Page 4
Wandel & Goltermann Technologies, Inc.
EBITDA Multiple Methodology for Discounted Cash Flow Analysis (Assumes Average Scenario)
(Dollars in Thousands)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Average Cost of Capital (WACC) 15.00% 17.50% 20.00% 22.50% 25.00% 27.50%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Present Value of Cash Flows: $11,632 $10,836 $10,115 $9,461 $8,867 $8,325
- ------------------------------------------------------------------------------------------------------------------------------------
Present Value of Terminal Value:
4.0 x $50,995 $46,291 $42,106 $38,375 $35,040 $32,053
4.5 $57,369 $52,077 $47,370 $43,172 $39,420 $36,059
5.0 $63,744 $57,863 $52,633 $47,969 $43,800 $40,066
5.5 $70,118 $63,650 $57,896 $52,766 $48,180 $44,072
Multiple 6.0 $76,492 $69,436 $63,160 $57,563 $52,560 $48,079
6.5 $82,867 $75,222 $68,423 $62,359 $56,940 $52,085
7.0 $89,241 $81,009 $73,686 $67,156 $61,320 $56,092
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value:
4.0 x $62,627 $57,126 $52,221 $47,836 $43,907 $40,377
4.5 $69,002 $62,913 $57,485 $52,633 $48,287 $44,384
5.0 $75,376 $68,699 $62,748 $57,430 $52,667 $48,391
5.5 $81,750 $74,485 $68,011 $62,227 $57,047 $52,397
Multiple 6.0 $88,125 $80,272 $73,274 $67,024 $61,427 $56,404
6.5 $94,499 $86,058 $78,538 $71,821 $65,807 $60,410
7.0 $100,873 $91,845 $83,801 $76,617 $70,187 $64,417
- ------------------------------------------------------------------------------------------------------------------------------------
Equity Value:
4.0 x $70,023 $64,522 $59,617 $55,232 $51,302 $47,773
4.5 $76,397 $70,308 $64,880 $60,028 $55,682 $51,779
5.0 $82,771 $76,095 $70,143 $64,825 $60,062 $55,786
5.5 $89,146 $81,881 $75,407 $69,622 $64,442 $59,793
Multiple 6.0 $95,520 $87,667 $80,670 $74,419 $68,822 $63,799
6.5 $101,894 $93,454 $85,933 $79,216 $73,202 $67,806
7.0 $108,269 $99,240 $91,196 $84,013 $77,582 $71,812
- ------------------------------------------------------------------------------------------------------------------------------------
Implied Total Value / Fiscal 1998 EBITDA Multiple:
4.0 x 19.0 x 17.3 x 15.8 x 14.5 x 13.3 x 12.2 x
4.5 20.9 19.1 17.4 16.0 14.6 13.5
5.0 22.9 20.8 19.0 17.4 16.0 14.7
5.5 24.8 22.6 20.6 18.9 17.3 15.9
Multiple 6.0 26.7 24.3 22.2 20.3 18.6 17.1
6.5 28.7 26.1 23.8 21.8 20.0 18.3
7.0 30.6 27.8 25.4 23.2 21.3 19.5
- ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------
SUMMARY:
- -------------------------------------------------
WACC : 20.00%
Multiple: 6.0
EBITDA Terminal Value: $23,907
Present Value of Cash Flows: $10,115
Present Value of Terminal Value: $63,160
-----------
Total Value: $73,274
===========
Plus: Cash (1) $7,395
Less: Debt $0
-----------
Equity Value: $80,670
===========
Equity Value per Share $14.84
- -------------------------------------------------
</TABLE>
(1) Pro Forma as of 12/31/97.
<PAGE>
<TABLE>
The Robinson-Humphrey Company, LLC
Wandel & Goltermann Technologies, Inc.
Terminal Free Cash Flow Methodology for Discounted Cash Flow Analysis (Assumes Average Scenario)
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Weighted Average Cost of Capital (WACC) 15.00% 17.50% 20.00% 22.50% 25.00% 27.50%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Present Value of Cash Flows: $11,632 $10,836 $10,115 $9,461 $8,867 $8,325
- ------------------------------------------------------------------------------------------------------------------------------------
Present Value of Terminal Value:
6.0% $49,009 $34,813 $26,009 $20,112 $15,947 $12,891
6.5% $51,894 $36,396 $26,973 $20,741 $16,378 $13,198
Growth rate 7.0% $55,139 $38,130 $28,011 $21,410 $16,833 $13,520
7.5% $58,817 $40,037 $29,132 $22,124 $17,314 $13,858
8.0% $63,021 $42,145 $30,346 $22,887 $17,824 $14,213
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value:
6.0% $60,641 $45,648 $36,124 $29,573 $24,814 $21,216
6.5% $63,526 $47,232 $37,088 $30,202 $25,245 $21,523
Growth rate 7.0% $66,771 $48,965 $38,126 $30,871 $25,700 $21,845
7.5% $70,449 $50,873 $39,247 $31,585 $26,181 $22,183
8.0% $74,653 $52,981 $40,461 $32,348 $26,690 $22,538
- ------------------------------------------------------------------------------------------------------------------------------------
Equity Value:
6.0% $68,037 $53,044 $43,520 $36,968 $32,209 $28,611
6.5% $70,921 $54,627 $44,483 $37,597 $32,640 $28,918
Growth rate 7.0% $74,167 $56,361 $45,521 $38,266 $33,095 $29,240
7.5% $77,845 $58,268 $46,642 $38,980 $33,576 $29,578
8.0% $82,049 $60,377 $47,856 $39,743 $34,086 $29,934
- ------------------------------------------------------------------------------------------------------------------------------------
Implied Total Value / Fiscal 1998 EBIT Multiple:
6.0% 41.7 x 31.4 x 24.8 x 20.3 x 17.1 x 14.6 x
6.5% 43.7 32.5 25.5 20.8 17.4 14.8
Growth rate 7.0% 45.9 33.7 26.2 21.2 17.7 15.0
7.5% 48.5 35.0 27.0 21.7 18.0 15.3
8.0% 51.3 36.4 27.8 22.2 18.4 15.5
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------
SUMMARY:
- --------------------------------------------------
WACC: 20.00%
Terminal Growth Rate: 7.00%
Present Value of Cash Flows: $10,115
Present Value of Terminal Value: $28,011
-----------
Total Value: $38,126
===========
Plus: Cash (1) $7,395
Less: Debt $0
-----------
Equity Value: $45,521
===========
Equity Value per share $8.37
- --------------------------------------------------
(1) Pro Forma as of 12/31/97.
<PAGE>
The Robinson-Humphrey Company, LLC
Wandel & Goltermann Technologies, Inc. Page 1
Transaction Multiple Analysis for
Selected Mergers and Acquisitions in the
Network Solutions Industry Since 1/1/94
<TABLE>
<CAPTION>
Date Date
Effective Announced Target Target Business Description Acquiror
- --------- --------- ------ ------------------------------ --------
<S> <C> <C> <C> <C>
03/30/94 01/25/94 Brightwork Development Develop LAN mgmt software McAfee Associates Inc
02/13/95 11/14/94 Powersoft Corp Develop software Sybase Inc
02/28/95 02/28/95 Extension Technology Corp Dvlp digital network software Microcom Inc
08/31/95 05/30/95 Saber Software Corp. [4] Dvlp PC network mgmt software McAfee Associates Inc
10/30/95 06/22/95 Frame Technology Corp Develop publishing software Adobe Systems Inc
08/15/95 08/15/95 Hotware Inc Develop networking software Microtest Inc
03/04/96 01/31/96 Tivoli Systems Inc Dvlp systems mgmt software IBM Corp
02/20/96 02/20/96 Synergistic Solutions Inc Develop software Dynatech Corp
03/25/96 03/07/96 Vycor Corp Dvlp integrated network syss McAfee Associates Inc
08/01/96 04/29/96 Continuum Co Inc Develop computer software Computer Sciences Corp
09/03/96 08/19/96 FSA Corp Pvd security commun services McAfee Associates Inc
12/31/96 12/18/96 Itronix Corp(Telxon Corp) Mnfr electric measuring equip Dynatech Corp
06/26/97 04/10/97 Microcom, Inc. Mnfr data comm products Compaq Computer Corp.
04/01/97 04/01/97 3DV Technology Develop computer software Network General Corp
06/12/97 02/26/97 US Robotics Corp Mnfr commun products,systems 3Com Corp
06/30/97 03/31/97 Cascade Communications Corp Mnfr frame relays Ascend Communications Inc
08/30/97 07/30/97 Cinco Networks Inc Develop utilities software Network General Corp
12/09/97 09/12/97 Unison Software Inc Develop network mgmt software Tivoli Systems Inc(IBM Corp)
12/01/97 10/13/97 Network General Corp Pvd computer sys design svcs McAfee Associates Inc
12/22/97 Dynatech Corp Mnfr test,analysis products Investor Group
02/03/98 Netsation Corp. Develop network management software Bay Networks, Inc.
<CAPTION>
Equity Value
as a Multiple of:
----------------- Firm Value as a Multiple of:
Transaction Book Net Transaction --------------------------------
Target Equity Value Value Income Firm Value [1] Revenues EBITDA [2] EBIT [3]
------ ------------ ----- ------ -------------- -------- ---------- --------
($MM) ($MM)
<S> <C> <C> <C> <C> <C> <C> <C>
Brightwork Development $ 10.3 6.5 x 24.6 x $ 10.0 1.36 x NA x 14.0 x
Powersoft Corp 827.7 13.0 63.7 790.8 7.39 36.2 41.8
Extension Technology Corp NA NA NA NA NA NA NA
Saber Software Corp. [4] 61.0 4.1 85.0* 51.7 2.43 NA 66.6*
Frame Technology Corp 460.0 8.0 50.0 414.1 5.01 22.4 30.7
Hotware Inc 0.5 NA NA NA NA NA NA
Tivoli Systems Inc 743.0 17.5* 306.7* 712.7 16.78* 144.8* 213.3*
Synergistic Solutions Inc NA NA NA NA NA NA NA
Vycor Corp 9.0 NA NA NA NA NA NA
Continuum Co Inc 1,300.0 11.7 52.1 1,299.0 2.60 19.0 29.2
FSA Corp 22.2 NA NA NA NA NA NA
Itronix Corp(Telxon Corp) 65.0 11.5 31.5 67.7 1.08 12.2 17.9
Microcom, Inc. 262.0 2.4 55.9 267.5 1.52 14.6 29.4
3DV Technology 20.0 NA NA NA NA NA NA
US Robotics Corp 7,346.8 8.5 26.2 7,425.0 2.98 15.8[5] 16.9
Cascade Communications Corp 2,603.3 10.8 34.8 2,472.6 6.59 18.6 21.3
Cinco Networks Inc 27.0 NA NA NA NA NA NA
Unison Software Inc 179.5 5.8 33.3 156.9 3.68 19.2 20.2
Network General Corp 918.5 6.0 27.5 823.7 3.21 12.6 15.5
Dynatech Corp 826.7 4.7 21.1 804.5 1.94 9.9 12.6
Netsation Corp. 11.6 NA NA 11.6 NA NA NA
-----------------------------------------------------------------------------------------
AVERAGE 7.7x 38.2x 3.32x 18.0x 22.7x
MEDIAN 8.0x 34.6x 2.98x 18.6x 21.3x
=========================================================================================
</TABLE>
- ----------
* Excluded from the average.
NM - Not Meaningful
NA - Not Available
[1] Firm value equals equity value plus debt assumed minus cash and marketable
securities, if disclosed.
[2] EBITDA equals operating income before interest, taxes, depreciation and
amortization.
[3] EBIT equals operating income before interest and taxes.
[4] Equals annualized numbers from the six months ended June 30, 1995.
[5] Includes annual depreciation and amortization only.
<PAGE>
The Robinson-Humphrey Company, LLC 3/22/98
Wandel & Goltermann Technologies, Inc. Page 2
Implied Valuation Analysis Utilizing Network Solution M&A Transaction Multiples
(Dollars in Thousands)
<TABLE>
<CAPTION>
Average Multiple Implied
--------------------- Equity
Equity Equity Implied Value
WGTI's Value/LTM Value/ Equity Per
Valuation Parameter Value Net Income Book Value Share (4)
- --------------------------------- ------ ---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Calendar 1997 Net Income ($1,317) 38.2 x NM NM
Pro Forma 12/31/97 Book Value (1) 23,950 7.7 x $185,421 $34.10
<CAPTION>
Average Multiple
----------------------------------------
Firm Firm Firm Less
WGTI's Value(2)/ Value(2)/ Value(2)/ Net
Valuation Parameter Value LTM Revenues LTM EBITDA LTM EBIT Debt(3)
- --------------------------------- ------ -------------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Calendar 1997 Revenues $53,351 3.32 x ($7,395) $184,293 $33.89
Calendar 1997 EBITDA (783) 18.0 x (7,395) NM NM
Calendar 1997 EBIT (2,485) 22.7 x (7,395) NM NM
-------- ------
---------------------------------------
Average: $73,943 $13.60
High: $185,421 $34.10
Low: $0 $0.00
---------------------------------------
</TABLE>
- ----------
* Excluded from average.
(1) Adjusted $6.3 million for contemplated write-downs of purchased technology.
(2) Firm value equals equity value plus debt assumed minus cash and marketable
securities, if disclosed.
(3) Net debt equals debt plus preferred stock less cash and marketable
securities. Assumes cash outlay of $6.0 million for acquisitions (Tinwald
and Network Intelligence) to be completed in the second quarter of fiscal
1998.
(4) Assumes 5,437,432 shares outstanding (includes outstanding options using
the treasury stock method).
<PAGE>
The Robinson-Humphrey Company, LLC
Wandel & Goltermann Technologies, Inc. Page 3
Selected M&A Transaction Premiums and Forward PE Multiples for
Public Network Solutions Companies Since 1/1/94
<TABLE>
<CAPTION>
Price Current Forward
Date Date Per Year Year
Announced Effective Target Acquiror Share PE [1] PE [1]
- --------- --------- ------ -------- ----- ------ -------
<S> <C> <C> <C> <C> <C> <C>
02/13/95 11/14/94 Powersoft Corp Sybase Inc $77.40 66.7 x* 47.5 x*
10/30/95 06/22/95 Frame Technology Corp Adobe Systems Inc 32.95 37.4 29.2
03/04/96 01/31/96 Tivoli Systems Inc IBM Corp 47.50 182.7* 101.1*
08/01/96 04/29/96 Continuum Co Inc Computer Sciences Corp 61.72 34.9 29.0
06/12/97 02/26/97 US Robotics Corp 3Com Corp 68.50 20.9 15.7
06/30/97 03/31/97 Cascade Communications Corp Ascend Communications Inc 36.40 45.5 29.6
12/09/97 09/12/97 Unison Software Inc Tivoli Systems Inc(IBM Corp) 15.00 25.9 20.5
06/26/97 04/10/97 Microcom Inc Compaq Computer Corp 16.25 54.2 20.3
12/01/97 10/13/97 Network General Corp McAfee Associates Inc 24.98 33.3 24.3
12/22/97 Dynatech Corp Investor Group 47.75 20.4 15.9
---------------------------------
AVERAGE 34.1 x 23.1 x
MEDIAN 36.2 26.6
=================================
<CAPTION>
Premium Premium Premium
1 Day 1 Week 4 Weeks
Prior To Prior To Prior To
Announcement Announcement Announcement
Target Date Date Date
- ------ ------------ ------------ ------------
<S> <C> <C> <C>
Powersoft Corp 26.1% 22.4% 33.2%
Frame Technology Corp 25.5 18.7 49.8
Tivoli Systems Inc 25.8 25.0 41.8
Continuum Co Inc 36.0 35.6 45.2
US Robotics Corp 11.4 13.2 0.4*
Cascade Communications Corp 28.3 46.7 21.1
Unison Software Inc 9.1* 25.0 22.4
Microcom Inc 54.8 91.2* 35.4
Network General Corp 19.6 25.3 42.7
Dynatech Corp 29.9 37.2 29.9
-----------------------------------------------------------------------
AVERAGE 28.6% 27.7% 35.7%
MEDIAN 26.0 25.1 34.3
=======================================================================
</TABLE>
- ----------
Source: Securities Data Company, Inc.
* - excluded from average
[1] Current and forward year EPS projections provided by IBES. Multiples based
on price per share offered to the target at the time of the announcement.
<PAGE>
The Robinson-Humphrey Company, LLC 3/22/98
Wandel & Goltermann Technologies, Inc.
Implied Valuation Analysis Utilizing Network Solution M&A Premiums
and Forward PE Multiples
Projections With Technology Acquisitions
(Dollars in Thousands)
<TABLE>
<CAPTION>
Average Multiple Implied
--------------------------- Equity
Price/ Price/ Implied Value
WGTI's Current Forward Equity Per
Valuation Parameter Value Yr EPS Yr EPS Value Share (1)
- ------------------------------------------ ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Fiscal 1998 EPS Estimate (1) $0.24 34.1 x $44,451 $8.18
Fiscal 1999 EPS Estimate $0.74 23.1 x 92,773 17.06
<CAPTION>
Average Multiple
---------------------------------------------
Premium Premium Premium
WGTI's One Day One Week Four Weeks
Valuation Parameter Value Prior to Ann. Prior to Ann. Prior to Ann.
- ------------------------------------------ ------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Price One Day Prior to Announcement (3) $10.00 28.6 % $69,931 $12.86
Price One Week Prior to Announcement (3) 9.50 27.7 % 65,954 12.13
Price Four Weeks Prior to Announcement (3) 10.50 35.7 % 77,491 14.25
---------------------------------
Average: $70,120 $12.90
Median: $69,931 $12.86
High: $92,773 $17.06
Low: $44,451 $8.18
=================================
</TABLE>
- ----------
* Excluded from average.
(1) Excludes $6.3 million in purchased technology write-downs.
(2) Assumes 5,437,432 shares outstanding (includes outstanding options using
treasury stock method).
(3) Assumes announcement date on November 19, 1997.
<PAGE>
The Robinson-Humphrey Company, LLC
Wandel & Goltermann Technologies, Inc. Page 1
Selected M&A Transaction Premiums for Minority Interest Acquisitions
in Going Private Transactions
1/1/92 - 3/1/98
<TABLE>
<CAPTION>
Value of
Transaction
Date Acquiror Target Target Business Description ($MM)
---- -------- ------ --------------------------- -----------
<S> <C> <C> <C> <C>
06/25/92 Katy Holdings Katy Industries Inc Mnfr industrial machinery $ 190.047
07/14/92 WR Grace & Co Grace Energy Corp Contract drilling,oilfield svc 628.696
07/29/92 Investor Group Fretter Inc Home appliances, electronics 102.182
01/04/93 Investor Group United Medical Corp Whl medical supplies 19.473
02/19/93 National Mutual Insurance Co Celina Financial Corp Insurance agents 7.482
03/08/93 Dundee Bancorp International Avalon Corp(Corona Corp) Oil and gas exploration, prodn 38.999
05/07/93 New Marvel Holdings Inc Marvel Entertainment Group Inc Publish comic books 738.858
08/12/93 REMEC Inc Humphrey Inc Mnfr precision instruments 10.302
09/01/93 Investor Group Forum Group Inc Own,operate nursing homes 245.530
04/28/94 Investor Group Enquirer/Star Group Inc Publish tabloid newspapers 1067.888
09/13/94 Investor Group LDB Corp Mnfr mobile homes;whl carpets 17.766
11/15/94 Freeman Spogli & Co Koll Management Services(Koll) Real estate management svcs 109.062
03/15/95 LinPac Mouldings Ltd Ropak Corp Manufacture plastic containers 79.638
03/24/95 Dole Food Co Inc Castle & Cooke Homes Inc Real estate development firm 525.031
04/28/95 Fleet Financial Group Inc,MA Fleet Mortgage Group Inc Mortgage bank;holding company 1742.003
05/19/95 BIC SA Bic Corp(BIC SA) Mnfr writing instruments 906.058
08/02/95 Club Mediterranee SA Club Med Inc Operate vacation resorts 503.609
08/25/95 Berkshire Hathaway Inc. GEICO Corp. Insurance and financial svcs 5441.824
08/30/95 Investor Group Syms Corp Own,op men's clothing store 160.687
09/26/95 SCOR SCOR US Corp(SCOR SA) Reinsurance holding company 386.745
10/02/95 Genzyme Corp IG Laboratories Inc Operate medical laboratories 71.294
11/06/95 Investor Group NPC International Inc Own and operate restaurants 298.189
12/11/95 COBE Laboratories(Gambro AB) REN Corp-USA(COBE Labs Inc) Own,op kidney dialysis centers 388.346
03/29/96 Equity Holdings Ltd Great American Mgmt & Invt Inc Invt advice and financial svcs 746.409
05/27/96 Novartis AG SyStemix Inc(Sandoz AG) Mnfr,dvlp cellular processes 401.596
06/21/96 Seaboard Acquisition Partners Seaboard Oil Co Oil and gas exploration,prodn 10.769
09/17/96 Chemed Corp Roto-Rooter Inc(Chemed Corp) Provide plumbing services,prod 220.326
09/30/96 CUS Acquisition Inc Customedix Corp Mnfr dental, medical products 15.103
10/03/96 Electromagnetic Sciences LXE Radio control devices 13.500
10/10/96 Renco Group Inc WCI Steel Inc(Renco Group Inc) Manufacture steel 437.182
11/13/96 Monsanto Co Calgene Inc Own and operate greenhouse 584.080
11/20/96 Andrews Group Inc Toy Biz Inc Mnfr games and toys 452.237
11/27/96 JW Childs Equity Partners LP Central Tractor Farm & Country Own,op tractor,hardware stores 169.606
01/21/97 Mafco Holdings Inc Mafco Consolidated Grp(Mafco) Mnfr cosmetics,beauty products 980.318
<CAPTION>
Premium Premium Premium
1 Day 1 Week 4 Weeks
Price Prior To Prior To Prior To
Percent Per Announcement Announcement Announcement
Target Sought Share Date Date Date
- ------ ------ ----- ------------ ------------ ------------
<C> <C> <C> <C> <C> <C>
Katy Industries Inc 48.1% $25.75 53.7% 51.5% 46.1%
Grace Energy Corp 16.6% 19.00 24.6 21.6 7.8
Fretter Inc 24.0% 4.00 77.8 100.0 52.4
United Medical Corp 48.0% 9.50 49.0 52.0 49.0
Celina Financial Corp 44.4% 5.80 16.0 36.5 36.5
Avalon Corp(Corona Corp) 16.5% 3.75 42.9 42.9 50.0
Marvel Entertainment Group Inc 20.7% 30.00 53.8 42.9 58.9
Humphrey Inc 48.5% 6.00 18.5 14.3 45.5
Forum Group Inc 35.7% 3.62 106.9 70.4 106.9
Enquirer/Star Group Inc 43.0% 17.50 20.7 20.7 7.7
LDB Corp 31.0% 7.50 42.9 42.9 42.9
Koll Management Services(Koll) 48.0% 33.20 107.5 107.5 114.2
Ropak Corp 45.2% 11.00 4.8 6.0 4.8
Castle & Cooke Homes Inc 18.3% 15.75 35.5 41.6 55.6
Fleet Mortgage Group Inc 19.0% 20.00 19.4 18.5 18.5
Bic Corp(BIC SA) 22.0% 40.50 13.3 12.5 28.6
Club Med Inc 33.0% 32.00 41.4 39.9 44.6
GEICO Corp. 47.6% 70.00 25.6 23.1 25.3
Syms Corp 22.0% 8.75 11.1 9.4 25.0
SCOR US Corp(SCOR SA) 20.0% 15.25 37.1 35.6 38.6
IG Laboratories Inc 34.9% 7.00 43.6 86.7 143.5
NPC International Inc 38.0% 9.00 44.0 44.0 33.3
REN Corp-USA(COBE Labs Inc) 48.4% 20.00 27.0 20.3 26.0
Great American Mgmt & Invt Inc 12.1% 50.00 2.6 4.2 3.6
SyStemix Inc(Sandoz AG) 26.3% 19.50 4.7 69.6 59.2
Seaboard Oil Co 29.0% 9.75 11.4 11.4 39.3
Roto-Rooter Inc(Chemed Corp) 45.1% 41.00 12.3 12.3 11.2
Customedix Corp 45.4% 2.38 22.6 26.7 5.6
LXE 28.0% 13.13 22.1 14.1 19.3
WCI Steel Inc(Renco Group Inc) 15.5% 10.00 17.6 29.0 77.8
Calgene Inc 9.4% 8.00 64.1 80.3 39.1
Toy Biz Inc 33.0% 22.50 29.5 25.9 20.0
Central Tractor Farm & Country 34.6% 14.25 17.5 17.5 18.8
Mafco Consolidated Grp(Mafco) 15.0% 33.50 23.5 23.5 27.6
</TABLE>
<PAGE>
The Robinson-Humphrey Company, LLC
Wandel & Goltermann Technologies, Inc. Page 2
Selected M&A Transaction Premiums for Minority Interest Acquisitions
in Going Private Transactions
1/1/92 - 3/1/98
<TABLE>
<CAPTION>
Value of
Transaction
Date Acquiror Target Target Business Description ($MM)
---- -------- ------ --------------------------- -----------
<S> <C> <C> <C> <C>
01/24/97 National Patent Development General Physics Corp Provide training services 70.360
07/15/97 Anthem Inc Acordia Inc(Anthem Inc) Pvd insurance brokerage svcs 633.961
09/05/97 Gold Kist Golden Poultry Company Poultry Processing 230.600
12/16/97 Orion Capital Corp Guaranty National Corp Insurance company 647.411
Pending Texas Industries Inc Chaparral Steel Co Mnfr primary steel products 519.310
Pending Rayonier Inc Rayonier Timberlands LP Own,op timber tracts 65.800
Pending Koninklijke KNP BT NV BT Office Products Intl Inc Whl office stationary,supplies 105.400
<CAPTION>
Premium Premium Premium
1 Day 1 Week 4 Weeks
Price Prior To Prior To Prior To
Percent Per Announcement Announcement Announcement
Target Sought Share Date Date Date
- ------ ------ ----- ------------ ------------ ------------
<C> <C> <C> <C> <C> <C>
General Physics Corp 48.0% 5.10 16.6 31.6 36.0
Acordia Inc(Anthem Inc) 39.2% 40.00 12.7 11.5 26.0
Golden Poultry Company 25.5% 14.25 28.1 31.0 29.5
Guaranty National Corp 22.7% 36.00 10.8 23.9 27.7
Chaparral Steel Co 18.7% 15.50 20.4 25.3 29.2
Rayonier Timberlands LP 25.3% 13.00 11.2 25.3 17.5
BT Office Products Intl Inc 30.0% 10.50 1.2 36.6 36.6
-----------------------------------------------------------------------------------------
AVERAGE 31.1% 30.4% 35.1% 38.7%
MEDIAN 30.0% 22.6% 26.7% 33.3%
HIGH 48.5% 107.5% 107.5% 143.5%
LOW 9.4% 1.3% 4.2% 3.6%
=========================================================================================
</TABLE>
Source: Securities Data Company, Inc.
<PAGE>
The Robinson-Humphrey Company, LLC
Wandel & Goltermann Technologies, Inc. Page 3
Implied Valuation Analysis Utilizing Selected Premiums From
Minority Interest/Going Private Transactions
(Dollars in Thousands)
<TABLE>
<CAPTION>
Implied
Average Premium Equity
--------------------------------------------------- Implied Value
WGTI's 1 Day Prior 1 Week Prior 4 Weeks Prior Equity Per
Valuation Parameter [1] Value To Announcement To Announcement To Announcement Value Share [2]
- ----------------------------------------- ------ --------------- --------------- --------------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stock Price 1 Day Prior to Announcement $10.00 30.4 % $70,897 $13.04
Stock Price 1 Week Prior to Announcement 9.50 35.1 % 69,801 12.84
Stock Price 4 Weeks Prior to Announcement 10.50 38.7 % 79,173 14.56
-----------------------------------
Average: $73,291 $13.48
Median: $70,897 $13.04
High: $79,173 $14.56
Low: $69,801 $12.84
===================================
</TABLE>
- ----------
* Excluded from the unweighted average.
[1] Press release announcing potential acquisition was made on November 19,
1997.
[2] Assumes 5,437,432 shares outstanding (includes outstanding options under
treasury stock method).
<PAGE>
Project Triangle
- --------------------------------------------------------------------------------
Discussion Materials Relative To
Wandel & Goltermann Technologies, Inc
December 23, 1997
[LOGO] BROADVIEW ASSOCIATES
<PAGE>
Disclaimer
- --------------------------------------------------------------------------------
These discussion materials have been prepared by Broadview Associates
("Broadview") exclusively for the benefit and internal use of Wandel &
Goltermann Management Holding GmbH ("WG Holding" or the "Parent") in order to
evaluate, on a preliminary basis, the feasibility of an acquisition of the
publicly held minority interest in Wandel & Goltermann Technologies, Inc.
("WGTI" or the "Company").
Broadview's role as financial advisor to WG Holding, and therefore the scope of
its analysis, has focused on the financial valuation of WGTI based on available
information relating to the Company. The analysis reflects Broadview's views and
the prevailing market conditions as of December 23, 1997 and may accordingly be
subject to change. In performing its analysis, Broadview has relied upon and has
assumed, without independent verification, the accuracy and completeness of all
information available from public sources or provided to Broadview by or on
behalf of WG Holding and WGTI. Further due diligence is required in order to
fully assess the risks inherent in the acquisition.
[LOGO] BROADVIEW ASSOCIATES 2
<PAGE>
Table Of Contents
- --------------------------------------------------------------------------------
Section
Executive Summary 1
Business And Financial Outlook 2
Trading Performance 3
Valuation Analysis 4
-- Discounted Cash Flow Analysis
-- Public Comparables
-- M&A Comparables
-- Control Premia
Appendix 5
[LOGO] BROADVIEW ASSOCIATES 3
<PAGE>
- --------------------------------------------------------------------------------
Executive Summary
[LOGO] BROADVIEW ASSOCIATES 4
<PAGE>
Scope Of Evaluation
- --------------------------------------------------------------------------------
o Broadview has been engaged as financial advisor to WG Holding in connection
with its current review of various strategic transactions, including the
possible repurchase of all of the common stock of WGTI not currently held
by WG Holding
o Our assessment of WGTI, the subject of these materials, incorporates a
detailed review of the business and prospects of WGTI taking into account:
- Review of publicly available documents
- Review of management accounts and forecasts
- Due diligence, including site visits and meetings with WGTI's senior
management
- Discussions with WG Holding management
- Analysis of share trading history and current market rating
o In making our recommendations, Broadview has considered WGTI's valuation as
an independent company, based on the following information:
- Market position
- Financial performance and outlook
- Trading performance and outlook
- Valuation analyses, including discounted cash flow, comparisons with
comparable public companies and M&A transactions, and analyses of
control premia paid in public takeovers
[LOGO] BROADVIEW ASSOCIATES 5
<PAGE>
Recommended Offer Strategy
- --------------------------------------------------------------------------------
o Should WG Holding wish to proceed with an acquisition of the outstanding
public minority interest in WGTI, Broadview recommends an offer in the
range of $12.00 to $13.50 per share
o Should WG Holding not wish to consider other alternatives such as the sale
of WGTI to a third party or a secondary offering, Broadview advises that
the Parent indicate in its offer to shareholders its sole interest in the
acquisition of the public minority
[LOGO] BROADVIEW ASSOCIATES 6
<PAGE>
Key Parameters Of A Possible Transaction
- --------------------------------------------------------------------------------
Consideration WG Holding may consider an offer of $12.00-13.50
per share in cash for each of the 1,975,422 WGTI
Common Shares (38%) not owned by WG Holding for an
aggregate value of $23.7 to $26.7 million
Premium Day Prior To Announcement Of
"Special Committee" (18-Nov-97) 20-35%
20 Trading Days Prior (22-Oct-97) 14-29%
60-Trading Days Prior (26-Aug-97) 10-24%
Latest Available Price (23-Dec-97) (10)-1%
Execution Likely as a cash-out merger
Closing conditions Receipt of all requisite regulatory and government
approvals
Delisting/Deregistration WGTI shares to be delisted from trading on NASDAQ
and deregistered with the SEC
[LOGO] BROADVIEW ASSOCIATES 7
<PAGE>
- --------------------------------------------------------------------------------
Business And Financial Outlook
[LOGO] BROADVIEW ASSOCIATES 8
<PAGE>
Market Outlook
- --------------------------------------------------------------------------------
Broadview's evaluation of WGTI has focused on assessing the Company's value as a
stand-alone business. As an independent entity, the Company faces a number of
challenges affecting its long-term success and profitability
o Intense competition in a rapidly consolidating market -- The pace of
technical innovation in the Test & Measurement ("T&M") industry requires
increasing R&D funding and technical resources, with certain vendors such as
Hewlett-Packard and Network Associates establishing market leading positions
at the expense of smaller, less resourceful competitors
o Product market experiencing fundamental technology shift -- The network test
equipment market is undergoing a dramatic change toward software-based
products, with the traditionally hardware-focused vendors required to raise
R&D spending
o Target customers changing -- The primary growth in T&M is generated by the
Local Area Network market, i.e. a very large number of corporate MIS
departments, rather than WGTI's traditional target market of manufacturers
of communication equipment, which require significantly different sales,
marketing and distribution strategies
[LOGO] BROADVIEW ASSOCIATES 9
<PAGE>
Business Outlook
- --------------------------------------------------------------------------------
Broadview's evaluation of WGTI has focused on assessing the Company's value as a
stand-alone business. As an independent entity, the Company faces a number of
challenges affecting its long-term success and profitability:
o WGTI's product offering faces major challenges -- With one of the three
WGTI product lines, the DA-30, nearing the end of its lifecycle and the new
NetForce network solutions only entering beta-testing, WGTI faces
significant risks in terms of maintaining overall revenue momentum. In
future, WGTI must also adjust its sales & marketing strategy to new
technologies, in particular relative to Domino and NetForce, and new target
markets for T&M products
o WGTI is dependent on WG Holding in multiple areas:
- Benefits from international distribution - WGTI has the right to
access WG Holding's worldwide network of sales and service
subsidiaries for distribution outside the USA
- Benefits from exclusive US distribution of WG Holding products - WGTI
enjoys an exclusive distribution agreement with WG Holding for sales
of the Parent's products in the USA
- Benefits from established WG Holding brand name - WGTI benefits from
the right to use WG Holding's brand name and access its marketing
infrastructure, e.g. WG Holding's global product catalogue
- Benefits form R&D and other operational resources - WGTI benefits from
certain inter-company arrangements with WG Holding concerning the use
of R&D, administration and other facilities
[LOGO] BROADVIEW ASSOCIATES 10
<PAGE>
Financial Outlook
- --------------------------------------------------------------------------------
Broadview's evaluation of WGTI has focused on assessing the Company's value as a
stand-alone business. As an independent entity, the Company faces a number of
challenges affecting its long-term success and profitability:
o Declining revenue -- Over the last four quarters, WGTI has experienced a
substantial revenue decline, with quarterly revenue falling from one
quarter to the next
o Future revenue uncertain -- Current and future results will be affected by
declining DA-30 sales and an uncertain contribution from the NetForce
launch, resulting in very limited revenue and earnings visibility and high
risk
o Decreasing gross margin -- Gross margins have declined, and are set to
shrink further, as WGTI is growing its 3rd-party products business, a trend
likely to continue
o Above-average cost structure -- By T&M industry standards, WGTI's R&D and
SG&A spending is markedly above industry average
o Loss-making -- WGTI has been unprofitable for the last four quarters, with
losses increasing by the quarter
o Variance between forecast and actuals -- WGTI has historically shown
variances, in part material, between its forecast and actual financial
performance
[LOGO] BROADVIEW ASSOCIATES 11
<PAGE>
WGTI's Attractiveness To WG Holding
- --------------------------------------------------------------------------------
Broadview believes that WG Holding can obtain multiple benefits from a closer
integration of WGTI into its group of subsidiaries. Several benefits may be
uniquely available to WG Holding, potentially making WGTI more valuable to WG
Holding than to other parties.
o WGTI represents a well-established, "WG-branded" foothold in the US -- Given
the priority placed on a rapid penetration of the US market, WG Holding has
a choice of building upon WGTI or acquiring another vendor, with the latter
option likely being more expensive, risky and time-consuming
o WGTI's product set complements the offering of WG Holding -- Given the
integration between the two companies' offerings and the synergies in terms
of R&D and sourcing, WGTI may be seen as the preferable option to acquiring
another vendor with a similar set of products
o Opportunities for better group-wide financial optimisation -- With the
acquisition of WGTI, WG Holding may have the opportunity to manage the group
financial and tax affairs in a better way than currently possible
o Reduced costs following delisting -- As a result of the delisting, WGTI may
improve profitability as it will no longer incur charges associated with the
current public listing
[LOGO] BROADVIEW ASSOCIATES 12
<PAGE>
- --------------------------------------------------------------------------------
Trading Performance
[LOGO] BROADVIEW ASSOCIATES 13
<PAGE>
Market Attributes
- --------------------------------------------------------------------------------
In its assessment of the trading performance of WGTI, Broadview has reviewed
both the share price development since the initial public offering ("IPO") of
the Company and the particular circumstances affecting WGTI's stock price.
The market in WGTI's shares can be described by the following attributes:
o Lack of market-making activity
o Low liquidity
o Very wide and volatile price fluctuations
o Very limited research coverage
o Largely news-driven trading, in particular around the quarterly results
[LOGO] BROADVIEW ASSOCIATES 14
<PAGE>
Share Performance
- --------------------------------------------------------------------------------
In its assessment of the trading performance of WGTI, Broadview has reviewed
both the share price development since the IPO of the Company and the particular
circumstances affecting WGTI's stock price.
WGTI's share price performance since its IPO can be summarised as follows:
Post-Event Price
Year Event Level ($/share)
- ---- ----- ---------------
1994 IPO (4/94) $11
Year-end close $13
1995 Better than expected Q2 results (5/95) $20
Worse than expected Q3 results (6/95) $11
Year-end close $11
1996 Better than expected Q2 results (4/96) $18
Cisco distribution agreement (4/96) $20
Better than expected full-year results (11/96) $22
Year-end close $30
1997 Worse than expected Q2 results (4/97) $11
Research analyst downgrade (6/97) $9
Announcement of "Special Committee" formation (11/97) $12
Positive equities research (12/97) $13
[LOGO] BROADVIEW ASSOCIATES 15
<PAGE>
Long-Term Share Price Development
- --------------------------------------------------------------------------------
Since its IPO, WGTI's stock has experienced wide price fluctuations, caused by
volatile financial results.
Stock Price History (April 1994 To Date)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
PLOT POINTS TO COME
[LOGO] BROADVIEW ASSOCIATES 16
<PAGE>
Recent Share Price Development
- --------------------------------------------------------------------------------
In early 1997, WGTI's share price declined from $30.00 to $8.50 due to
worse-than-expected financial results. Following November 18, 1997, the share
price rose in excess of 20% as the result of speculative trading after the
"Special Committee" announcement. The new price level was elevated by a further
7% due to the late December release of equities research suggesting "more
immediate upside".
Stock Price History 1997
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
PLOT POINTS TO COME
[LOGO] BROADVIEW ASSOCIATES 17
<PAGE>
T&M Sector Comparison
- --------------------------------------------------------------------------------
WGTI's share price has clearly underperformed in comparison with its publicly
quoted T&M industry competitors such as Dynatech, Fluke, IFR, Keithley, Lecroy,
Tekelec and Tektronix.
WGTI Stock Performance Vs. T&M Index (April 1994 To Date)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
PLOT POINTS TO COME
[LOGO] BROADVIEW ASSOCIATES 18
<PAGE>
- --------------------------------------------------------------------------------
Valuation Analysis
[LOGO] BROADVIEW ASSOCIATES 19
<PAGE>
Approach
- --------------------------------------------------------------------------------
o Broadview's evaluation has drawn on a number of analyses, including:
- Discounted Cash Flow ("DCF Analysis") - Sensitivity analyses based on
a review of expected cash flows using WGTI's management forecasts for
the business provided to Broadview on December 11, 1997 for the years
1998-2000, extending these forecasts to 2003 and applying an
appropriate discount rate and terminal value to reflect the value of
the business beyond the forecasting period
- Analysis of Comparable Publicly Traded Companies ("Public
Comparables") - Valuation based on trading multiples of comparable T&M
companies
- Analysis of Comparable M&A Transactions ("M&A Comparables") -
Valuation based on benchmarks established by M&A transactions
involving T&M vendors as targets
- Analysis of Premia Paid In Takeovers of Public Companies ("Control
Premia") - Review of premia paid for acquisitions of US stock exchange
quoted companies, acquisitions of public information technology
companies and acquisitions of public minority stakes
o Balance sheet adjustments, as appropriate, have been made to determine
equity value
[LOGO] BROADVIEW ASSOCIATES 20
<PAGE>
Approach (continued)
- --------------------------------------------------------------------------------
o WGTI's 5,261,022 common shares outstanding have been used for calculating
per share values
- Broadview has analysed the Company's 804,570 options, the majority of
which are at strike prices well in excess of the current share price
and outside the range of offer values recommended by Broadview
- While a legal review of the option agreements should be undertaken
prior to an offer, there is no indication these options would be
exercised following an offer
- Only 315,375 options are potentially exerciseable at or near the range
of proposed offer prices, with such options having no material
financial impact on the range of offer values
[LOGO] BROADVIEW ASSOCIATES 21
<PAGE>
Valuation Summary
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
($ per share)
Equity
Trading Acquisition Value
Valuation Methodology Value (1) Control Premia Range (2)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DCF Analysis -- -- -- $10.78 $12.82
Public Comparables $8.89 8.6% 27.0 $9.65 $11.29
M&A Comparables -- -- -- $5.81 $15.44
Share Price Prior To "Special $10.00 8.6% 27.0% $.86 $12.70
Committee" Announcement
</TABLE>
Note
(1) "Equity Trading Value" represents the price per share in normal trading
circumstances
(2) "Acquisition Value" represents the price per share following public
announcement of an acquisition, reflecting a control premium
[LOGO] BROADVIEW ASSOCIATES 22
<PAGE>
Valuation Summary (continued)
- --------------------------------------------------------------------------------
DCF Analysis
Public Comparables
M&A Comparables
Control Premia
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
PLOT POINTS TO COME
[LOGO] BROADVIEW ASSOCIATES 23
<PAGE>
Valuation Summary: Implied-Premium Analysis
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Offer Price ($ per Share) 10.00 10.25 10.50 10.75 11.00 11.25 11.50 11.75 12.00 12.25 12.50
Premium to
1-Trading-Day Prior (18-Nov-97) 0.0% 2.5% 5.0% 7.5% 10.0% 12.5% 15.0% 17.5% 20.0% 22.5% 25.0%
20-Trading-Days Prior (22-Oct-97) -4.8% -2.4% 0.0% 2.4% 4.8% 7.1% 9.5% 11.9% 14.3% 16.7% 19.0%
60-Trading-Days Prior (26-Aug-97) -8.0% -5.7% -3.4% -1.1% 1.1% 3.4% 5.7% 8.0% 10.3% 12.6% 14.9%
Current Price (23-Dec-97) -25.2% -23.4% -21.5% -19.6% -17.8% -15.9% -14.0% -12.1% -10.3% -8.4% -6.5%
Implied P/E (Trailing) 124.08 127.18 130.28 133.39 136.49 139.59 142.69 145.79 148.90 152.00 155.10
Implied P/EBITDA (Trailing) 29.76 30.50 31.24 31.99 32.73 33.48 34.22 34.96 35.71 36.45 37.20
Implied P/E (Forward 1998) 26.54 27.21 27.87 28.53 29.20 29.86 30.53 31.19 31.85 32.52 33.18
Implied P/EBITDA (Forward 1998) 14.55 14.92 15.28 15.64 16.01 16.37 16.74 17.10 17.46 17.83 18.19
Offer Price ($ per Share) 12.75 13.00 13.25 13.50 13.75 14.00 14.25 14.50 14.75 15.00 15.25
Premium to
1-Trading-Day Prior (18-Nov-97) 27.5% 30.0% 32.5% 35.0% 37.5% 40.0% 42.5% 45.0% 47.5% 50.0% 52.5%
20-Trading-Days Prior (22-Oct-97) 21.4% 23.8% 26.2% 28.6% 31.0% 33.3% 35.7% 38.1% 40.5% 42.9% 45.2%
60-Trading-Days Prior (26-Aug-97) 17.2% 19.5% 21.8% 24.1% 26.4% 28.7% 31.0% 33.3% 35.6% 37.9% 40.2%
Current Price (23-Dec-97) -4.7% -2.8% -0.9% 0.9% 2.8% 4.7% 6.5% 8.4% 10.3% 12.1% 14.0%
Implied P/E (Trailing) 158.20 161.30 164.41 167.51 170.61 173.71 176.81 179.92 183.02 186.12 189.22
Implied P/EBITDA (Trailing) 37.94 38.68 39.43 40.17 40.92 41.66 42.40 43.15 43.89 44.64 45.38
Implied P/E (Forward 1998) 33.84 34.51 35.17 35.83 36.50 37.16 37.83 38.49 39.15 39.82 40.48
Implied P/EBITDA (Forward 1998) 18.56 18.92 19.28 19.65 20.01 20.37 20.74 21.10 21.47 21.83 22.19
</TABLE>
[LOGO] BROADVIEW ASSOCIATES 24
<PAGE>
- --------------------------------------------------------------------------------
Valuation Analysis
Discounted Cash Flow Analysis
[LOGO] BROADVIEW ASSOCIATES 25
<PAGE>
DCF Analysis: Model Assumptions
- --------------------------------------------------------------------------------
o Financial forecasts provided by WGTI management (1998-2000), extended for
three years applying consistent assumptions (note: there are no recent
multi-year projections by research analysts available)
o Discounted present value of free cash flow using a range of discount rates
determined by the Company's beta
o Terminal value ("TV") obtained using a range of perpetuity growth rates
o Sensitivity analyses based on various revenue growth scenarios, discount
rates and perpetuity growth rates
- sensitivity analysis adjusts the WGTI management forecast's compound
annual growth rate from 25.1% to a range between 22% and 28%
- sensitivity analysis adjusts the 12.2% discount rate calculated from
the Company's beta to a range between 10% and 14%
- sensitivity analysis adjusts the median perpetuity growth rate of 4%
to a range between 3% and 5%
[LOGO] BROADVIEW ASSOCIATES 26
<PAGE>
DCF Analysis: Terminal Value
- --------------------------------------------------------------------------------
o Basis -- The DCF is based on two major components: (i) a present value of
the unleveraged free cash flows from 1998-2003 and (ii) the present value
of the business beyond 2003 into perpetuity (Terminal Value).
o Terminal Value -- The TV reflects the value of cash flows not included in
the detailed forecast period. These cash flows are assumed to continue and
can therefore be assimilated into perpetuity. The TV calculation is based
on the following formula:
TV = CFN (1 + g) where: o CFN is the last cash flow (year 2003) in
(r - g) the forecast period
o r is the applicable discount rate
o g is the assumed future growth in cash
flow
o Growth Assumptions -- The Protocol Analyser marker is forecast to grow over
the next four years at a rate of approximately 10%(1) per annum
o Consistency With Public Markets -- The P/E ratio of publicly traded
companies supports growth assumptions for the terminal value analysis.
Current P/E multiples are 15 - 20x for the T&M sector. Based on an analysis
of the sector equity dicount rate (beta), this implies a long term expected
growth rate of 3% to 7% per annum
Notes: (1) Sources - Frost and Sullivan and Primedata
[LOGO] BROADVIEW ASSOCIATES 27
<PAGE>
DCF Analysis: Discount Rates
- --------------------------------------------------------------------------------
o Discount Of Unleveraged Cash Flow -- The DCF model analyses unleveraged
cash flows in order to eliminate the effects of capital structure, thereby
enabling use of a consistent discount rate for the valuation of companies
in the same sector
- Discounted unleveraged cash flows yields total enterprise valuation
- Adjustments for different capital structures gives the equity value
o Discount Rate -- The discount rate to establish the present value of
projected cash flows has been calculated with the following key
assumptions:
- Risk-free rate - Assumed to be the 10-year US government bond yield
- Equity risk premium (Beta) - The Company's beta
- Market premium - The average premium over the risk-free rate which the
equity market has historically yielded
Discount Rate = Risk Free Rate + (Beta x Market Premium)
[LOGO] BROADVIEW ASSOCIATES 28
<PAGE>
DCF Analysis: Income Statement
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Figures in $ thousands)
FYE September 30, 1997 1998(P) 1999(P) 2000(P) 2001(P) 2002(P) 2003(P) NOTES
------ ------- ------- ------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue 54,455 66,200 82,600 106,900 132,855 158,282 180,442 For 2001-03, growth
% growth -7.8% 21.6% 24.8% 29.4% 24.3% 19.1% 14.0% is gradually reduced
to 14% StratPlan
forecasts a CAGR in
the 15-20% range
Cost of Sales 24,381 29,922 38,244 49,388 61,379 74,393 84,808
% of Revenue 44.8% 45.2% 46.3% 46.2% 46.2% 47.0% 47.0%
Gross Profit 30,074 36,278 44,356 57,512 71,476 83,890 95,634
% of Revenue 55.2% 54.8% 53.7% 53.8% 53.8% 53.0% 53.0%
Selling, General and Admin. (SG&A) 19,360 22,600 26,400 34,100 42,379 50,490 57,559
% of Revenue 35.6% 34.1% 32.0% 31.9% 31.9% 31.9% 31.9%
Research & Development 10,712 11,700 13,500 16,500 20,506 24,431 27,851 R&D as a percentage
% of Revenue 19.7% 17.7% 16.3% 15.4% 15.4% 15.4% 15.4% of own product sales
is about 20%-25%
For 2003, R&D
spending is reduced
to 15% of total
revenue
EBITDA 1,768 3,615 6,496 9,912 11,680 12,510 14,281
Depreciation & Amortisation 1,766 1,638 2,040 3,000 3,090 3,542 4,058
EBIT 2 1,978 4,456 6,912 8,590 8,968 10,224
% of Revenue 0.0% 3.0% 5.4% 6.5% 6.5% 5.7% 5.7%
Financial Charges 422 500 989 1,168 1,259 1,451 1,738
Pre-tax Profit 424 2,478 5,446 8,081 9,850 10,419 11,962
% of Revenue 0.8% 3.7% 6.6% 7.6% 7.4% 6.6% 6.6%
Income Taxes 496 1,361 2,182 2,659 2,813 3,230
Effective Tax Rate 0.0% 20.0% 25.0% 27.0% 27.0% 27.0% 27.0%
Net Income 424 1,982 4,084 5,899 7,190 7,606 8,732
% of Revenue 0.8% 3.0% 4.9% 5.5% 5.4% 4.8% 4.8%
</TABLE>
[LOGO] BROADVIEW ASSOCIATES 29
<PAGE>
DCF Analysis: Balance Sheet
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Figures in $ thousands)
FYE September 30, 1997 1998(P) 1999(P) 2000(P) 2001(P) 2002(P) 2003(P)
------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and Cash Equivalents 13,329 13,952 15,272 17,991 20,726 24,829 32,373
Trade Accounts Receivable 11,002 14,000 16,100 19,082 23,715 28,253 31,577
Inventories 5,596 6,000 7,200 9,000 11,185 13,557 15,313
Other Current Assets 3,742 2,600 3,000 3,200 3,200 3,200 3,200
Total Current Assets 33,669 36,552 41,572 49,273 58,826 69,839 82,463
Net PP&E 2,886 3,671 3,651 3,651 4,290 3,913 3,465
Other Assets 588 780 1,500 1,700 1,700 1,700 1,700
Net Intangible Assets 149 20 0 0 0 0 0
Total Assets 37,292 41,023 46,722 54,624 64,815 75,452 87,627
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade Accounts Payable 3,319 3,700 4,500 5,500 6,835 8,285 10,365
Accrued Compensation 1,467 2,291 2,499 3,000 3,769 4,499 5,127
Other Accrued Liabilities 1,847 2,391 2,998 3,500 4,397 5,248 5,982
Total Current Liabilities 6,633 8,381 9,997 12,000 15,001 18,032 21,474
Bank Debt 0 0 0 0 0 0 0
Total Liabilities 6,633 8,381 9,997 12,000 15,001 18,032 21,474
Shareholders Equity 30,659 32,641 36,725 42,624 49,815 57,420 66,153
Total Liabilities and Shareholders' Equity 37,292 41,023 46,722 54,624 64,815 75,452 87,627
</TABLE>
[LOGO] BROADVIEW ASSOCIATES 30
<PAGE>
DCF Analysis: Balance Sheet Assumptions
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Figures in $ thousands)
FYE September 30, 1997 1998(P) 1999(P) 2000(P) 2001(P) 2002(P) 2003(P)
------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Minimum Cash Balance in $ 13,329 13,000 13,000 13,000 16,156 15,828 18,044
as % of Total Revenues 24.5% 19.6% 15.7% 12.2% 12.2% 10.0% 10.0%
Accounts Receivable as % of Total Revenue 20% 21.1% 19.5% 17.9% 18% 18% 18%
A/R Days 73 76 70 64 64 64 63
Inventory as % of COGS 23.0% 20.1% 18.8% 18.2% 18.2% 18.2% 18.1%
Inventory Days 83 72 68 66 66 66 65
Accounts Payable as % of Cost of Goods Sold 14% 12% 12% 11% 11% 11% 12%
Accounts Payable Days 49 45 42 40 40 40 44
Accrued compensation as % of Operating Expenses 5.2% 7.0% 6.6% 6.3% 6.3% 6.3% 6.3%
Other accrued liabilities as % of Operating Expenses 6.5% 7.3% 7.9% 7.4% 7.4% 7.4% 7.4%
Capital Expenditure 1,020 2,293 2,000 3,000 3,728 3,166 3,609
as a % of Total Revenue 1.9% 3.5% 2.4% 2.8% 2.8% 2.0% 2.0%
Capitalised Intangible Assets 64
as a % of Total Revenue 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Net Change in Other Assets 352 192 720 200
as a % of Total Revenue 0.6% 0.3% 0.9% 0.2% 0.0% 0.0% 0.0%
RATIOS
Current Assets (Less Cash) as % of Total Revenue 37% 34% 32% 29% 29% 28% 28%
Trade Assets as % of Total Revenue 30% 30% 28% 26% 26% 26% 26%
Trade Financing as % of Trade Assets 20% 19% 19% 20% 20% 20% 22%
Current Assets/Current Liabilities 5.08 4.36 4.16 4.11 3.92 3.87 3.84
Debt/Debt+Equity 0% 0% 0% 0% 0% 0% 0%
</TABLE>
[LOGO] BROADVIEW ASSOCIATES 31
<PAGE>
DCF Analysis: Cash Flow Statement
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Figures in $ thousands)
FYE September 30, 1997 1998(P) 1999(P) 2000(P) 2001(P) 2002(P) 2003(P)
------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net lncome 424 1,982 4,084 5,899 7,190 7,606 8,732
Adjustments for Non-Cash Items
Depreciation & Amortisation 1,766 1,638 2,040 3,000 3,090 3,542 4,058
Total Adjustments for Non-Cash Items 1,766 1,638 2,040 3,000 3,090 3,542 4,058
Cash Flow From Operations 2,190 3,620 6,124 8,899 10,280 11,148 12,790
Adjustments for Investment and Working Capital
Capital Expenditure -1,020 -2,293 -2,000 -3,000 -3,728 -3,166 -3,609
Change in Other Assets -416 -192 -720 -200 0 0 0
Repayment of Debt 0 0 0 0 0 0 0
Change in Net Working Capital 876 -512 -2,084 -2,979 -3,817 -3,879 -1,637
Total Adjustments for Investments and Working Capital -560 -2,997 -4,804 -6,179 -7,546 -7,045 -5,246
Cash Retained In Business With Given Capital Structure 1,630 623 1,320 2,720 2,734 4,103 7,544
===== ===== ===== ===== ===== ===== =====
</TABLE>
[LOGO] BROADVIEW ASSOCIATES 32
<PAGE>
DCF Analysis: Valuation Summary
- --------------------------------------------------------------------------------
A discounted cash flow valuation yields a value of $10.78 to $12.82 per share.
However, given the limited visibility an future revenue and earnings growth, we
are cautious about the validity of the management forecasts that formed the
basis of the valuation.
<TABLE>
<CAPTION>
(Figures in $ thousands)
FYE September 30, 1997 1998(P) 1999(P) 2000(P) 2001(P) 2002(P) 2003(P)
------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income 424 1,982 4,084 5,899 7,190 7,606 8,732
Adjustments for Non-Cash Items 1,766 1,638 2,040 3,000 3,090 3,542 4,058
Adjustments for Investment and Working Capital -560 -2,997 -4,804 -6,179 -7,546 -7,045 -5,246
Adjustments for Capital Structure (639) (400) (742) (853) (919) (1,059) (1,269)
Unlevered Free Cash FIow 991 223 578 1,867 1,815 3,044 6,275
Present Value of Free Cash Flows 199 459 1,323 1,147 1,714 3,150
<CAPTION>
- ------------------------------------------------------- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Unlevered Beta for WGTI A 1.07 Perpetuity Growth Rate 3.0% 4.0% 5.0%
Equity Market Premium B 6.00% Terminal Cash Flow Multiple 11.2 12.7 14.6
Risk Free Rate C 5.75% Free Cash Flow at 2003 6,275 6,275 6,275
Equity Discount rate D=C+A+B 12.2% Terminal Value 70,484 79,879 91,895
- -------------------------------------------------------
Present Value of Terminal Value 35,386 40,102 46,135
- ------------------------------------------------------- Present Value of Free Cash Flows 1998-2003 7,992 7,992 7,992
Share Price 19-Dec-97 $12.25
Common Shares Outstanding (1) 5,261 Total Enterprise Value 43,377 48,094 54,127
Equity Market Capitalisation 64,447 Plus Cash 13,329 13,329 13,329
Float (Shares) 1,980 Minus Debt 0 0 0
Float (% of total shares outstanding) 38%
Value of Float 24,255 Total Equity Value 56,706 61,423 67,456
Value per Share $10.78 $ 1.68 $12.82
- ------------------------------------------------------- ---------------------------------------------------------------------------
</TABLE>
Notes
- -----
(1) Options on Common Shares not considered as dilution impact, if any, is
negligible. Review of option agreement required.
[LOGO] BROADVIEW ASSOCIATES 33
<PAGE>
DCF Analysis : Sensitivity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Revenue CAGR 1998-2003
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
22.0% 23.0% 24.0% 25.1% 26.0% 27.0% 28.0%
5.00% $7.2 $8.9 $1O.7 $12.8 $14.4 $16.4 $18.4
4.75% $7.0 $8.7 $10.5 $12.5 $14.1 $16.O $17.9
4.50% $6.9 $8.5 $1O.2 $12.2 $13.7 $15.6 $17.5
4.25% $6.8 $8.4 $10.0 $11.9 $13.4 $15.2 $17.1
Perpetuity Growth Rate 4.00% $6.7 $8.2 $9.8 $11.6 $13.1 $14.9 $16.7
3.75% $6.6 $8.1 $9.6 $11.4 $12.9 $14.6 $16.3
3.50% $6.5 $7.9 $9.4 $11.2 $12.6 $14.3 $16.O
3.25% $6.4 $7.8 $9.3 $11.O $12.4 $14.O $15.6
3.00% $6.3 $7.7 $9.1 $10.8 $12.1 $13.7 $15.3
<CAPTION>
Revenue CAGR 1998-2003
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
22.0% 23.0% 24.0% 25.1% 26.0% 27.0% 28.0%
10.0% $8.6 $10.8 $13.1 $15.7 $17.9 $20.4 $22.9
10.5% $8.0 $1O.0 $12.1 $14.5 $16.5 $18.8 $21.1
11.0% $7.5 $9.4 $11.3 $13.5 $15.3 $17.4 $19.5
11.5% $7.1 $8.8 $10.6 $12.6 $14.3 $16.2 $18.2
Discount Rate 12.2% $6.7 $8.2 $9.8 $11.6 $13.1 $14.9 $16.7
12.5% $6.5 $7.9 $9.5 $11.2 $12.6 $14.3 $16.0
13.0% $6.2 $7.6 $9.0 $10.6 $11.9 $13.5 $15.1
13.5% $5.9 $7.2 $8.6 $1O.1 $11.3 $12.8 $14.3
14.0% $5.7 $6.9 $8.2 $9.6 $10.8 $12.1 $13.5
<CAPTION>
Perpetuity Growth Rate
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3.3% 3.5% 3.8% 4.0% 4.3% 4.5% 4.8%
10.0% $14.5 $14.9 $15.4 $15.9 $16.4 $17.0 $17.6
10.5% $13.5 $13.9 $14.2 $14.6 $15.1 $15.6 $16.1
11.0% $12.6 $12.9 $13.3 $13.6 $14.0 $14.4 $14.8
11.5% $11.9 $12.1 $12.4 $12.7 $13.0 $13.4 $13.7
Discount Rate 12.2% $11.0 $11.2 $11.4 $11.7 $11.9 $12.2 $12.5
12.5% $10.6 $10.8 $11.O $11.2 $11.5 $11.7 $12.0
13.0% $10.1 $1O.2 $1O.4 $1O.6 $10.8 $11.O $11.3
13.5% $9.6 $9.7 $9.9 $10.1 $10.3 $10.4 $10.7
14.0% $9.2 $9.3 $9.4 $9.6 $9.8 $9.9 $10.1
</TABLE>
[LOGO] BROADVIEW ASSOCIATES 34
<PAGE>
- --------------------------------------------------------------------------------
Valuation Analysis
Public Comparables
[LOGO] BROADVIEW ASSOCIATES 35
<PAGE>
Public Comparables: Methodology
- --------------------------------------------------------------------------------
o Analysis of public market trading multiples of T&M companies selected based
on the following criteria:
-- majority of activities focused on T&M market
-- product portfolio centred around hardware-based technology with
comparable business models
-- established vendor with at least one year of public market history
o Comparison of the most recent publicly available financials (trailing
twelve months)
o Adjustment to eliminate extraordinary items and balance sheet effects
(e.g., net cash or net debt positions)
o Analysis of trading relative to profit and loss performance, with median
multiples used to reduce the impact of outliers
o Focus on the total market capitalisation ("TMC") to revenue ("TMC/R"),
TMC/EBITDA and 1998 and 1999 price-earnings ("P/E") analyses as the most
relevant valuation benchmarks relative to WGTI
- TTM operating profitability, after depreciation and amortisation, is
only breakeven
- TTM profitability before and after tax is due solely to interest
income on cash balances
[LOGO] BROADVIEW ASSOCIATES 36
<PAGE>
Public Comparables: Operating Performance
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
($ Thousands) Equity Total
Rev. Gross EBITDA EBIT Pretax Net Market Market
Company Revenue Growth Margin Margin Margin Margin Margin Cap(1) Cap(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dynatech 415,741 23.5% 60.3% 22.4% 18.3% 18.8% 11.0% 593,894 571,513
Fluke 434,592 4.0% 58.2% 13.4% 9.9% 10.5% 6.5% 429,016 393,760
IFR Systems 105,834 15.0% 44.8% 14.4% 11.4% 11.5% 6.9% 120,428 121,078
Keithley 118,145 3.7% 59.7% 2.5% 2.2% 0.7% 1.1% 43,174 59,052
Lecroy 108,752 15.4% 60.3% 13.4% 10.4% 10.5% 7.1% 231,665 210,505
Tekelec 105,772 69.9% 65.7% 21.1% 16.6% 18.3% 21.4% 747,736 701,636
Tektronix 1,981,241 9.7% 45.7% 11.7% 8.6% 8.8% 6.0% 1,899,000 1,922,714
WGTI 54,455 -8.0% 59.4% 3.2% 0.0% 0.8% 0.8% 64,172 50,843
Median 15.0% 59.7% 13.4% 10.4% 10.5% 6.9%
</TABLE>
Notes:
All historical financial data taken from the latest available SEC filings
and calculated on a trailing twelve month basis
(1) Equity Market Capitalisation (EMC) as of 15 December 1997
(2) Total Market Capitalisation (TMC) = EMC + Debt - Cash
[LOGO] BROADVIEW ASSOCIATES 37
<PAGE>
Public Comparables: Valuation Multiples
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Forward Forward
TMC(2)/ TMC/ TMC/ EMC(1)/ EMC/Net Calendar Calendar
Company Revenue EBITDA EBIT Pretax Income 1998 P/E(4) 1999 P/E(4)
<S> <C> <C> <C> <C> <C> <C> <C>
Dynatech 1.37 6.1 7.5 7.6 13.0 12.6 10.6
Fluke 0.91 6.8 9.2 9.4 15.2 12.5 10.9
IFR Systems 1.14 8.0 10.0 9.9 16.5 12.7 10.0
Keithley 0.50 19.8 22.4 53.8 32.4 15.9 N/A
Lecroy 1.94 14.4 18.5 20.2 29.9 18.3 15.0
Tekelec 6.63 31.4 40.0 38.6 33.0 38.7 26.7
Tektronix 0.97 8.3 11.3 10.8 16.0 13.1 11.5
WGTI (3) 0.93 28.8 N/M N/M N/M 25.6 14.1
Median 1.14 8.3 11.3 10.8 16.5 13.1 11.2
</TABLE>
Notes:
All historical financial data taken from the latest available SEC filings
and calculated on a trailing twelve month basis
All projected financial data taken from Zack's Corporate Earnings Estimator
(1) Equity Market Capitalisation (EMC) as of 15 December 1997
(2) Total Market Capitalisation (TMC) = EMC + Debt - Cash
(3) WGTI projected earnings estimates based on management forecasts
(4) Projected earnings estimates calculated by calendarising FYE forecasts to
31 December year end
[LOGO] BROADVIEW ASSOCIATES 38
<PAGE>
Public Comparables: Valuation Summary
- --------------------------------------------------------------------------------
Using public comparables as valuation benchmark, the share price ranges from
$9.65 to $11.29. WGTI's volatile financial track record and less than precise
forecasts, which form the basis of this analysis, should be noted, however.
<TABLE>
<CAPTION>
WGTI Implied
Median Applicable Total Market Balance Sheet Equity Implied Share
Valuation Metrics Multiple Figure(3) Capitalisation Adjustment(2) Value Price(1)
<S> <C> <C> <C> <C> <C> <C>
TTM Revenue 1.14 x $54,455 $62,299 $13,329 $75,628 $14.38
TTM EBITDA 8.3 x $1,768 $14,638 $13,329 $27,967 $5.32
Projected Calendar 1998 Earnings (4) 13.1 x $2,508 $32,764 $6.23
Projected Calendar 1999 Earnings (4) 11.2 x $4,538 $50,683 $9.63
Mean Trading Value per Share $8.89
Control Premia (5) 8.6% - 27.0%
Mean Acquisition Value per Share $9.65 - $11.29
</TABLE>
Notes:
All historical financial data taken from the latest available SEC filings and
calculated on a trailing twelve month basis
All projected financial data taken from Zack's Corporate Earnings Estimator
(1) As of December 1, 1997 there were 5,261,022 common shares outstanding
(2) Revenue and EBITDA based analyses adjusted for capital structure to
arrive at Equity Value
(3) WGTI projected earnings estimates based on management forecasts
(4) Projected earnings estimates calculated by calendarising FYE forecasts
to 31 December year end
(5) Applicable range as defined in the Control Premia Analysis
[LOGO] BROADVIEW ASSOCIATES 39
<PAGE>
- --------------------------------------------------------------------------------
Valuation Analysis
M&A Comparables
[LOGO] BROADVIEW ASSOCIATES 40
<PAGE>
M&A Comparables: Methodology
- --------------------------------------------------------------------------------
o Analysis is based on a review of merger, acquisition and investment
transactions involving T&M companies with similar business and financial
profiles based on the following criteria:
- majority of activities focused on T&M market
- product portfolio centred around hardware-based technology with
comparable business models
o Comparison of the most recent publicly available financials (trailing
twelve months)
o Adjustment to eliminate extraordinary items and balance sheet effects
(e.g., net cash or net debt positions)
o Analysis of trading relative to profit and loss performance, with median
multiples used to reduce the impact of outliers
o Focus on TMC/R and TMC/EBITDA analyses as the most relevant valuation
benchmarks relative to WGTI
- TTM operating profitability after depreciation and amortisation is
only breakeven
- TTM profitability before and after tax is due solely to interest
income on cash balances
[LOGO] BROADVIEW ASSOCIATES 41
<PAGE>
M&A Comparables: Valuation Multiples
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Date Buyer Target Target Description
<S> <C> <C> <C>
Dec-97 McAfee Associates Inc. Network General Corp Fault, Performance And Security Network
Management Solutions.
Oct-97 Thermo Electron Corp (Thermo Peek Plc Data Collection, Computation And Communication
Power Corp) Equipment For The Traffic Control Market
Sep-97 Tektronix Inc Siemens AG (Siemens Comms ISDN And Telecoms Service Test Products
Test Equipment)
Aug-97 Confidential Confidential Test Equipment For Ethernet And Related Data
Communications Applications
May-97 Investors backed by DLJ And Wavetek Corp Test Equipment For Communication Networks,
Green Equity Funds Calibration And Electronic Testing, Handheld
Electronic Test Tools
May-97 Bowthorpe Plc Adtech Inc Digital Telecommunications Test Equipment
Apr-97 Ametek Inc Technitrol Inc (T & M Product Force-Measurement And Testing Devices, Hand-Held
Segment) Gauges, Electronic Instruments, Software
Aug-95 Dynatech Corporation Tele-Path Industries Inc Communications Test Equipment
Mar-95 Confidential Confidential Sonet, Bert And Jitter Telecom Test Equipment
Nov-94 GN Great Nordic A/S (GN Great Laser Precision Corp Fibre Optics And T&M Instruments
Nordic Ltd)
Feb-92 IFR Systems Inc Photon Kinetics Inc T&M Systems For Optical Fibres
<CAPTION>
Date Buyer Adjusted Target Adjusted Price/ Adjusted
Price(1) Revenue Revenue Price/ EBITDA
<S> <C> <C> <C> <C> <C>
Dec-97 McAfee Associates Inc. 1071.60 256.37 4.18 23.2
Oct-97 Thermo Electron Corp (Thermo 158.70 254.43 0.62 9.2
Power Corp)
Sep-97 Tektronix Inc 46.00 60.00 0.77 N/A
Aug-97 Confidential 182.50 33.60 5.43 N/A
May-97 Investors backed by DLJ And 198.80 154.51 1.29 9.7
Green Equity Funds
May-97 Bowthorpe Plc 64.00 10.00 6.40 N/A
Apr-97 Ametek Inc 34.00 30.00 1.13 N/A
Aug-95 Dynatech Corporation 23.60 20.00 1.18 N/A
Mar-95 Confidential 15.80 10.00 1.58 N/A
Nov-94 GN Great Nordic A/S (GN Great 31.51 25.27 1.25 N/A
Nordic Ltd)
Feb-92 IFR Systems Inc 12.00 14.80 0.81 N/A
Median 1.25 9.7
</TABLE>
[LOGO] BROADVIEW ASSOCIATES 42
<PAGE>
M&A Comparables: Valuation Summary
- --------------------------------------------------------------------------------
An analysis of T&M industry merger and acquisition transactions indicates a
range of share prices from $5.81 to $15.44. The metrics for the valuation were
limited to revenue and EBITDA as WGTI's earnings stream consisted largely of
interest income on its cash balance
<TABLE>
<CAPTION>
($ Thousands) WGTI Balance Implied
Median Applicable Total Market Sheet Equity Implied Share
Valuation Metrics Multiple Figure Capitalisation Adjustment(2) Value Price(1)
<S> <C> <C> <C> <C> <C> <C>
TTM Revenue 1.25 x $54,455 $67,902 $13,329 $81,231 $15.44
TTM EBITDA 9.7 x $1,768 $17,229 $13,329 $30,558 $5.81
Acquisition Value per Share $5.81 - $15.44
</TABLE>
Notes:
All historical financial data taken from the latest available SEC filings and
calculated on a trailing twelve month basis
All projected financial data taken from Zack's Corporate Earnings Estimator
(1) As of December 1, 1997 there were 5,261,022 common shares outstanding
(2) Revenue and EBITDA based analysis adjusted for capital structure to
arrive at Equity Value
[LOGO] BROADVIEW ASSOCIATES 43
<PAGE>
- --------------------------------------------------------------------------------
Valuation Analysis
Control Premia
[LOGO] BROADVIEW ASSOCIATES 44
<PAGE>
Control Premia: Methodology
- --------------------------------------------------------------------------------
o Analysis is based on a review of public takeover transactions in the U.S.,
specifically:
- Analysis of minority buyouts -- Review of minority - buyout
transactions in the U.S. and the premia paid to minority shareholders
relative to the target's share price one, twenty and sixty trading
days prior to announcement
- Analysis of U.S. public takeovers in the Information Technology ("IT")
industry -- Review of all public takeovers in the U.S. since 1-Jan-97
involving a publicly quoted target in the IT industry and the premia
paid to minority shareholders relative to the target's share price one
and twenty trading days prior to announcement
- Analysis of all U.S. public takeovers -- Review of all public
takeovers in the U.S. since 1-Jan-97 involving a publicly quoted
target in any industry and the premia paid to minority shareholders
relative to the target's share price one and twenty trading days prior
to announcement
o The focus is on control premia relative to twenty trading days prior to the
announcement of an acquisition intent as this statistic best reflects the
premium paid above the true trading value of the target (compared to
one-day-prior) and is less susceptible to other influences such as market
corrections (compared to sixty-days-prior)
[LOGO] BROADVIEW ASSOCIATES 45
<PAGE>
Control Premia: Minority Buyouts
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Premium Premium
Percent 20 60
of Shares Premium Trading Trading
Date Target Name Acquiror Name Target Description Owned One Day Days Days
Pre-Offer Prior Prior Prior
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Aug-97 Rexel Inc Rexel SA Electrical components 50.6% 19% 22% 24%
Jun-97 Acordia Anthem Insurance broker 66.8% 13% 26% 26%
Jan-97 Calgene Monsanto Biotech (genetic engineering) 54.6% 62% 58% 64%
Jan-97 Mafco Consolidated Group Mafco Holdings Inc. Manufactures cigars 85.0% 61% 63% 75%
Nov-96 Central Tractor Farm JW Childs Equity Partners LP Agricultural speciality retailer 64.5% 18% 23% 47%
& Country
Oct-96 WCI Steel Inc. Renco Group Inc. Steel manufacturer 84.5% 18% 78% 86%
Jun-96 Seaboard Oil Co. Seaboard Acquisition Partners Operates oil & gas wells 71.0% 26% 39% 95%
May-96 SyStemix Inc Novartis AG Gene therapies for cancer, AIDS 71.6% 77% 59% 32%
Mar-96 Great American Mgmt Equity Holdings Ltd Building materials 87.9% 6% 11% 2%
& Invt Inc
Sep-95 SCOR US Corp SCOR Reinsurance holding company 80.0% 37% 39% 67%
Aug-95 GEICO Berkshire Hathaway Property insurer 51.0% 26% 25% 26%
Jul-95 REN Corp COBE Laboratories (Gambro AB) Dialysis services 53.0% 27% 26% 36%
May-95 Bic Corp Bic SA Manufactures writing instruments 78.0% 13% 29% 29%
Apr-95 LIN Broadcasting McCaw Cellular (AT&T) Holding for cellular phone assets 52.0% 7% 7% -2%
Apr-95 Club Med Inc Club Mediterranee Holiday resorts 70.8% 41% 45% 36%
Mar-95 Ropak Corp LinPac Mouldings Ltd Manufacture plastic containers 54.8% 7% 5% 4%
Oct-94 Chemical Waste Management WMX Technologies Chemical waste management 78.6% 7% 12% 1%
Sep-94 Contel GTE Telephone services 90.0% 44% 36% 55%
Aug-94 Castle & Cooke Homes Inc Dole Food Company Builds homes 82.8% 31% 54% 29%
Jun-94 Ogden Projects Inc Ogden Corp Waste to energy plants 84.2% 6% 21% 20%
Median 22% 27% 30%
</TABLE>
[LOGO] BROADVIEW ASSOCIATES 46
<PAGE>
Control Premia: Valuation Summary
- --------------------------------------------------------------------------------
Precedent minority buyout transactions and public takeovers in the U.S. market
point to a premium range of 9% to 27%.
<TABLE>
<CAPTION>
One-Trading-Day 20-Trading-Days 60-Trading-Days
Prior To Prior To Prior To
Announcement Announcement Announcement
<S> <C> <C> <C> <C>
Minority Buyouts (1) 22.0% 27.0% 30.0%
U.S. Public IT Takeovers (2) 0.1% 16.3%
All U.S. Public Takeovers (3) 4.3% 8.6%
Range Of Control Premia Paid (4) 8.6% - 27.0%
Acquisition Value Per Share (5) $10.86 - $12.70
</TABLE>
Notes
(1) Broadview Analysis
(2) IFR Securities Data Company 18-Dec-97. Data covers all for-cash
acquisitions.
(3) Data covers the average of all transactions involving a US public target in
1997 YTD in the "IT and Telecommunications" and "All Deals" segments.
(4) The Range Of Control Premia Paid focuses on premia relative to 20 trading
days prior to the announcement. This period best reflects the true trading
value of the target (compared to one day prior, when share prices have
often been affected by information leaks) and the corresponding control
premium paid. 20-days-prior is also less susceptible to other influences
(e.g. market corrections) which often impact the 60-days-prior premia.
(5) Acquisition value per share based on the share price prior to the
announcement of the formation of the "Special Committee".
[LOGO] BROADVIEW ASSOCIATES 47
<PAGE>
- --------------------------------------------------------------------------------
Appendix
Due Diligence: Information Sessions
[LOGO] BROADVIEW ASSOCIATES 48
<PAGE>
Due Diligence: Information Sessions
- --------------------------------------------------------------------------------
WGTI Information Session Participants
Gerry Chastelet Richard L. Popp
President and Senior Vice President and
Chief Executive Officer Chief Operating Officer
Bert Kuthe John T. Goehrke
Chief Financial Officer Vice President of Marketing
Robert D. Hockman E. J. (Jay) Bowers
Vice President Engineering Vice President of Development
Matt Weitz Daniel I. Hunt
Personnel Director Controller
Kevin G. Gribbon Alex Brisbourne
Manager, International Marketing Senior Partner, A&A Associates
(Independent Strategic Advisor)
WG Holding Information Sources
Albrecht Wandel Peter M. Wagner
Vorsitzender der Geschaftsfuhrung Mitglied der Geschaftsfuhrung
Rolf Schmid Karl-Heinz Eisemann
Mitglied der Geschaftsfuhrung Mitglied der Geschaftsfuhrung
[LOGO] BROADVIEW ASSOCIATES 49
<PAGE>
Due Diligence: Schedule
- --------------------------------------------------------------------------------
Dates Activities
- ----- ----------
December 8, 1997 Introductory discussions with CEO
December 9, 1997 Detailed information request submitted to
CEO and CFO
December 11, 1997 Corporate strategy discussion with CEO
December 12, 1997 Detailed information submitted by CFO
December 18, 1997 Due diligence with CEO, CFO, COO, and various
other corporate officers and external advisor
December 18, 1997 Visit of main premises, R&D lab, and
manufacturing facilities
December 8-23, 1997 Review and analysis of WGTI and WG Holding
prepared materials relative to WGTI
Review and analysis of internally and
externally prepared market research of a
strategic, technical and financial nature
Financial analysis
[LOGO] BROADVIEW ASSOCIATES 50
<PAGE>
Project Triangle
- --------------------------------------------------------------------------------
Discussion Materials: Valuation Of
Wandel & Goltermann Technologies, Inc.
March 11, 1998
[LOGO] BROADVIEW ASSOCIATES
Regulated by the SFA
<PAGE>
Valuation Methodologies
- --------------------------------------------------------------------------------
o WGTI's shares have been valued using four different valuation
methodologies, including:
- Discounted Cash Flow Analysis ("DCF Analysis") - Valuation based on
WGTI's expected future cash flow generation, the primary input being
the January 1998 financial forecasts by WGTI management for the years
1998-2001
- Analysis of Comparable Publicly Traded Companies ("Public
Comparables") - Valuation based on trading multiples of comparable
test & measurement ("T&M") and network management solutions ("NMS")
companies quoted on a US exchange, applied to relevant WGTI financial
statistics
- Analysis of Comparable M&A Transactions ("M&A Comparables") -
Valuation based on pricing benchmarks established by M&A transactions
involving T&M and NMS vendors as targets, applied to relevant WGTI
financial statistics
- Analysis of Premia Paid In Minority Buyouts ("Premia Analysis") -
Valuation based on share price premia paid in transactions in which a
buyer with a majority shareholding of a US exchange listed target buys
out the minority shareholders
[LOGO] BROADVIEW ASSOCIATES 2
<PAGE>
Due Diligence
o Our valuation analysis has incorporated a detailed review of the business
and prospects of WGTI, taking into account:
- Review of publicly available documents, including third-party market
research
- Site visits and meetings with WGTI management
- Meetings with WG Holding management and staff familiar with WGTI
- Analysis of WGTI's share trading history
o We have twice reviewed WGTI management accounts and forecasts
- Review of Strategic Plan in December 1997, leading to our
recommendation to Holding of an offer at $12.00 to $13.50 per share
- Review of revised Strategic Plan in February 1998, including
acquisitions of Tinwald and Network Intelligence
[LOGO] BROADVIEW ASSOCIATES 3
<PAGE>
DCF Analysis
- --------------------------------------------------------------------------------
o Basis for our DCF analysis has been WGTI's "Strategic Plan FY98-FY01 (With
Technology Acquisitions)"
o Minor adjustments have been made based on information obtained during the
due diligence meetings with WGTI and WG Holding, as well as a detailed
review of:
- Actuals vs Forecast, in particular for Q1/98
- Order Input, in particular for the period Q3/97-Q1/98
- Timing and impact of possible synergies and contingencies arising from
WGTI's recent acquisitions and expected near-term product releases
o Our DCF analysis suggests a valuation range from $11.61 to $14.16 per WGTI
share
[LOGO] BROADVIEW ASSOCIATES 4
<PAGE>
Public Comparables
- --------------------------------------------------------------------------------
o Basis for our analysis has been a sample of US exchange listed T&M and NMS
vendors that are comparable in business model and product portfolio to WGTI
o Our analysis has reviewed the operating performance and valuation
statistics of WGTI relative to the public comparables, using the most
recent (trailing twelve months ("TTM")) historical and prospective
financials
o Due to its current negative profitability, the valuation of WGTI can only
be based on TTM revenue and prospective 1999 earnings figures
o WGTI's valuation based on public comparables yields a value per share in
the range from $7.34 to $15.82
o Relative to the public comparables, WGTI's operating performance is below
the median, suggesting a valuation in the lower end of the indicated range
[LOGO] BROADVIEW ASSOCIATES 5
<PAGE>
M&A Comparables
- --------------------------------------------------------------------------------
o Basis for our analysis has been a sample of merger and acquisition
transactions involving T&M and NMS target companies with business and
financial profiles similar to WGTI
o We have reviewed the M&A valuation benchmarks established by the sample
transactions, using the most precise pricing and target financial data
available
o Due to its current negative profitability, WGTI can only be valued based on
its TTM revenue figure
o The analysis of WGTI's share value based on M&A comparables provides a
single point estimate of $14.11
o WG Holding's 62% controlling stake suggests that the payment of a "control
premium", as reflected in the sample transactions and the implied pricing
multiples, is unnecessary. Consequently, the value of WGTI's shares should
lie below the estimate of $14.11
[LOGO] BROADVIEW ASSOCIATES 6
<PAGE>
Premia Analysis
- --------------------------------------------------------------------------------
o Basis for our analysis has been a sample of acquisitions by a majority
shareholder of the minority interest in target companies listed on a US
exchange
o Our analysis has focused on the premium paid to the minority shareholders
relative to the target's share price twenty and sixty trading days prior to
announcement of the acquisition intent
o Based on the applicable WGTI share prices of $10.50 and $10.87, as of
October 10, 1997 and August 26, 1997, respectively, the indicated range of
values per share stretches from $13.36 to $14.18 and incorporates premia of
27% and 30%, respectively
[LOGO] BROADVIEW ASSOCIATES 7
<PAGE>
Summary Of Valuations
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Share Price
Prior To "Special
Committee" Current Share
Announcement Price
(18-Nov-97) (5-Mar-98)
----------- --------------
Value Ranges
<S> <C> <C>
DCF Analysis $11.61-$14.16
Public Comparables $7.34-$15.82 Extremely broad range solely based on TTM
revenue and 1999 prospective earnings
M&A Comparables $14.11 Single-point estimate solely based on TTM
revenue
Premia Analysis $13.36-$14.18
</TABLE>
WGTI Price Per Share ($)
[LOGO] BROADVIEW ASSOCIATES 8
<PAGE>
Share Trading Performance
- --------------------------------------------------------------------------------
o We have reviewed WGTI's trading performance and indexed the development of
the share price against a sample of comparable US exchange listed vendors.
WGTI's shares have largely underperformed those of its competitors
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
WGTI Stock Performance Vs. T&M Index (April 1994 To Date)
[PLOT POINTS TO COME]
o WGTI's static share price below $13.00 following WG Holding's offer is
significant in that a bid, if perceived as being below fair market value,
typically causes the target's share price to rise above the offer as market
participants anticipate a higher bid
[LOGO] BROADVIEW ASSOCIATES 9
<PAGE>
- --------------------------------------------------------------------------------
Appendix
[LOGO] BROADVIEW ASSOCIATES 10
<PAGE>
DCF Analysis
- --------------------------------------------------------------------------------
Income Statement
<TABLE>
<CAPTION>
(Figures in $ thousands) FYE September 30, 1997 1998(P) 1999(P) 2000(P) 2001(P) 2002(P) 2003(P)
---- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Revenue 54,455 64,200 80,575 99,944 121,913 151,440 183,395
% growth -7.8% 17.8% 25.5% 24.0% 22.0% 24.2% 21.1%
Total Cost of Sales 24,381 30,264 37,677 46,050 55,287 67,530 80,419
% of Revenue 44.8% 47.1 46.8% 46.1% 45.3% 44.6% 43.9%
Gross Profit 30,074 33,936 42,898 53,893 66,626 83,910 102,976
% of Revenue 55.2% 52.9% 53.2% 53.9% 54.7% 55.4% 56.1%
Selling, General and Admin. (SG&A) 19,360 22,051 25,777 31,252 37,061 46,038 55,752
% of Revenue 35.6% 34.3% 32.0% 31.3% 30.4% 30.4% 30.4%
Research & Development 10,712 11,477 13,778 16,091 18,896 21,959 26,592
% of Revenue 19.7% 17.9% 17.1% 16.1% 15.5% 14.5% 14.5%
EBIT 2 408 3,343 6,550 10,668 15,913 20,631
% of Revenue 0.0% 0.6% 4.1% 6.6% 8.8% 10.5% 11.2%
Financial Income 422 300 617 978 1,547 1,859 1,724
Pre-tax Profit 424 708 3,726 7,160 11,501 16,434 21,774
% of Revenue 0.8% 1.1% 4.6% 7.2% 9.4% 10.9% 11.9%
Income Taxes 500 926 1,933 3,105 4,437 5,879
Effective Tax Rate 0.0% NM 24.8% 27.0% 27.0% 27.0% 27.0%
Net Income 424 208 2,800 5,227 8,395 11,997 15,895
% of Revenue 0.8% 0.3% 3.5% 5.2% 6.9% 7.9% 8.7%
</TABLE>
Note: 1998 figures exclude the impact of acquisitions
[LOGO] BROADVIEW ASSOCIATES 11
<PAGE>
DCF Analysis
- --------------------------------------------------------------------------------
Balance Sheet
<TABLE>
<CAPTION>
(Figures in $ thousands) FYE September 30, 1998(P) 1999(P) 2000(P) 2001(P) 2002(P) 2003(P)
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and Cash Equivalents 8,500 10,400 15,500 22,700 22,700 27,348
Accounts Receivable 12,561 14,245 16,854 21,915 27,223 32,967
Inventories 5,868 6,095 6,370 7,929 9,685 11,534
Other Current Assets 2,600 3,000 3,200 4,200 5,513 7,235
Total Current Assets 29,529 33,740 41,924 56,744 65,121 79,084
Net PP&E 3,900 4,420 4,720 4,920 5,870 6,470
Other Assets 767 1,408 1,576 1,901 2,304 2,793
Net Intangible Assets 20 0 0 0 0 0
Total Assets 34,215 39,567 48,219 63,565 73,295 88,347
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable 3,978 4,407 4,799 7,095 8,666 10,320
Accrued Compensation 1,789 2,234 2,582 2,545 3,138 3,791
Other Accrued Liabilities 1,867 2,680 3,013 3,394 4,185 5,055
Total Current Liabilities 7,634 9,321 10,394 13,034 15,989 19,166
Bank Debt 1,714 2,580 4,931 9,242 4,020 0
Total Liabilities 9,349 11,900 15,325 22,275 20,009 19,166
Shareholders` Equity 24,867 27,667 32,894 41,290 53,286 69,181
Total Liabilities and Shareholders' Equity 34,215 39,567 48,219 63,565 73,295 88,347
</TABLE>
Note: 1998 figures exclude the impact of acquisitions
[LOGO] BROADVIEW ASSOCIATES 12
<PAGE>
DCF Analysis
- --------------------------------------------------------------------------------
DCF Valuation Summary
<TABLE>
<CAPTION>
(Figures in $ thousands) FYE September 30, 1998(P) 1999(P) 2000(P) 2001(P) 2002(P) 2003(P)
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net lncome 208 2,800 5,227 8,395 11,997 15,895
Adjustments for Non-Cash ltems 1,908 2,500 3,700 4,300 4,300 5,400
Adjustments for Investment and Working Capital -2,659 -4,265 -6,179 -9,806 -11,075 -12,627
Adjustments for Capital Structure (300) (288) (446) (608) (380) (834)
Unlevered Free Cash Flow -843 747 2,303 2,282 4,842 7,834
Present Value of Free Cash Flows -752 593 1,632 1,441 2,727 3,933
</TABLE>
- --------------------------------------------------------------------------------
Unlevered Beta for WGT A 1.07
Equity Market Premium B 6.00%
Risk Free Rate C 5.75%
Equity Discount rate D=C+A*B 12.2%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Share Price 05-Mar-98 $13.00
Common Shares Outstanding (1) 5,261
Equity Market Capitalisation 68,393
Float (Shares) 1,980
Float (% of total shares outstanding 38%
Value of Float 25,740
- --------------------------------------------------------------------------------
<TABLE>
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Perpetuity Growth Rate 3.0% 4.0% 5.0%
Terminal Cash Flow Multiple 11.2 12.7 14.6
Free Cash Flow at 2003 7,834 7,834 7,834
Terminal Value 87,995 99,725 114,726
Present Value of Terminal Value 44,177 50,066 57,597
Present Value of Free Cash Flows from 1998 to 2003 9,574 9,574 9,574
- ----------------------------------------------------------------------------------
Total Enterprise Value 53,752 59,640 67,172
- ----------------------------------------------------------------------------------
Plus Cash 7,329 7,329 7,329
Minus Debt 0 0 0
- ----------------------------------------------------------------------------------
Total Equity Value 61,081 66,969 74,501
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Value per Share $ 11.61 $ 12.73 $ 14.16
- ----------------------------------------------------------------------------------
</TABLE>
Note: 1998 figures exclude the impact of acquisitions
[LOGO] BROADVIEW ASSOCIATES 13
<PAGE>
Public Comparables
- --------------------------------------------------------------------------------
Operating Performance Measures
<TABLE>
<CAPTION>
($ Thousands)
Equity Total
Rev. Gross EBITDA EBIT Pretax Net Market Market
Company Revenue Growth Margin Margin Margin Margin Margin Cap. Cap.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Applied Digital Access 29,614 28.7% 50.9% -8.9% -18.3% -14.7% -16.7% 94,208 80,658
Fluke 441,034 3.4% 53.8% 14.0% 10.5% 10.7% 6.8% 440,036 403,304
IFRSystems 106,386 5.6% 43.1% 15.2% 12.4% 12.5% 7.5% 164,509 161,688
Keithley 127,032 3.7% 58.1% 7.2% 4.1% 3.1% 2.1% 42,857 54,813
Lecroy 112,265 12.8% 64.3% 17.1% 14.1% 14.1% 9.5% 168,600 146,891
Network Associates 612,193 45.0% 82.3% 35.8% 31.7% 34.1% 14.5% 4,590,551 4,343,175
Tekelec 105,772 69.9% 66.0% 21.1% 16.6% 18.3% 21.4% 1,010,733 964,633
Tektronix 2,033,121 10.1% 41.1% 10.0% 6.9% 7.1% 4.8% 2,185,569 2,205,730
Median 11.5% 55.9% 14.6% 11.5% 11.6% 7.1%
WGTI 53,851 -12.6% 52.1% -1.6% -5.4% -4.4% -3.2% 69,405 56,010
</TABLE>
Note: TTM WGTI figures including pro-forma adjustment for acquisitions
Share prices as of 4-Mar-98
[LOGO] BROADVIEW ASSOCIATES 14
<PAGE>
Public Comparables
- --------------------------------------------------------------------------------
Valuation Multiples
<TABLE>
<CAPTION>
($ Thousands)
Projected Projected
TMC/ EMC/Net Calendar 1998 Calendar 1999
Company Revenue TMC/EBITDA TMC/EBIT EMC/Pretax Income P/E P/E
<S> <C> <C> <C> <C> <C> <C> <C>
Applied Digital Access 2.72 (NM) (NM) (NM) (NM) (NM) (NM)
Fluke .91 6.55 8.68 9.29 14.76 13.63 12.14
IFR Systems 1.52 9.98 12.21 12.34 20.60 17.87 14.56
Keithley .43 5.98 10.64 10.82 15.96 NA NA
Lecroy 1.31 7.63 9.26 10.67 15.84 13.85 11.54
Network Associates 7.09 19.79 22.39 21.99 51.84 27.24 20.97
Tekelec 9.12 43.18 54.99 52.20 44.62 45.06 32.67
Tektronix 1.08 10.87 15.81 15.05 22.36 15.00 13.04
Median 1.41 8.81 11.43 11.58 18.28 16.44 13.80
</TABLE>
Note: NM = Not meaningful
NA = Not avallable
[LOGO] BROADVIEW ASSOCIATES 15
<PAGE>
Public Comparables
- --------------------------------------------------------------------------------
Valuation Summary
<TABLE>
<CAPTION>
($ Thousands)
WGTI
Median Applicable Total Market Balance Sheet Implied Equity Implied Share
Valuation Metrics Multiple Figure Capitalisation Adjustment Value Price
A B C=AxB D E=C-D
<S> <C> <C> <C> <C> <C> <C>
TTM Revenue 1.41 x $53,851 $76,152 ($7,095) $83,247 $15.82
TTM EBITDA 8.81 x NM NM
TTM EBIT 11.43 x NM NM
TTM Pretax Income 11.58 x NM NM
TTM Net Income 18.28 x NM NM
Projected 1998 Earnings 16.44 x NM NM
Projected 1999 Earnings 13.80 x $2,800 $38,635 $7.34
</TABLE>
Note: WGTI's figures for TTM revenue and cash have been adjusted to reflect
acquisitions
NM = Not meaningful
[LOGO] BROADVIEW ASSOCIATES 16
<PAGE>
M&A Comparables
- --------------------------------------------------------------------------------
Valuation Multiples
($ Millions)
<TABLE>
<CAPTION>
Date Buyer Target Target Description
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jan-98 IFR Systems Inc GEC (Marconi Instruments Ltd) Test and measurement equipment
Dec-97 McAfee Associates Inc. Network General Corp Fault, performance and security management solutions for
LAN and WAN networks
Dec-97 Investors (Clayton, Dynatech Corporation Communications test solutions for telecommunication
Dubilier and Rice) companies and large network users, industrial computing
and video hardware
Nov-97 GN Great Nordic A/S (GN Siemens AG (Siemens OTE, Inc.) Fibre optic cable testing equipment in the LAN/WAN
Nettest) segment
Oct-97 Thermo Electron Corp Peek Plc Data collection, computation and communication equipment
(Thermo Power Corp) for the traffic control market
Sep-97 Tektronix Inc Siemens AG (Siemens ISDN and tetecoms service test products
Communications Test Equipment
GmbH)
Aug-97 Confidential Confidential Test equipment for ethernet and related data
communications applications
Jul-97 Confidential Confidential Windows based network analysis software for field
technicians, departmental networks and small businesses
May-97 Investment (DLJ Merchant Wavetek Corp Test equipment for communication networks, instruments to
Banking Partners II LP And calibrate and test electronic equipment, handheld
Green Equity Investors II LP) electronic test tools
May-97 Bowthorpe Plc Adtech Inc Digital telecommunications test equipment
Apr-97 Ametek Inc Technitrol Inc (Test & Force-measurement and testing devices, hand-held gauges,
Measurement Product electronic instruments, test stands, analytical
Segment) software and support services
Aug-95 Dynatech Corporation Tele-Path Industries Inc Communications test equipment
Mar-95 Confidential Conftdential Sonet, BERT and jitter telecom test equipment
Nov-94 GN Great Nordic A/S Laser Precision Corp Fibre optics and T&M instruments
(GN Great Nordic)
Feb-92 IFR Systems Inc Photon Kinetics Inc T&M systems for optical fibre networks
<CAPTION>
Adjusted Adjusted
Adjusted Target Target Price/ Price/
Date Price(1) Revenue EBITDA Revenue EBITDA
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jan-98 107.00 110.00 NA 0.97 NA
Dec-97 1071.60 256.37 46.10 4.18 23.25
Dec-97 842.00 456.00 97.81 1.85 8.61
Nov-97 10.00 12.00 NA 0.83 NA
Oct-97 158.70 254.43 17.16 0.62 9.25
Sep-97 46.00 60.00 NA 0.77 NA
Aug-97 182.50 33.60 NA 5.43 NA
Jul-97 32.78 4.60 NA 7.13 NA
May-97 198.80 154.51 20.40 1.29 NA
May-97 64.00 10.00 NA 6.40 NA
Apr-97 34.00 30.00 NA 1.13 NA
Aug-95 23.60 20.00 NA 1.18 NA
Mar-95 15.80 10.00 NA 1.58 NA
Nov-94 31.51 25.27 NA 1.25 NA
Feb-92 12.00 14.80 NA 0.81 NA
Median Multiple l.25 9.25
</TABLE>
Note: Prices paid have been adjusted for capital structure at the time
of acquisition, where data available.
[LOGO] BROADVIEW ASSOCIATES 17
<PAGE>
M&A Comparables
- --------------------------------------------------------------------------------
Valuation Summary
<TABLE>
<CAPTION>
($ Thousands)
WGTI
Median Applicable Total Market Balance Sheet Implied Equity Implied
Valuation Metrics Multiple Figure Capitalisation Adjustment Value Share Price
A B C=AxB D E=C-D
<S> <C> <C> <C> <C> <C> <C>
TTM Revenue 1.25 x $53,851 $67,149 ($7,095) $74,244 $14.11
TTM EBITDA 9.25 x NM NM
</TABLE>
Note: WGTI's figures for TTM revenue and cash have been adjusted to reflect
acquisitions
NM = Not meaningful
[LOGO] BROADVIEW ASSOCIATES 18
<PAGE>
Premia Analysis
- --------------------------------------------------------------------------------
Premia Paid In Minority Buyouts
<TABLE>
<CAPTION>
Date Target Name Acquiror Name Target Description
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aug-97 Rexel Inc Rexel SA Electrical components
Jun-97 Acordia Anthem Insurance broker
Jan-97 Calgene Monsanto Biotech (genetic engineering)
Jan-97 Mafco Consolidated Group Mafco Holdings Inc. Manufactures cigars
Nov-96 Central Tractor Farm & Country JW Childs Equity Partners LP Agricultural speciality retailer
Oct-96 WCI Steel Inc. Renco Group Inc. Steel manufacturer
Jun-96 Seaboard Qil Co. Seaboard Acquisition Partners Operates oil & gas wells
May-96 SyStemix Inc Novartis AG Gene therapies for cancer, AIDS
Mar-96 Great American Mgmt & Invt Inc Equity Holdings Ltd Building materials
Sep-95 SCOR US Corp SCOR Reinsurance holding company
Aug-95 GEICO Berkshire Hathaway Property insurer
Jul-95 REN Corp COBE Laboratories (Gambro AB) Dialysis services
May-95 Bic Corp Bic SA Manufactures writing instruments
Apr-95 LIN Broadcasting McCaw Cellular (AT&T) Holding for cellular phone assets
Apr-95 Club Med Inc Club Mediterranee Holiday resorts
Mar-95 Ropak Corp LinPac Mouldings Ltd Manufacture plastic containers
Oct-94 Chemical Waste Management WMX Technologies Chemical waste management
Sep-94 Contel GTE Telephone services
Aug-94 Castle & Cooke Homes Inc Dole Food Company Builds homes
Jun-94 Ogden Projects Inc Ogden Corp Waste to energy plants
<CAPTION>
% of
Shares
Owned Premium Premium Premium
Pre- One Day 20 Trading 60 Trading
Date Target Name Offer Prior Days Prior Days Prior
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aug-97 Rexel Inc 50.6% 19% 22% 24%
Jun-97 Acordia 66.8% 13% 26% 26%
Jan-97 Calgene 54.6% 62% 58% 64%
Jan-97 Mafco Consolidated Group 85.0% 61% 63% 75%
Nov-96 Central Tractor Farm & Country 64.5% 18% 23% 47%
Oct-96 WCI Steel Inc. 84.5% 18% 78% 86%
Jun-96 Seaboard Qil Co. 71.0% 26% 39% 95%
May-96 SyStemix Inc 71.6% 77% 59% 32%
Mar-96 Great American Mgmt & Invt Inc 87.9% 6% 11% 2%
Sep-95 SCOR US Corp 80.0% 37% 39% 67%
Aug-95 GEICO 51.0% 26% 25% 26%
Jul-95 REN Corp 53.0% 27% 26% 36%
May-95 Bic Corp 78.0% 13% 29% 29%
Apr-95 LIN Broadcasting 52.0% 7% 7% -2%
Apr-95 Club Med Inc 70.8% 41% 45% 36%
Mar-95 Ropak Corp 54.8% 7% 5% 4%
Oct-94 Chemical Waste Management 78.6% 7% 12% 1%
Sep-94 Contel 90.0% 44% 36% 55%
Aug-94 Castle & Cooke Homes Inc 82.8% 31% 54% 29%
Jun-94 Ogden Projects Inc 84.2% 6% 21% 20%
Median 22% 27% 30%
</TABLE>
[LOGO] BROADVIEW ASSOCIATES 19
<PAGE>
Premia Analysis
- --------------------------------------------------------------------------------
Valuation Summary
One Day Prior 20 Days Prior 60 Days Prior
(18-Nov-97) (22-Oct-97) (26-Aug-97)
Premium Paid In Minority
Buyout Transactions 22% 27% 30%
WGTI Share Price $10.00 $1O.50 $10.88
Implied Value Per Share $12.24 $13.36 $14.18
[LOGO] BROADVIEW ASSOCIATES 20
<PAGE>
WANDEL & GOLTERMANN TECHNOLOGIES, INC.
1030 Swabia Court
Research Triangle Park, North Carolina 27709-3585
June , 1998
To the Shareholders of Wandel & Goltermann Technologies, Inc.:
On behalf of the Board of Directors of Wandel & Goltermann Technologies,
Inc. (the "Company"), it is my pleasure to invite you to attend a Special
Meeting of Shareholders of the Company (the "Special Meeting") to be held on
, July , 1998 at 10:00 a.m. local time, at .
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve an Agreement and Plan of Merger (the "Merger Agreement")
dated as of March 28, 1998, among the Company, Wandel & Goltermann Management
Holding GmbH ("WG Holding") and WG Merger Corp., a wholly-owned subsidiary of
WG Holding, pursuant to which, (i) WG Merger Corp. will be merged with and into
the Company, (ii) each outstanding share of the common stock of WG Merger Corp.
will be converted into one outstanding share of the common stock of the Company
and (iii) each share of the Company's outstanding common stock (the "Common
Stock") (other than shares owned by WG Holding and shares held by dissenting
shareholders) will be converted into the right to receive $15.90 in cash (the
"Merger"). A copy of the Merger Agreement is included as Appendix A to the
accompanying Proxy Statement. As a result of the Merger, WG Holding will
acquire all of the outstanding shares of Common Stock not already owned by WG
Holding, and the public shareholders of the Company will no longer have an
equity interest in the Company.
A special committee of directors of the Company (the "Special Committee"),
consisting of two directors who are neither employees of the Company nor
employees or directors of WG Holding or WG Merger Corp., has reviewed and
considered the terms of the Merger Agreement and the Merger and has recommended
that the Board of Directors approve the Merger Agreement. In addition, The
Robinson-Humphrey Company, LLC ("Robinson-Humphrey"), the Special Committee's
financial advisor in connection with the Merger, has rendered its opinion that
the cash merger consideration of $15.90 per share is fair, from a financial
point of view, to the shareholders of the Company (other than WG Holding). The
written opinion of Robinson-Humphrey, dated March 28, 1998, is attached as
Appendix B to the accompanying Proxy Statement and should be read carefully and
in its entirety by the shareholders. The Board of Directors has unanimously
approved the Merger Agreement and believes that the terms of the Merger are in
the best interests of the Company and its shareholders and fair to the
Company's public shareholders. On behalf of the Board of Directors, I recommend
that you vote FOR approval of the Merger Agreement.
Completion of the Merger is subject to certain conditions, including
approval of the Merger Agreement by the shareholders. WG Holding, which owns
approximately 62% of the outstanding Common Stock, has advised the Company that
it intends to vote its shares of Common Stock in favor of the Merger Agreement,
which will assure approval of the Merger Agreement at the Special Meeting. The
Merger is expected to be completed promptly after the Special Meeting, provided
all of such conditions have been satisfied or waived by the parties.
The enclosed Notice of Meeting and Proxy Statement provide you with a
summary of the Merger and additional information about the parties involved and
their interests in the Merger. I encourage you to read and consider carefully
the information contained in the Proxy Statement.
Whether or not you plan to attend the meeting, you are urged to complete,
sign and promptly return the enclosed proxy card to assure that your shares
will be voted at the meeting. If you attend the Special Meeting, you may revoke
your proxy and vote in person if you choose, even if you have returned your
proxy card.
Sincerely,
GERRY CHASTELET
President and Chief Executive Officer
<PAGE>
WANDEL & GOLTERMANN TECHNOLOGIES, INC.
--------------------------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD JULY , 1998
--------------------------------------------------------------
To Our Shareholders:
Notice is hereby given that a Special Meeting of Shareholders (the
"Special Meeting") of Wandel & Goltermann Technologies, Inc., a North Carolina
corporation (the "Company"), will be held on , July , 1998 at 10:00
a.m., local time, at , for the following purposes:
(1) To consider and vote on a proposal to approve an Agreement and Plan of
Merger pursuant to which WG Merger Corp. ("WGMC"), a newly-formed North
Carolina corporation that is a wholly-owned subsidiary of Wandel &
Goltermann Management Holding GmbH, a German limited liability company ("WG
Holding"), will be merged with and into the Company and each outstanding
share of the Company's common stock (other than shares held by WG Holding
and shares held by shareholders who have properly perfected their
dissenters' rights) will be converted into the right to receive $15.90 in
cash. A copy of the Agreement and Plan of Merger dated as of March 28, 1998
is attached as Appendix A to and is described in the accompanying Proxy
Statement.
(2) To consider and act upon such other matters as may properly come before
the Special Meeting.
The Board of Directors has determined that only holders of the Company's
common stock of record at the close of business on May 8, 1998, are entitled to
notice of, and to vote at, the Special Meeting.
By Order of the Board of
Directors
BERT KUTHE,
Vice President-Finance and
Secretary
YOUR VOTE IS IMPORTANT
If you are unable to attend the meeting, please date, sign and return the
accompanying proxy card promptly in the enclosed envelope which requires no
postage if mailed in the United States. Please do not send in any share
certificates at this time. Upon approval of the Merger, you will be sent
instructions regarding the procedures to exchange your share certificates for
the consideration to be paid.
Any shareholder (other than WG Holding) will have the right to dissent from the
consummation of the transactions contemplated by the Agreement and Plan of
Merger and to receive payment of the "fair value" of his or her shares upon
compliance with the procedures set forth in Chapter 55, Article 13 of the
General Statutes of North Carolina. See "RIGHTS OF DISSENTING SHAREHOLDERS" in
the accompanying Proxy Statement and the full text of Chapter 55, Article 13
which is attached as Appendix C to and is described in the accompanying Proxy
Statement.
WANDEL & GOLTERMANN TECHNOLOGIES, INC.
1030 Swabia Court
Research Triangle Park, North Carolina 27709-3585
---------------
PROXY STATEMENT
---------------
This Proxy Statement is being furnished to the shareholders of Wandel &
Goltermann Technologies, Inc., a North Carolina corporation (the "Company"), in
connection with the solicitation by its Board of Directors (the "Board") of
proxies to be used at a Special Meeting of Shareholders (the "Special Meeting")
to be held on , July , 1998 at 10:00 a.m. (local time) at
, and at any adjournment or adjournments thereof.
At the Special Meeting, the shareholders of the Company will be asked to
consider and vote on a proposal to approve an Agreement and Plan of Merger (the
"Merger Agreement") dated as of March 28, 1998, among the Company, Wandel &
Goltermann Management Holding GmbH, a German limited liability company ("WG
Holding") and WG Merger Corp., a newly formed North Carolina corporation that
is wholly-owned by WG Holding ("WGMC"), which is attached to this Proxy
Statement as Appendix A. Pursuant to the Merger Agreement, (i) WGMC will be
merged with and into the Company, (ii) each outstanding share of the common
stock of WGMC will be converted into one outstanding share of the common stock
of the Company and (iii) each outstanding share of common stock, $.01 par
value, of the Company (the "Common Stock"), other than shares held by WG
Holding and shares held by shareholders who are entitled to and who have
perfected their dissenters' rights, will be canceled and converted
automatically into the right to receive $15.90 in cash, payable to the holder
thereof, without interest (the "Merger"). As a result of the Merger, WG Holding
will acquire all of the outstanding shares of Common Stock not already owned by
WG Holding, and the Company's other shareholders (the "Public Shareholders")
will no longer have an equity interest in the Company.
A special committee of directors of the Company (the "Special Committee"),
consisting of two directors who are neither employees of the Company nor
employees or directors of WG Holding or WGMC, reviewed and considered the terms
of the Merger, determined that the Merger is in the best interests of the
Company and its shareholders and fair to the Public Shareholders and
recommended that the Board approve the Merger Agreement. The Board has
unanimously approved the Merger Agreement, has determined that the Merger is in
the best interests of the Company and its shareholders and fair to the Public
Shareholders and recommends that the shareholders vote FOR the approval of the
Merger Agreement. The Special Committee's recommendation and the Board's
approval and recommendation were based on a number of factors described in this
Proxy Statement, including the opinion of The Robinson-Humphrey Company, LLC
("Robinson-Humphrey"), the financial advisor to the Special Committee, dated
the date of the Merger Agreement, that the cash consideration to be received by
the Public Shareholders pursuant to the Merger is fair, from a financial point
of view, to such shareholders. The opinion of Robinson-Humphrey is included as
Appendix B to this Proxy Statement and should be read in its entirety.
Completion of the Merger is subject to certain conditions, including
approval of the Merger Agreement by the Company's shareholders. WG Holding,
which owns approximately 62% of the Company's outstanding Common Stock, has
advised the Company that it intends to vote its shares of Common Stock in favor
of the Merger Agreement, which will assure approval of the Merger Agreement at
the Special Meeting. The Merger is expected to be completed promptly after the
Special Meeting, provided all other conditions have been satisfied or waived by
the parties.
This Proxy Statement, the Notice of Special Meeting and the enclosed proxy
card, are first being mailed to shareholders of the Company on or about June ,
1998.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRE-SENTATION TO THE CONTRARY IS
UNLAWFUL.
The date of this Proxy Statement is June , 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION ............................................. iii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ................... iii
SUMMARY ........................................................... 1
Date, Time and Place of the Special Meeting ..................... 1
Purpose of the Special Meeting .................................. 1
Record Date and Quorum .......................................... 1
Vote Required ................................................... 1
Parties to the Merger Transaction ...............................
The Merger ......................................................
Effective Time of the Merger and Payment for Shares .............
Purpose and Reasons for the Merger ..............................
The Special Committee's and the Board's Recommendation ..........
Opinion of the Special Committee's Financial Advisor ............
Interests of Certain Persons in the Merger ......................
Certain Litigation ..............................................
Certain Effects of the Merger ...................................
Rights of Dissenting Shareholders ...............................
Conditions to the Merger; Termination; Expenses .................
Federal Income Tax Consequences .................................
Financing of the Merger .........................................
Market Prices of Common Stock and Dividends .....................
Purchases of Common Stock by the Company and WG Holding .........
Selected Financial Data .........................................
SPECIAL FACTORS ...................................................
Background of the Merger ........................................
The Special Committee's and the Board's Recommendation ..........
Opinion of the Special Committee's Financial Advisor ............
Position of WG Holding as to Fairness of the Merger .............
Purpose and Reasons for the Merger ..............................
Interests of Certain Persons in the Merger ......................
Market Prices of Common Stock and Dividends .....................
Purchases of Common Stock by the Company and WG Holding .........
Certain Relationships ...........................................
Certain Litigation ..............................................
Certain Effects of the Merger ...................................
Conduct of the Company's Business after the Merger ..............
Certain Forward Looking Information .............................
GENERAL INFORMATION ABOUT THE SPECIAL MEETING .....................
Proxy Solicitation ..............................................
Record Date and Quorum Requirement ..............................
Voting Procedures ...............................................
Voting and Revocation of Proxies ................................
THE MERGER ........................................................
Effective Time ..................................................
Conversion of Securities ........................................
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Termination of the Company Stock Options .........................................
Transfer of Shares ...............................................................
Conditions .......................................................................
Representations and Warranties ...................................................
Covenants ........................................................................
Indemnification ..................................................................
Expenses .........................................................................
Termination, Amendment and Waiver ................................................
Source of Funds for the Merger. ..................................................
Expenses of the Transaction ......................................................
RIGHTS OF DISSENTING SHAREHOLDERS ..................................................
FEDERAL INCOME TAX CONSEQUENCES ....................................................
BUSINESS OF THE COMPANY ............................................................
SELECTED FINANCIAL DATA ............................................................
CERTAIN FORWARD LOOKING INFORMATION ................................................
PRINCIPAL SHAREHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT ...........................
SHAREHOLDER PROPOSALS ..............................................................
INDEPENDENT AUDITORS ...............................................................
OTHER MATTERS ......................................................................
APPENDICES
APPENDIX A -- Agreement and Plan of Merger ......................................... A-1
APPENDIX B -- Opinion of The Robinson-Humphrey Company, LLC ........................ B-1
APPENDIX C -- Chapter 55, Article 13 of the General Statutes of North Carolina ..... C-1
</TABLE>
ii
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements, and other information filed with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Judiciary Plaza, Washington D.C. 20549 and at the
following Regional Offices of the Commission: 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material can be obtained at prescribed rates
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.
Judiciary Plaza, Washington, D.C. 20549. The Commission maintains a World Wide
Web site on the Internet at http:// www.sec.gov that contains reports, proxy
and information statements and other information regarding registrants that
file electronically with the Commission, including the Company. The same
information is also available on the Internet at http:// www.FreeEDGAR.com.
The Company and WG Holding have filed a Schedule 13E-3 with the Commission
with respect to the transactions contemplated by the Merger Agreement. As
permitted by the rules and regulations of the Commission, this Proxy Statement
omits certain information contained in the Schedule 13E-3 and the exhibits
thereto. The Schedule 13E-3, including any amendments and exhibits filed or
incorporated by reference as a part thereof, is available for inspection or
copying as set forth above. Statements contained in this Proxy Statement or in
any document incorporated herein by reference as to the contents of any
contract or other document referred to herein or therein are not necessarily
complete and in each instance reference is made to such contract or other
document filed as an exhibit to the Schedule 13E-3 or such other document, and
each such statement shall be deemed qualified in its entirety by such
reference.
No person has been authorized to give any information or make any
representation in connection with the solicitation of proxies made hereby other
than those contained or incorporated by reference in this Proxy Statement, and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company, WG Holding or WGMC. The delivery of this
Proxy Statement shall not, under any circumstances, create any implication that
there has been no change in the affairs of the Company since the date hereof or
that the information contained or incorporated by reference herein is correct
as of any time subsequent to its date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by the
Company (File No. 0-25176) pursuant to the Exchange Act are incorporated herein
by this reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1997 (as amended);
2. The Company's Current Report on Form 8-K dated January 27, 1998.
3. The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 1997.
4. The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1998.
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15 (d) of the Exchange Act subsequent to the date
hereof and prior to the date of the Special Meeting are hereby incorporated by
reference into this Proxy Statement and shall be deemed a part hereof from the
date of filing such documents or reports. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Proxy Statement to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Proxy Statement.
This Proxy Statement incorporates documents by reference which are not
presented herein or delivered herewith. Such documents (other than exhibits to
such documents unless such exhibits are specifically incorporated by reference)
are available, without charge, to any person, including any beneficial owner,
to whom this Proxy Statement is delivered, on written or oral request to the
Company at 1030 Swabia Court, P.O. Box 13585, Research Triangle Park, North
Carolina 27709-3585, (telephone number (919) 941-5730), Attention: Bert Kuthe,
Secretary. Such documents will be provided to such person by first class mail
or other equally prompt means within one business day of receipt of such
request. In order to ensure delivery of the documents prior to the Special
Meeting, requests should be received by July , 1998.
iii
<PAGE>
SUMMARY
The following is a brief summary of certain information contained
elsewhere in this Proxy Statement. Reference is made to, and this Summary is
qualified in its entirety by, the more detailed information contained elsewhere
or incorporated by reference in this Proxy Statement. Shareholders are urged to
read this Proxy Statement and its appendices in their entirety before voting.
Date, Time and Place of the Special Meeting
The Special Meeting of Shareholders of the Company will be held on ,
July , 1998, at 10:00 a.m., local time, at .
Purpose of the Special Meeting
At the Special Meeting, the shareholders of the Company will be asked to
consider and vote on a proposal to approve the Merger Agreement, which is
attached to this Proxy Statement as Appendix A, pursuant to which (i) WGMC will
be merged with and into the Company, (ii) each outstanding share of the common
stock of WGMC will be converted into one outstanding share of the common stock
of the Company and (iii) each outstanding share of Common Stock, other than
shares held by WG Holding and shareholders who are entitled to and who have
perfected their Dissenters' Rights (as defined below), will be converted
automatically into the right to receive $15.90 in cash payable to the holders
thereof, without interest (the "Cash Merger Consideration"). As a result of the
Merger, WG Holding will acquire all of the outstanding shares of Common Stock
not already owned by WG Holding, and the Public Shareholders will no longer
have an equity interest in the Company. See "The Merger."
Record Date and Quorum
The Board of Directors of the Company (the "Board") has fixed the close of
business on May 8, 1998 as the record date (the "Record Date") for the
determination of shareholders entitled to notice of, and to vote at, the
Special Meeting and any postponements or adjournments thereof. Each holder of
record of Common Stock at the close of business on the Record Date is entitled
to one vote for each share then held on each matter submitted to a vote of
shareholders. At the close of business on the Record Date, there were 5,288,652
shares of Common Stock outstanding. The holders of a majority of the
outstanding shares entitled to vote at the Special Meeting must be present in
person or represented by proxy to constitute a quorum for the transaction of
business at the Special Meeting. See "General Information About the Special
Meeting."
Vote Required
Under North Carolina law, the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock entitled to vote at the
Special Meeting is required to approve the Merger Agreement. Thus, a failure to
vote or a vote to abstain will have the same legal effect as a vote cast
against approval. In addition, brokers who hold shares of Common Stock as
nominees will not have discretionary authority to vote such shares in the
absence of instructions from the beneficial owners. See "General Information
About the Special Meeting -- Voting Procedures."
As of the Record Date, WG Holding owned approximately 62% of the
outstanding shares of Common Stock. WG Holding has advised the Company that it
intends to vote its shares of Common Stock in favor of the Merger Agreement
which will assure approval of the Merger Agreement. The Company has also been
advised that directors and executive officers of the Company, who owned an
aggregate of 13,738 shares of Common Stock on the Record Date, intend to vote
their shares in favor of the Merger Agreement.
Parties to the Merger Transaction
The Company
The Company develops, manufactures, markets and supports test,
measurement, diagnostic and monitoring products for local and wide area data
networks. The Company's network analysis products, which primarily consist of
the Domino and DA-3x product families, enable customers to analyze and solve
interoperability and performance problems across all the principal
configurations of network topologies and communication protocols. In the United
States, the Company also markets specialized test, measurement and monitoring
instruments primarily for use by operators of telecommunication and data
transmission systems. These products are primarily purchased for resale from
the foreign manufacturing affiliates of WG Holding.
1
<PAGE>
The Company's major customers include AT&T, Cisco Systems, Deutsche
Telekom, Embratel, GTE, IBM, Lufthansa, MCI, Nortel, NCR, Telecom Italia,
Qualcomm and various U.S. governmental agencies.
On January 27, 1998, the Company acquired for an initial payment of $5
million the outstanding capital stock of Tinwald Networking Technologies, Inc.
("Tinwald"), a Canadian-based developer of the LinkView family of software
analysis tools. On March , 1998, the Company acquired for an initial payment of
$1.25 million the assets of Network Intelligence, Inc. ("Network
Intelligence"), a California-based developer of network performance management
software. With respect to both acquisitions, the Company has agreed to certain
additional payments upon the satisfaction of certain contingencies.
The principal executive offices of the Company are located at 1030 Swabia
Court, Research Triangle Park, North Carolina 27709-3585. The Company's
telephone number is (919) 941-5730. See "Business of the Company."
WG Holding
WG Holding is a privately-held German limited liability company that,
through its various manufacturing and sales affiliates, develops, manufactures,
markets and distributes on a worldwide basis communications test measuring
equipment. WG Holding owns approximately 62% of the Company's outstanding
Common Stock. Prior to the Company's initial public offering in April 1994, the
Company was a wholly-owned subsidiary of a predecessor to WG Holding.
On March 18, 1998, WG Holding and Wavetek Corporation, a privately owned
global designer, manufacturer and distributor of a broad range of electronic
test instruments, jointly announced that they had reached an agreement in
principle to merge the companies. See "Special Factors -- Conduct of the
Company's Business After the Merger."
The principal executive offices of WG Holding are located at Arbachstra-e
6, D-72800 Eningen, Federal Republic of Germany. WG Holding's telephone number
is 49-7121-86-1700.
WGMC
WGMC is a newly-formed North Carolina corporation that is a wholly-owned
subsidiary of WG Holding organized for the sole purpose of effecting the Merger
and has not conducted any business. The principal executive offices of WGMC are
located 1030 Swabia Court, Research Triangle Park, North Carolina 27709-3585.
WGMC's telephone number is 919-941-5730.
The Merger
The Merger Agreement provides that subject to satisfaction of certain
conditions, WGMC will be merged with and into the Company, and that following
the Merger, the separate existence of WGMC will cease and the Company will
continue as the surviving corporation and a wholly-owned subsidiary of WG
Holding. At the effective time of the Merger, which will be the date and time
of filing of Articles of Merger with the Secretary of State of the State of
North Carolina or at such later time as is specified in the Articles of Merger
(the "Effective Time"), and subject to the terms and conditions set forth in
the Merger Agreement, each share of issued and outstanding Common Stock (other
than shares held by WG Holding and shares as to which Dissenters' Rights (as
defined below) are properly perfected and not withdrawn) will, by virtue of the
Merger, be converted into the right to receive the Cash Merger Consideration.
As a result of the Merger, the Company's Common Stock will no longer be
publicly traded and will be 100% owned by WG Holding. See "The Merger."
Effective Time of the Merger and Payment for Shares
The Effective Time is currently expected to occur as soon as practicable
after the Special Meeting, subject to approval of the Merger Agreement at the
Special Meeting and satisfaction or waiver of the terms and conditions of the
Merger Agreement. See "The Merger -- Conditions." Detailed instructions with
regard to the surrender of share certificates, together with a letter of
transmittal, will be forwarded to shareholders by First Union National Bank
(the "Disbursing Agent") promptly following the Effective Time. Shareholders
should not submit their certificates to the Disbursing Agent until they have
received these materials. The Disbursing Agent will send payment for shares to
shareholders as promptly as practical following receipt by the Disbursing Agent
of their certificates and other required documents. No interest will be paid or
accrued on the cash payable upon the surrender of certificates. See "The Merger
- -- Conversion of Securities." Shareholders should not send any share
certificates at this time.
Purpose and Reasons for the Merger
The purpose of the Merger is to enable WG Holding, which currently owns
approximately 62% of the outstanding Common Stock, to acquire 100% of the
ownership of the Company pursuant to a transaction in which the Public
Shareholders will receive $15.90 per share. The Board believes that the
respective long-term business objectives of the Company and
2
<PAGE>
WG Holding can best be achieved by more closely coordinating the activities and
operations of the Wandel & Goltermann affiliated group of companies. By
aligning the interest and ownership of the Company and the other Wandel &
Goltermann affiliated companies, internationally coordinated programs for
research and development, product manufacturing, marketing and sales may be
implemented. In addition, the integration of the Company's operations with WG
Holding's other manufacturing and sales affiliates is expected to eliminate
potential conflicts of interest that now exist among the Company and other WG
Holding affiliates related to access to proprietary information and the
allocation of the benefits, through licensing agreements and other
arrangements, of proprietary product developments. The integration of the
Company, as a private enterprise, into WG Holding is also expected to provide
the Company with access to greater financial and technical resources that will
permit the Company to better meet the competitive demands of its industry.
The Special Committee's and the Board's Recommendation
The Special Committee, at a meeting of the Board held on March 28, 1998,
unanimously recommended that the Board approve, and the Board unanimously
approved, the Merger Agreement. The Board has determined that the Merger
Agreement is in the best interests of the Company and its shareholders and is
fair to the Public Shareholders and recommends that the Public Shareholders
vote FOR the approval of the Merger Agreement. For a discussion of the factors
considered by the Special Committee and the Board in reaching their
recommendation and determination, see "Special Factors -- Background of the
Merger," " -- The Special Committee's and the Board's Recommendation," and " --
Opinion of the Special Committee's Financial Advisor."
Opinion of the Special Committee's Financial Advisor
Robinson-Humphrey was engaged by the Special Committee to act as its
financial advisor in connection with the Merger. Robinson-Humphrey has
delivered its written opinion, dated March 28, 1998 to the Special Committee to
the effect that the consideration to be received by the Public Shareholders
pursuant to the Merger is fair to such shareholders from a financial point of
view. No limitations were imposed on Robinson-Humphrey by the Special Committee
or the Company with respect to the investigations made or procedures followed
by Robinson-Humphrey in rendering its opinion. The full text of
Robinson-Humphrey's opinion, including the procedures followed, the matters
considered and the assumptions made by Robinson-Humphrey, is included as
Appendix B to this Proxy Statement and should be read in its entirety. The
opinion of Robinson-Humphrey included in this Proxy Statement does not
constitute a recommendation as to how any holder of shares should vote with
respect to the Merger Agreement. Pursuant to the terms of Robinson-Humphrey's
engagement, the Company has paid Robinson-Humphrey a fee of $250,000. For a
description of Robinson-Humphrey's opinion and of the terms of its engagement
by the Special Committee, see "Special Factors -- Opinion of the Special
Committee's Financial Advisor."
Interests of Certain Persons in the Merger
In considering the recommendation of the Special Committee and the Board
with respect to the Merger Agreement, shareholders should be aware that WG
Holding and certain members of the Board and of management of the Company have
certain interests which may give rise to potential conflicts of interest in
connection with the Merger. The Special Committee and the Board were aware of
these interests and considered them, among other factors, in approving the
Merger Agreement. See "Special Factors -- Interests of Certain Persons in the
Merger" and " -- The Special Committee's and the Board's Recommendation."
Certain Litigation
Class action complaints relating to WG Holding's January 12, 1998 offer to
acquire the outstanding shares of Common Stock not owned by WG Holding held by
the Public Shareholders for $13.00 per share were filed in late January 1998
shortly after the Company's public announcement of the receipt of the offer
(the "Shareholder Litigation"). The Company, WG Holding and the individual
defendants who are currently directors of the Company believe that the
complaints are without merit and intend to contest the lawsuits vigorously. See
"Special Factors -- Certain Litigation" and " -- The Special Committee's and
the Board's Recommendation."
Certain Effects of the Merger
As a result of the Merger, the entire equity interest in the Company will
be owned by WG Holding. Following the Merger, the Public Shareholders will no
longer have any interest in, and will not be shareholders of the Company and,
accordingly, will not participate in the Company's future earnings and growth.
Instead, each such holder of Common Stock
3
<PAGE>
(other than WG Holding) will have the right to receive the Cash Merger
Consideration for each share held (other than shares in respect of which
Dissenters' Rights (as defined below) have been perfected). WG Holding will be
the sole beneficiary of any future earnings and growth of the Company and will
have the ability to benefit from any corporate opportunities that may be
pursued by the Company in the future. WG Holding will also bear the risk of any
decreases in the value of the Company. See "Special Factors -- Certain Effects
of the Merger" and "Certain Forward Looking Information."
In addition, the Common Stock will no longer be traded on the NASDAQ
National Market and price quotations with respect to sales of shares in the
public market will no longer be available. The registration of the Common Stock
under the Exchange Act will terminate, and this termination will eliminate the
Company's obligation to file periodic financial and other information with the
SEC and will make certain provisions of the Exchange Act inapplicable. See
"Special Factors -- Certain Effects of the Merger."
Rights of Dissenting Shareholders
Any shareholder of the Company who does not vote in favor of the proposal
to approve the Merger Agreement and who complies strictly with the applicable
provisions of Article 13 of Chapter 55 of the North Carolina General Statutes
("Article 13") has the right to dissent and be paid cash for the "fair value"
for such holder's shares of Common Stock ("Dissenters' Rights"). The applicable
provisions of Article 13 are attached to this Proxy Statement as Appendix C. To
perfect Dissenters' Rights with respect to the Merger, a shareholder must
follow the procedures set forth therein precisely. Those procedures are
summarized in this Proxy Statement under "Rights of Dissenting Shareholders."
Shares of Common Stock held by persons properly exercising Dissenters'
Rights (the "Dissenting Shares") will not be converted into the Cash Merger
Consideration in the Merger and after the Effective Time will represent only
the right to receive such consideration as is determined to be due such
dissenting shareholder pursuant to Article 13. If after the Effective Time any
dissenting shareholder fails to perfect or loses such right to payment or
appraisal under Article 13, each share of Common Stock of such shareholder
shall be treated as a share that had been converted as of the Effective Time
into the right to receive the Cash Merger Consideration.
Conditions to the Merger; Termination; Expenses
Each party's obligation to effect the Merger is subject to the
satisfaction or waiver of a number of conditions, including, without
limitation, (i) the approval of the Merger Agreement by the holders of a
majority of the outstanding shares of Common Stock; (ii) the absence of any
injunction or similar order prohibiting or restricting the consummation of the
Merger; (iii) the receipt of all other required authorizations, consents and
approvals; and (iv) the material correctness of all representations and
warranties of the parties to the Merger Agreement. See "The Merger --
Conditions." Even if the shareholders approve the Merger Agreement, there can
be no assurance that the Merger will be consummated.
At any time prior to the Effective Time, the Merger Agreement may be
terminated by the mutual consent of the Board and WG Holding. In addition, any
of the parties may terminate the Merger Agreement prior to the Effective Time
if (i) the Merger is not completed by October 31, 1998, (ii) the requisite
approval by the shareholders of the Company has not been obtained, or (iii) a
court or other governmental entity permanently enjoins, restrains or prohibits
any of the parties from completing the Merger and such action is final and
non-appealable. See "The Merger -- Termination, Amendment and Waiver."
Each of WG Holding and the Company has agreed to pay its own costs and
expenses in connection with the Merger whether or not the Merger is
consummated. See "The Merger -- Expenses."
Federal Income Tax Consequences
The receipt of the Cash Merger Consideration by holders of Common Stock
pursuant to the Merger will be a taxable transaction for federal income tax
purposes. For a more detailed discussion of the federal income tax consequences
of the Merger, see "Federal Income Tax Consequences." Shareholders who will
receive the Cash Merger Consideration are urged to consult their tax advisors
to determine the effect of the Merger on such holders under federal, state,
local and foreign tax laws.
4
<PAGE>
Financing of the Merger
It is estimated that approximately $35 million will be required to
consummate the Merger and pay related fees and expenses. This sum will be
provided by a capital contribution of approximately $35 million to the Company
by WG Holding prior to the consummation of the Merger. The funds to be
contributed to the Company by WG Holding will be borrowed under credit
facilities established by WG Holding with a syndicate of foreign banks. See
"The Merger -- Source of Funds for the Merger."
Market Prices of Common Stock and Dividends
The Common Stock is traded on the NASDAQ National Market (symbol: WGTI).
The following table sets forth the high and low closing prices for each
quarterly period for the two most recent fiscal years and the first two
quarters of the current fiscal year.
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
---------------------------------------------------------------------
1996 1997 1998
---------------------- ----------------------- ----------------------
High Low High Low High Low
----------- ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
First Quarter .......... $ 13.25 $ 9.00 $ 31.50 $ 17.25 $ 13.75 $ 8.50
Second Quarter ......... 16.88 9.00 30.25 18.75 15.63 12.38
Third Quarter .......... 19.75 14.13 23.75 8.50
Fourth Quarter ......... 19.75 13.25 13.25 8.88
</TABLE>
On November 18, 1997, the last trading day prior to the announcement by
the Company of the formation of the Special Committee in anticipation of
receiving a possible proposal from WG Holding to acquire the outstanding Common
Stock not owned by WG Holding, the closing price per share of Common Stock as
reported by NASDAQ was $10.00. On January 9, 1998, the last trading day prior
to the announcement by the Company that WG Holding had submitted a proposal to
acquire, through a merger, all of the outstanding Common Stock of the Company
(other than the shares held by WG Holding) for a cash price of $13.00 per
share, the closing price per share of Common Stock reported by NASDAQ was
$12.63. On March 17, 1998, the last trading day prior to the announcement by
the Company that the Special Committee and WG Holding had reached an agreement
in principle on a cash price of $15.90 per share for the acquisition of the
shares of Common Stock not owned by WG Holding, the closing price per share of
Common Stock reported by NASDAQ was $13.13. On March 27, 1998, the last trading
day prior to the announcement of the execution of the Merger Agreement, the
closing price per share of Common Stock as reported by NASDAQ was $15.25. On
June , 1998, the last trading day prior to printing of this Proxy Statement,
the closing price per share of Common Stock as reported by NASDAQ was $ .
On May 8, 1998, the Company had approximately 1,300 shareholders of which
approximately 49 were record holders of Common Stock.
The Company has never paid any cash dividends on its Common Stock. Under
the Merger Agreement, the Company has agreed not to pay any dividends on the
Common Stock prior to the Effective Time.
Purchases of Common Stock by the Company and WG Holding
Since October 1, 1995, the Company has purchased 100,000 shares of Common
Stock and WG Holding has purchased 351,600 shares of Common Stock. See "Special
Factors -- Purchases of Common Stock by the Company and WG Holding."
Selected Financial Data
The following table sets forth selected historical combined and
consolidated financial data of the Company for each of the five fiscal years
ended September 30, 1997, which are derived from the audited combined and
consolidated financial statements of the Company. The combined and consolidated
financial statements for the five fiscal years ended September 30, 1997 have
been audited by Arthur Andersen LLP, independent auditors. The historical
results of operations of the Company for the six month periods ended March 31,
1997 and 1998 and the historical financial position of the Company as of March
31, 1998 are derived from unaudited consolidated financial statements included
in the Company's Form 10-Q Quarterly Report for the three months ended March
31, 1998, incorporated herein by reference. The unaudited consolidated
financial statements include all adjustments, consisting of normal recurring
accruals, which the Company considers necessary for a fair presentation of the
consolidated financial position and consolidated results of operations for
these periods. The data are qualified by reference to, and should be read in
conjunction with, the Consolidated Financial Statements, related
5
<PAGE>
Notes and other financial information included in the Company's Form 10-K
Annual Report for the year ended September 30, 1997, incorporated by reference
herein.
<TABLE>
<CAPTION>
Six Months Ended March
Fiscal Year Ended September 30, 31,
------------------------------------------------------ -----------------------
1997 1996 1995 1994 1993 1998 1997
---------- ---------- ---------- ---------- ---------- ------------ ----------
(In thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenues:
Nonaffiliates .......................... $29,001 $ 33,186 $23,658 $ 21,785 $18,005 $ 15,556 $13,729
Affiliates ............................. 25,454 25,900 21,604 18,387 15,080 11,262 16,068
------- -------- ------- -------- ------- -------- -------
Total revenues ....................... 54,455 59,086 45,262 40,172 33,085 26,818 29,797
Cost of revenues ........................ 24,381 23,234 16,576 12,731 12,176 13,931 12,372
------- -------- ------- -------- ------- -------- -------
Gross profit ......................... 30,074 35,852 28,686 27,441 20,909 12,887 17,425
Selling, general & admin. expenses ...... 19,360 18,934 15,872 12,984 10,603 9,395 9,807
Product development expenses ............ 10,712 9,804 10,469 9,059 6,545 5,791 4,932
Restructuring charges ................... -- -- 1,279 -- -- -- --
Acquired in-process research and
development and other non-recurring
charges ................................ -- -- -- -- -- 5,825 --
------- -------- ------- -------- ------- -------- -------
Operating income (loss) .............. 2 7,114 1,006 5,398 3,761 (8,124) 2,686
Interest expense ........................ -- -- -- (460) (779) -- --
Interest income ......................... 639 350 313 295 274 285 320
Foreign currency gains (losses) ......... (271) (104) (245) 213 498 34 (270)
------- -------- ------- -------- ------- -------- -------
Income (loss) before income taxes ...... 424 7,360 1,134 5,446 3,754 (7,805) 2,736
Benefit from (provision for) income
taxes .................................. -- (2,208) (98) (2,124) 867 779 (821)
------- -------- ------- -------- ------- -------- -------
Income from continuing operations ....... 424 5,152 1,036 3,322 4,621 (7,026) 1,915
Income from discontinued operations ..... -- -- -- 204 135 -- --
------- -------- ------- -------- ------- -------- -------
Net income (loss) .................... $ 424 $ 5,152 $ 1,036 $ 3,526 $ 4,756 $ (7,026) $ 1,915
======= ======== ======= ======== ======= ======== =======
Per Share Data:
Net income (loss) per share (assuming
dilution) .............................. $ 0.08 $ 0.98 $ 0.20 $ 0.80 $ 1.27 $ (1.33) $ 0.35
Weighted average number of common
shares outstanding (assuming
dilution) .............................. 5,359 5,231 5,245 4,398 3,750 5,274 5,395
</TABLE>
<TABLE>
<CAPTION>
As of September 30,
-----------------------------------------------------
1997 1996 1995 1994 1993 As of March 31, 1998
---------- ---------- ---------- ---------- --------- ---------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital ................................ $27,036 $24,869 $20,117 $20,041 $ 6,569 $19,986
Total assets ................................... 37,292 34,298 29,344 28,272 20,381 30,300
Short-term debt, including current maturities
of long-term debt ............................. -- -- -- -- 5,978 --
Long-term debt ................................. -- -- -- -- 4,370 --
Shareholders' equity ........................... 30,659 28,822 24,354 23,113 5,303 23,976
</TABLE>
<TABLE>
<CAPTION>
As of
--------------------------------------
September 30, 1997 March 31, 1998
-------------------- ---------------
<S> <C> <C>
Book Value Per Share ......... $ 5.83 $ 4.53
</TABLE>
6
<PAGE>
SPECIAL FACTORS
Background of the Merger
Prior to its initial public offering ("IPO") in April 1994, the Company
was a wholly-owned subsidiary of a predecessor of WG Holding. Since the IPO, WG
Holding (and its predecessors), directly or through subsidiaries, have acquired
and disposed of shares of Common Stock in market transactions but WG Holding
has always owned a majority of the outstanding Common Stock. As of the Record
Date, WG Holding beneficially owned approximately 62% of the outstanding Common
Stock.
Among the worldwide operations of WG Holding, the Company is the only
entity controlled either directly or indirectly by WG Holding that has public
shareholders holding a minority equity interest. During 1997, WG Holding, as
part of its long-term strategic planning process, began considering its options
relating to its investment in the Company. In particular, WG Holding began
considering the possibility of acquiring the equity interest in the Company not
already owned by WG Holding. In considering this possibility, WG Holding
concluded that by acquiring all of the outstanding Common Stock: (i) the
interests of the Company and the other WG Holding affiliated companies would be
fully aligned, (ii) a more streamlined and integrated management and operating
structure would be possible, and (iii) conflicts of interest that might arise
in managing the operations of the WG Holding affiliated group of companies
would be eliminated.
During a Board meeting on November 18, 1997, Peter Wagner, a director of
the Company and then the Chief Operating Officer and a Managing Director of WG
Holding, advised the Board that WG Holding was considering the possibility of
making a proposal to the Company pursuant to which WG Holding would seek to
acquire all of the Company's outstanding Common Stock held by the Public
Shareholders. Following receipt of this advice, the Board determined that a
proposal from WG Holding might involve a transaction in which WG Holding had
interests that are in addition to, or different from, the interests of the
Public Shareholders. Accordingly, pursuant to resolutions adopted on November
18, 1997 (the "Special Committee Formation Resolutions"), the Board created the
Special Committee and appointed Sidney Topol and Richard E. Pospisil to serve
as members, with Mr. Topol serving as Chairman. Neither of these directors is
an employee of the Company or an employee or director of WG Holding or WGMC.
The Special Committee was authorized to consider, review, evaluate and
recommend to the Board what actions, if any, should be taken with respect to a
proposal that might be received from WG Holding and to engage in negotiations
with WG Holding with respect to any such proposal. Upon formation of the
Special Committee, the Company issued a press release on November 18, 1997
announcing that WG Holding had informed the Board that it was considering
various strategic transactions, certain of which might involve the Company and
the Public Shareholders, including, as one of the alternatives, a merger of the
Company with one or more affiliates of WG Holding or a transaction in which WG
Holding would acquire all of the Common Stock held by the Public Shareholders.
The press release announced that, while WG Holding had made no proposal at such
time and no assurance was given that any proposal would be made, the Board had
formed the Special Committee to review and consider any proposal that might be
made by WG Holding.
Shortly after its formation and as authorized by the Special Committee
Formation Resolutions, the Special Committee retained Powell, Goldstein, Frazer
& Murphy LLP ("Powell, Goldstein") as its legal counsel. Thereafter, the
Special Committee and its legal counsel discussed the procedures to be followed
in considering and responding to a proposal from WG Holding. As part of this
discussion, Powell, Goldstein advised the Special Committee as to the Special
Committee's legal responsibilities and the legal principles applicable to, and
the legal consequences of, actions taken by the Special Committee with respect
to a proposal from WG Holding. Because WG Holding owned approximately 62% of
the outstanding Common Stock and Mr. Wagner had advised the Board on November
18, 1997 that WG Holding would not be in favor of a sale of the Company or its
assets to a third party, the Special Committee concluded that finding an
alternative acquirer for the Company was unlikely, and that an all cash
transaction proposed by WG Holding, provided an acceptable price could be
achieved, would be the best option for the Company and the Public Shareholders.
Pursuant to the Special Committee Formation Resolutions authorizing the
Special Committee to retain a financial advisor, the Special Committee then
requested three nationally-recognized investment banking firms to make
proposals to serve as the financial advisor to the Special Committee. The
Special Committee received written proposals from these three investment
banking firms and the members of the Special Committee reviewed such proposals.
After a review and discussion of the proposals, on December 24, 1997, the
Special Committee unanimously selected Robinson-Humphrey to provide financial
advisory services to and to assist the Special Committee in its consideration
and evaluation of any proposal that might be received from WG Holding to
acquire the shares of the Company's outstanding Common Stock held by the Public
Shareholders. In addition, Robinson-Humphrey agreed, if requested by the
Special Committee, to render its opinion with respect to the fairness, from a
financial point of view, to the Public Shareholders of the consideration to be
received as part of any
7
<PAGE>
such proposal. Prior to its engagement by the Special Committee,
Robinson-Humphrey had served as the managing underwriter of the Company's IPO
and received customary fees for such services. In the ordinary course of its
business, Robinson-Humphrey has also traded in the Common Stock for its own
account as a market maker and executed transactions in the Common Stock for the
account of its customers. Robinson-Humphrey has not represented or provided
financial advisory, underwriting or other services to WG Holding or any of its
other affiliates. The Special Committee requested that Robinson-Humphrey begin
to assemble information regarding the Company and other comparable companies in
anticipation of the Special Committee receiving a proposal from WG Holding.
On December 5, 1997, WG Holding retained the investment banking firm of
Broadview Associates ("Broadview") as its financial advisor in connection with
WG Holding's consideration of its options regarding the Company. On December
12, 1997, Broadview notified Mr. Chastelet, the Company's Chief Executive
Officer, that Broadview had been engaged by WG Holding, requested that the
Company begin to assemble information about the Company for Broadview to
consider, and requested a meeting with representatives of the Company's
management team to review and discuss the Company's operations, financial
condition and prospects. In response to Broadview's request, the Company
furnished to Broadview, among other information relating to the Company,
preliminary financial forecasts prepared by the Company's management for the
fiscal years 1998 through 2000 with and without taking into account the
potential effects of the proposed acquisitions of Tinwald and Network
Intelligence (the "Preliminary Forecasts").
On December 18, 1997, representatives of Broadview met with the Company's
management team, including Mr. Chastelet, Bert Kuthe, the Company's Chief
Financial Officer and others, to discuss the Company's operations, financial
condition and prospects. During this meeting, the Company provided Broadview
with the Preliminary Forecasts.
On December 23, 1997, Broadview submitted a report to WG Holding (the
"December Broadview Report") to assist WG Holding in evaluating a possible
transaction pursuant to which WG Holding would acquire the remaining equity in
the Company not owned by WG Holding. See " -- Position of WG Holding as to
Fairness of the Merger -- Reports of WG Holding's Financial Advisor." In
connection with the December Broadview Report, Broadview reviewed the Company's
filings with the Commission, the Company's share price history and current
market rating, equity research reports on the Company, other publicly available
information on the Company, information gathered during Broadview's discussions
with the Company's management team, information on publicly-traded competitors,
information on transactions involving comparable target companies, and
information on comparable minority buy-backs. In preparing the December
Broadview Report, Broadview used the Preliminary Forecasts without
consideration of the Tinwald and Network Intelligence acquisitions based on
Broadview's conclusion that these acquisitions were in too early a stage to
assess their likely outcome. The December Broadview Report included discussion
materials on the Company's business and financial outlook and a number of
separate analyses and included a range of values for WG Holding to consider in
connection with any offer to acquire the remaining equity of the Company. The
range recommended by Broadview was $12.00-$13.50 per share. See " -- Position
of WG Holding as to Fairness of the Merger -- Reports of WG Holding's Financial
Advisor."
During December 1997 and January 1998, Robinson-Humphrey reviewed certain
financial and other information concerning the Company which it obtained from
the Company and from independent sources. On January 5, 1998, Robinson-Humphrey
met with the management team of the Company at the Company's offices to review
the Company's business, historical financial statements and future business
prospects at this meeting, the Company provided Robinson-Humphrey with the Base
Income Projections.
On January 9, 1998, the Special Committee met and received a report from
Powell, Goldstein that, pursuant to conversations with representatives of
Rogers & Hardin, legal counsel to WG Holding, it was expected that WG Holding
would submit a written proposal to acquire the outstanding Common Stock held by
the Public Shareholders in the near future. During that meeting, the members of
the Special Committee discussed the fact that the Company expected to complete
the Tinwald and Network Intelligence acquisitions in the near future and
discussed the possible impact these acquisitions might have on the Company and
the market price of the Company's Common Stock.
On January 9, 1998, the Special Committee received a written proposal from
WG Holding to acquire, through a merger, all of the outstanding Common Stock of
the Company held by the Public Shareholders at a cash price of $13.00 per share
(the "WG Holding Proposal").
On January 12, 1998, the Company issued a press release that disclosed the
WG Holding Proposal and also stated that the WG Holding Proposal had been
referred to the Special Committee for review and evaluation.
8
<PAGE>
On January 13, 1998, the Special Committee held a meeting to discuss the
WG Holding Proposal and to determine the actions which should be taken in
response to the WG Holding Proposal. Representatives of Powell, Goldstein and
Robinson-Humphrey participated in the meeting. Robinson-Humphrey reported that
although Robinson-Humphrey had begun to assemble information regarding the
Company, other comparable publicly-traded companies and comparable merger and
acquisition transactions in anticipation of receiving the WG Holding Proposal,
Robinson-Humphrey was not in a position to provide an evaluation of the WG
Holding Proposal at that time, but expected to be able to do so shortly. The
Special Committee and Robinson-Humphrey discussed the process which
Robinson-Humphrey would undergo in order to advise the Special Committee
concerning the WG Holding Proposal.
On January 14, 1998, Broadview received from the Company a copy of the
signed Memorandum of Understanding relating to the Company's acquisition of
Tinwald and projected income statements prepared by the Company's management
for the fiscal years 1998 through 2001 which took into account the estimated
effects of the proposed Tinwald and Network Intelligence acquisitions (the
"Base Income Projections").
On January 20, 1998, the Special Committee held a meeting in which
representatives of Powell, Goldstein and Robinson-Humphrey participated. At the
January 20 meeting, Robinson-Humphrey provided the Special Committee with
materials outlining its preliminary valuation analysis of the Company. During
the January 20, 1998 meeting, Robinson-Humphrey stressed that its valuation of
the Company was an ongoing process and that the information then provided to
the Special Committee was very preliminary in nature. Robinson-Humphrey
discussed with the Special Committee the results of its preliminary analysis
and the valuation methodologies employed by Robinson-Humphrey, which included a
comparison to comparable publicly-traded companies, an analysis of comparable
merger and acquisition transactions, an analysis of premiums paid for minority
interest acquisitions in going private transactions and a discounted cash flow
analysis based on the Base Income Projections. The Special Committee questioned
Robinson-Humphrey concerning the assumptions made in connection with its
preliminary analysis and the facts on which the assumptions were based.
Following its discussions with Robinson-Humphrey, the Special Committee noted
that much of Robinson-Humphrey's analysis was based upon the Base Income
Projections. After further discussion, it was observed that it would be
desirable if a meeting could be held with Messrs. Chastelet and Kuthe to
discuss the Base Income Projections considered by Robinson-Humphrey in its
preliminary valuation analysis, the assumptions underlying them and the support
for such assumptions, in order to permit the Special Committee and
Robinson-Humphrey, working together, to reach a better understanding of the
Base Income Projections and the risks associated with their attainability.
On February 3, 1998, the members of the Special Committee and
representatives of Robinson-Humphrey met with five members of the Company's
management team, including Messrs. Chastelet and Kuthe. At that meeting, the
Base Income Projections, the assumptions underlying such projections and the
support for such projections were discussed in detail, and additional
information was provided to Robinson-Humphrey and the Special Committee
relevant to the valuation analysis of the Company. After the meeting with the
Company's management team, the Special Committee met with representatives of
Powell, Goldstein and Robinson-Humphrey. The information provided by Messrs.
Chastelet and Kuthe and other members of management was discussed and
Robinson-Humphrey advised the Special Committee of the range of values which it
believed was supported by such information and other information which
Robinson-Humphrey deemed relevant and considered. Based upon this discussion
and to initiate its negotiations with WG Holding, the Special Committee
determined to advise WG Holding that it was prepared to recommend favorably an
acquisition of the Common Stock held by the Public Shareholders at a price in a
range of $19.00 to $23.00 per share. This price range per share was
communicated by Powell, Goldstein to Rogers & Hardin on February 5, 1998.
On February 12, 1998, Broadview and Robinson-Humphrey discussed via
telephone certain principles and methodologies underlying the valuation of the
Company. Broadview explained that in connection with its valuation it had used
the Preliminary Forecasts without taking into account the effects of the
Tinwald and Network Intelligence acquisitions. Robinson-Humphrey indicated that
its valuation did reflect the estimated effects of these acquisitions, as well
as the Company's revised business and financial outlook as reflected in the
Base Income Projections.
Thereafter, the members of the Special Committee learned, through various
sources, including information provided by Robinson-Humphrey based upon its
conversations with representatives of Broadview, that although WG Holding had
access to the Base Income Projections, the projections actually relied upon by
WG Holding and Broadview in developing the WG Holding Proposal may have
differed from the Base Income Projections. In an effort to provide Broadview
with an opportunity to receive the same information that had been provided to
Robinson-Humphrey and the Special Committee, a meeting was arranged at the
Company among representatives of Broadview and management of the Company. A
representative of Robinson-Humphrey also attended the meeting, which took place
on February 24, 1998.
9
<PAGE>
At this meeting, Broadview and the Company's management team discussed the
financial and operational outlook for the Company. In particular, Broadview
obtained additional information regarding the financial impact of the
acquisition of Tinwald, the timing and strategy of the Company's new product
launches necessary to sustain the forecasted growth by management, and the
Company's ongoing negotiations to acquire Network Intelligence. At this
meeting, the Company's management discussed with Broadview the Base Income
Projections and the underlying assumptions. The Company also provided Broadview
with detailed historical, year-to-date and projected financial data, including
statistics related to revenue and profitability by product as well as the
Company's order book.
Following the February 24 meeting, WG Holding and Broadview jointly
reviewed the information provided to Broadview. Based on the historical data
provided by the Company, Broadview performed sensitivity analyses with respect
to the Base Income Projections. As a result of these analyses and its review of
the information provided by the Company, Broadview adjusted the Base Income
Projections to reflect the perceived risk of potential delays in product
releases, increased spending in connection with establishing a sales and
marketing infrastructure and accelerating research and development expenses.
Based on these contingencies, qualified with the assistance of WG Holding,
Broadview adjusted the Base Income Projections to take into account these
contingencies (the "Adjusted Income Projections").
After the February 24 meeting, the Special Committee scheduled a meeting
for March 11, 1998, to be held at the offices of Powell, Goldstein and to be
attended by the available directors of the Company and representatives of
Powell, Goldstein, Rogers & Hardin and Moore & Van Allen, PLLC, counsel for the
Company ("Moore & Van Allen"). The purpose of the meeting was to allow the
members of the Special Committee to negotiate with representatives of WG
Holding concerning the price per share contained in the WG Holding Proposal.
On March 6, 1998, the Special Committee met with representatives of
Robinson-Humphrey and representatives of Powell, Goldstein. Robinson-Humphrey
reported to the Special Committee concerning the February 24 meeting among
Broadview and management of the Company, which had been attended by a
representative of Robinson-Humphrey. The Special Committee determined, based on
the discussions which took place at the March 6, 1998 meeting, that it would
follow a strategy of commencing negotiations with WG Holding regarding the
price per share of Common Stock to be paid by WG Holding, recognizing that,
based on the lack of an affirmative response from WG Holding to the Special
Committee's initial counter proposal of $19.00 to $23.00 per share, a lower
price probably would have to be agreed to in order for an agreement to be
reached with WG Holding. The Special Committee determined that, in the initial
stage of such negotiations, it would advise WG Holding that it continued to
believe a purchase price in the range of $19.00 to $23.00 per share was
appropriate in order possibly to elicit a counter proposal from WG Holding. The
Special Committee was advised by Robinson-Humphrey that it was prepared to
support a price of less than $19.00 per share as being fair, from a financial
point of view, to the Public Shareholders, although no particular minimum price
was discussed. The members of the Special Committee then discussed the agenda
for the March 11 meeting and asked Robinson-Humphrey to prepare a summary of
their preliminary valuation analysis which the Special Committee could use in
its negotiations with WG Holding at that meeting.
On March 9, 1998 Broadview submitted additional discussion materials (the
"March Broadview Report") to WG Holding which discussed the most recent
information and summarized the results of various valuation analyses based on
the Adjusted Income Projections. The March Broadview Report included a number
of analyses which separately reviewed the analyses included in the December
Broadview Report. On March 10, 1998, Rogers & Hardin provided a copy of the
March Broadview Report to Powell, Goldstein. See " -- Position of WG Holding as
to Fairness of the Merger -- Reports of WG Holding's Financial Advisor."
On March 10, 1998, the Special Committee provided WG Holding with a copy
of the valuation analysis dated March 10, 1998 prepared by Robinson-Humphrey
for the Special Committee. The March 10, 1998 analysis contained a range of
prices for the Company's shares from $15.10 to $34.68 for the Common Stock held
by the Public Shareholders based on the Base Income Projections and the
alternative valuation methodologies used by Robinson-Humphrey.
All of the directors of the Company (except Messrs. Wandel and Simmross),
Mr. Kuthe and representatives of Powell, Goldstein, Rogers & Hardin and Moore &
Van Allen attended the meeting on March 11, 1998. During this meeting Messrs.
Chastelet and Kuthe summarized the basis for the Base Income Projections and
the principal underlying assumptions. Representatives of WG Holding advised the
meeting participants that WG Holding did not believe that the Base Income
Projections would be attained by the Company, that WG Holding had discounted
such projections, and explained the basis used for WG Holding's adjustments to
the Base Income Projections. WG Holding made available to the directors the
Adjusted Income Projections and a copy of the March Broadview Report prepared
for WG Holding by Broadview based upon such projections. The Special Committee
delivered to the directors a copy of the preliminary valuation analysis dated
March 10, 1998 prepared by Robinson-Humphrey for the Special Committee.
Discussions occurred regarding the Base
10
<PAGE>
Income Projections and the Adjusted Income Projections and the respective
valuation methodologies used by Robinson-Humphrey and Broadview. The meeting
was recessed on several occasions to permit Messrs. Wagner and Schmid, as
representatives of WG Holding, and its legal counsel, and the Special
Committee, and its legal counsel, to meet separately to evaluate the status of
the discussions. After a separate conference between the members of the Special
Committee and Messrs. Wagner and Schmid, the meeting was reconvened and the
Special Committee advised WG Holding that the Special Committee was prepared to
recommend a price of $17.50 per share, based upon (i) the Special Committee's
belief after discussions with representatives of WG Holding, that WG Holding
would not pay a higher price and (ii) the Special Committee's belief, based in
part on the verbal advice of Robinson-Humphrey, that such price was fair. Mr.
Wagner replied on behalf of WG Holding that $17.50 per share was not
acceptable, but WG Holding would be prepared to pay $15.82 per share if such an
offer would allow the parties to promptly conclude the price negotiations.
After a brief discussion, WG Holding and the Special Committee determined that
further discussions at that time would not be productive and the meeting
adjourned.
After the March 11 meeting, the Special Committee asked Robinson-Humphrey
to prepare a set of income projections representing an average of the Base
Income Projections and the Adjusted Income Projections in order to allow
Robinson-Humphrey and Broadview to analyze a version of the Company's
projections representing a balanced approach between the Base Income
Projections and the Adjusted Income Projections. The projections prepared by
Robinson-Humphrey (the "Average Income Projections") were provided to Broadview
and the Special Committee. On several occasions after March 11,
Robinson-Humphrey and Broadview had discussions concerning the Average Income
Projections, the impact of utilizing the Average Income Projections on the
valuation methodologies employed by Robinson-Humphrey and Broadview and certain
other matters regarding the valuation of the Company's shares and the
assumptions that each financial advisor made in connection with their
respective valuations. The matters discussed included the most recent
information about the Company's business situation, the financial forecasts
used in the valuations, the selection of publicly traded companies as
comparables and the selection of transactions involving comparable target
companies as merger and acquisition transaction comparables.
During the same time period, Mr. Pospisil, acting on behalf of the Special
Committee, had several telephone conversations with representatives of WG
Holding in an effort to determine if WG Holding would increase the price per
share which it had offered during the March 11 meeting. During these
discussions, representatives of WG Holding advised Mr. Pospisil that WG Holding
was prepared to pay $15.90 per share but that, if this was not promptly
accepted by the Special Committee, WG Holding would withdraw its offer and
abandon its efforts to acquire the shares of Common Stock held by the Public
Shareholders. On March 17, 1998, Mr. Pospisil advised Mr. Topol and Powell,
Goldstein of the new price per share offered by WG Holding and the position
taken by WG Holding concerning its offer. The Special Committee and Powell,
Goldstein inquired of Robinson-Humphrey whether it could issue a fairness
opinion with respect to a price of $15.90 per share and Robinson-Humphrey
advised the Special Committee that it was prepared to do so. Mr. Pospisil
advised representatives of WG Holding that the Special Committee would agree to
a price of $15.90 per share. A meeting of the Board of Directors of the Company
was scheduled for March 18, 1998.
On March 18, 1998, the Board held a telephonic meeting in which all of the
directors participated. Also participating were Mr. Kuthe and representatives
of Moore & Van Allen, Rogers & Hardin and Powell, Goldstein. Mr. Topol, as
Chairman of the Special Committee, reported that the Special Committee had
concluded that a cash price of $15.90 per share of Common Stock was fair to the
Public Shareholders in connection with the merger transaction proposal received
from WG Holding. Mr. Wagner, on behalf of WG Holding, confirmed that WG Holding
had agreed to the cash price of $15.90 per share. Mr. Topol reported that
Robinson-Humphrey had orally confirmed to the Special Committee that, in its
opinion, the cash price of $15.90 per share was fair to the Public Shareholders
from a financial point of view. Representatives from each of the Special
Committee and WG Holding noted that their willingness to support the $15.90
price per share was subject to reaching agreement on the terms of a definitive
Merger Agreement. The Company issued a press release on March 18, 1998
announcing the agreement as to price reached between the Special Committee and
WG Holding.
A special meeting of the Board was held on March 28, 1998 at the offices
of Powell, Goldstein. All of the members of the Board were present. Also
present at the meeting were Mr. Kuthe and representatives of Robinson-Humphrey,
Moore & Van Allen, Powell, Goldstein, and Rogers & Hardin. Prior to the
meeting, the Board members were furnished a copy of the Merger Agreement and
the Investment Banking Presentation of Robinson-Humphrey dated March 28 1998,
containing the analyses conducted by Robinson-Humphrey supporting its opinion
that the Cash Merger Consideration was fair, from a financial point of view, to
the Public Shareholders (the "Robinson-Humphrey Evaluation Report"). At the
meeting:
(a) A representative of Rogers & Hardin reviewed with the Board the
principal terms of the Merger Agreement and the Board considered the amount
and sources of funding to consummate the merger and other transactions
contemplated by the Merger Agreement;
11
<PAGE>
(b) Each director disclosed the nature and extent of any direct or
indirect interest that he had in the proposed merger transaction after
being advised by counsel to the Company of the director conflict of
interest provisions of the North Carolina Business Corporation Act;
(c) The Board determined, upon the advice of a representative of Moore &
Van Allen, that Messrs. Topol and Pospisil did not have a direct or
indirect interest in WG Holding, WGMC or any other affiliate of WG Holding
(other than as a result of their service as a director of the Company) and
that their interests in the proposed merger and the transactions
contemplated by the Merger Agreement were aligned with the interests of the
Public Shareholders and the holders of outstanding options under the
Company's stock option plans;
(d) Mr. Topol provided the Board with a report of the activities of the
Special Committee from the time of its formation in November 1997 to March
28, 1998, which report summarized the activities of the Special Committee
as discussed above;
(e) Mr. Topol summarized the principal reasons (which are set forth under
"The Special Committee's and the Board's Recommendation -- Special
Committee") why the Special Committee was recommending approval of the
Merger Agreement as fair to the Public Shareholders and advised the Board
that the Special Committee recommended approval of the Merger Agreement;
(f) A representative of Robinson-Humphrey made a presentation to the
Board explaining the Robinson-Humphrey Evaluation Report and read the
fairness opinion that Robinson-Humphrey had prepared for the Special
Committee (see Appendix B to this Proxy Statement), noting that
Robinson-Humphrey's fairness opinion was also being provided for the
benefit of the Board;
(g) Members of the Board discussed the reasons why, in their view, it was
in the best interests of the Company and the Public Shareholders to approve
the Merger Agreement and proceed with the proposed merger (which reasons
are summarized below under " -- Purpose and Reasons for the Merger"); and
(h) Based on their consideration of the foregoing, the Board adopted
resolutions that determined that the Merger Agreement and the Merger and
other transactions contemplated by the Merger Agreement were in the best
interests of the Company and its shareholders and that the terms of the
Merger Agreement, including the Cash Merger Consideration, were fair to the
Public Shareholders, approved the Merger Agreement and recommended that the
Merger Agreement be approved by the Company's shareholders.
Prior to the presentation of the Robinson-Humphrey Evaluation Report to
the Board, the members of the Special Committee met privately with
representatives of Robinson-Humphrey and Powell, Goldstein to review and
discuss the Robinson-Humphrey Evaluation Report.
A copy of the Robinson-Humphrey Evaluation Report provided to the Board at
the March 28 meeting has been filed as an exhibit to the Schedule 13E-3. See
"Available Information." Such materials are available for inspection and
copying at the principal executive offices of the Company during its regular
business hours by any shareholder or any representative of a shareholder who
has been so designated in writing. A copy of such materials will be provided to
any shareholder or any representative of the shareholder who has been so
designated in writing upon written request and at the expense of the requesting
shareholder or representative.
The Special Committee's and the Board's Recommendation
The Special Committee
The Special Committee, in reaching its conclusion that the Merger is fair
to, and in the best interest of, the Public Shareholders, and in determining to
recommend approval of the Merger Agreement to the Board, considered a number of
factors, including, without limitation, the following:
(i) The Special Committee's knowledge of the business, financial
condition, results of operations and prospects of the Company. The members of
the Special Committee were knowledgeable about the Company's affairs, including
the present and possible future economic and competitive environment in which
the Company operates its business;
(ii) The terms of the Merger Agreement, including without limitation, the
amount and form of consideration; the nature of the parties' representations,
warranties, covenants and agreements; and the conditions to the obligations of
WG Holding,
12
<PAGE>
WGMC and the Company. In this regard, the Special Committee viewed favorably
the fact that the Merger Agreement contained a limited number of
representations and warranties by the Company and a limited number of
conditions to the closing of the Merger, thus making consummation of the
transaction more likely than one in which the agreement imposed more
significant conditions to consummation;
(iii) The Special Committee's conclusion, based on the course of the
negotiations, that the Cash Merger Consideration was the highest price
attainable, particularly in light of the fact that, as discussed in (viii)
below, WG Holding was unwilling to consider any third party transactions for
the Company. Accordingly, the Special Committee did not conduct any process to
determine potential interest in such a transaction on the part of any third
party. This conclusion was the result of the Special Committee's negotiations
with WG Holding in an attempt to obtain the highest possible price;
(iv) The fact that the Cash Merger Consideration represented (i) a 59.0%
premium over the last reported sales price of the Common Stock on November 18,
1997, the day immediately preceding the public announcement that WG Holding
might submit the WG Holding Proposal, (ii) a 67.4% premium over the last
reported sales price of the Common Stock one week prior to such date and (iii)
a 51.4% premium over such price four weeks prior to such date;
(v) The oral and written presentations of Robinson-Humphrey to the Special
Committee on January 20, 1998, March 10, 1998 and March 28, 1998, and the
written opinion of Robinson-Humphrey dated March 28, 1998 to the effect that,
as of the date of such opinion and based upon and subject to certain matters
stated in such opinion, the Cash Merger Consideration was fair, from a
financial point of view, to the Public Shareholders. See " -- Opinion of the
Special Committee's Financial Advisor." The opinion of Robinson-Humphrey is
attached hereto as Appendix B to this Proxy Statement. The shareholders of the
Company are urged to read such opinion carefully in its entirety;
(vi) The stock price and trading volume history of the Common Stock and
the fact that such shares are thinly traded;
(vii) The fact that the Cash Merger Consideration represents a 3.6
multiple to pro forma book value per share of Common Stock at December 31, 1997
after giving effect to the $6.3 million write-down of purchased technology then
expected to be recorded in the quarter ended March 31, 1998;
(viii) The unwillingness of WG Holding to consider a sale of the Company
or to engage in other alternative transactions with respect to the Company (as
a result of which the Special Committee did not solicit third party bids for
the Company);
(ix) WG Holding's advice to the Special Committee, which the Special
Committee assumed to be correct, that WG Holding would withdraw its offer of
$15.90 per share of Common Stock and abandon its efforts to acquire the Common
Stock not owned by it, if an agreement were not reached, which would present
the likelihood that the trading prices for the Common Stock would fall to the
pre-November 18, 1997 level of approximately $9.00, and possibly lower, and
that the Common Stock might trade in that price range for an indefinite period
of time thereafter;
(x) The Special Committee's view that, inasmuch as the Public Shareholders
represent a minority ownership position in the Company and that the long term
objectives of WG Holding may not be aligned with the interests of the Public
Shareholders, a sale by the Public Shareholders at a fair price was in their
best interests; and
(xi) The availability of Dissenters' Rights to dissenting shareholders in
the Merger. See "Rights of Dissenting Shareholders."
In light of the number and variety of factors the Special Committee
considered in connection with its evaluation of the Merger, the Special
Committee did not quantify or otherwise attempt to assign relative weights to
the foregoing factors. The Special Committee collectively made its
determination with respect to the Merger Agreement based on the unanimous
conclusion reached by its members that the Merger Agreement, in light of the
factors that each of them individually considered appropriate, is fair to, and
in the best interest of, the Company and the Public Shareholders.
Although the Special Committee did consider historical trading prices of
the Common Stock, the Special Committee did not consider trading prices of the
Common Stock for the period following the announcement of the WG Holding
Proposal, because the Special Committee believed that such prices reflected
anticipation of the possibility of the purchase by WG Holding of the Common
Stock held by the Public Shareholders. In addition, the Special Committee did
not consider the Cash Merger Consideration as compared to any implied
liquidation value because the Company is not in a liquidation mode and will be
operated by WG Holding as a going concern following the Merger.
In its evaluation of the Merger, the Special Committee took note of the
interests of various members of the Board. See "Special Factors -- Interests of
Certain Persons in the Merger".
13
<PAGE>
The Special Committee did not consider the Shareholder Litigation in
evaluating the fairness of the WG Holding Proposal or any other prices
considered by the Special Committee during its deliberations or negotiations
with representatives of WG Holding. The Special Committee believed that the
allegations made in the Shareholder Litigation were unfounded given, among
other things, the fact that such litigation commenced prior to any substantive
consideration of the WG Holding Proposal by the Special Committee, any
discussions between the Special Committee and Robinson-Humphrey regarding the
Company's value, and any negotiations between the Special Committee and
representatives of WG Holding with respect to the WG Holding Proposal. See " --
Certain Litigation."
The Special Committee believes that the Merger is procedurally fair
because:
(i) The Special Committee consisted of disinterested directors appointed
to represent the interests of, and to negotiate on an independent basis with WG
Holding (as if WG Holding were an unaffiliated third party) on behalf of, the
Company and the Public Shareholders;
(ii) The Special Committee retained and was advised by independent legal
counsel;
(iii) The Special Committee retained Robinson-Humphrey as its independent
financial advisor to assist it in evaluating the proposed Merger; and
(iv) The Cash Merger Consideration and the other terms and conditions of
the Merger resulted from arms length negotiations between the Special Committee
and WG Holding.
Although the Special Committee considered conditioning the Merger upon
approval of a majority of the votes entitled to be cast by the Public
Shareholders (a "majority of the minority vote"), the Special Committee
determined that in light of the foregoing factors, the Merger is procedurally
fair to the Public Shareholders without a majority of the minority vote.
The Board
At a special meeting of the Board on March 28, 1998, at which all members
were present, the Board unanimously approved the Merger Agreement, concluded
that the Cash Merger Consideration is fair to the Public Shareholders and
recommended that it be submitted to the Company's shareholders for approval.
The Board recommends that the Public Shareholders approve the Merger Agreement.
The Board's recommendation is based on (a) the recommendation of the Special
Committee, (b) the opinion of Robinson-Humphrey to the effect that the Cash
Merger Consideration is fair, from a financial point of view, to the Public
Shareholders and (c) the factors referred to above as having been considered by
the Special Committee. In view of the number and variety of factors considered
in connection with the Board's evaluation of the Merger Agreement and the Cash
Merger Consideration, the Board did not believe it practicable to assign
relative weights to such factors and, therefore, did not assign any such
relative weights or otherwise attempt to quantify these factors.
Because of the interest of four of directors in WG Holding (Messrs.
Wandel, Wagner, Schmid and Simmross) and Mr. Chastelet's position as the Chief
Executive Officer of the Company, his possible continued employment with the
Company upon completion of the Merger and his position as an officer and
director of WGMC, a majority of the Board could not independently review and
determine the fairness of the Merger Agreement and the Cash Merger
Consideration to the Public Shareholders. Therefore, the remaining directors,
Messrs. Topol and Pospisil, who also constituted the Special Committee, were
the only disinterested directors who voted in favor of the Merger Agreement. At
the special meeting on March 28, 1998, the Board was advised by a
representative of Moore & Van Allen that the approval of the Merger Agreement
by the entire Board did not affect the validity of the Board's action because
the Merger Agreement was also approved by two disinterested directors who had
been fully apprised at the meeting of the direct or indirect interests in the
Merger of the other directors. See " -- Background of the Merger."
Opinion of the Special Committee's Financial Advisor
Background
On March 28, 1998, Robinson-Humphrey delivered a written opinion to the
Special Committee to the effect that, as of such date and based upon and
subject to certain matters, the Cash Merger Consideration to be received by the
Public Shareholders of the Company pursuant to the Merger Agreement is fair to
such shareholders from a financial point of view.
The full text of Robinson-Humphrey's opinion, which sets forth the
assumptions made, matters considered and limitations on the review undertaken
in connection with the opinion, is attached hereto as Appendix B. Shareholders
are urged to read the opinion carefully and in its entirety.
Robinson-Humphrey's opinion is directed only to the consideration to be
received by the Public Shareholders in the Merger and does not constitute a
recommendation to any shareholder as to how
14
<PAGE>
such shareholder should vote. Robinson-Humphrey's opinion does not address the
likely tax consequences of the Merger to any Public Shareholder. No limitations
were imposed by the Special Committee, the Company, WG Holding or WGMC with
respect to the investigations made or procedures followed by Robinson-Humphrey
in rendering its opinion. Robinson-Humphrey conducted valuation analyses of the
Common Stock and evaluated the Cash Merger Consideration, but was not asked to
and did not recommend a specific per share price to be paid by WG Holding for
the minority interest in the Company. The summary of Robinson-Humphrey's
opinion set forth in this Proxy Statement is qualified in its entirety by
reference to the full text of such opinion.
In connection with its opinion, Robinson-Humphrey conducted, among other
analyses, (i) a review of certain publicly available information concerning the
Company; (ii) a review of certain internal financial statements and other
financial and operating data concerning the Company prepared by the management
of the Company; (iii) an analysis of certain financial assumptions prepared by
the Company; (iv) a review of the historical and current market prices and
trading patterns of the Common Stock; (v) a review of the historical market
prices and trading activity for the Common Stock and compared them with those
of certain publicly-traded companies engaged in similar businesses as the
Company; (vi) a review of the results of operations and present financial
condition of the Company and compared them with those of certain
publicly-traded companies engaged in similar businesses as the Company; (vii) a
review and analysis of the financial terms of certain merger and acquisition
transactions involving companies engaged in similar businesses as the Company;
(viii) a review and analysis of prices and premiums paid in, and other terms
of, other recent minority buy-out transactions; and (ix) a discounted cash flow
analysis of the Company. Robinson-Humphrey also held discussions with members
of the senior management of the Company regarding the Company's past and
current business operations, financial condition and future prospects.
Robinson-Humphrey relied without independent verification upon the
accuracy and completeness of all the financial and other information reviewed
by it for purposes of its opinion. In that regard, with respect to the Base
Income Projections and the Average Income Projections which the Special
Committee instructed Robinson-Humphrey to use for purposes of its analyses,
Robinson-Humphrey assumed that such forecasts were reasonably prepared on a
basis reflecting the best currently available estimates and judgments of the
Company's senior management as to the future financial performance of the
Company. In addition, Robinson-Humphrey was not requested or authorized to
solicit, and did not solicit, interest from any party with respect to an
acquisition of all or any portion of the outstanding Common Stock, the Company
or its constituent businesses.
The following is a summary of the presentation by Robinson-Humphrey to the
Special Committee and the Board on March 28, 1998 in connection with its March
28, 1998 fairness opinion:
Analysis of the Company
Historical Stock Price Analysis. Robinson-Humphrey analyzed the prices at
which the Common Stock of the Company traded after its initial public offering
on April 8, 1994. In calendar 1994, the high price was $16.13 and the low price
was $8.38. In calendar 1995, the high price was $20.75 and the low price was
$9.00. In calendar 1996, the high price was $31.50 and the low price was $9.00.
In calendar 1997, the high price was $30.25 and the low price was $8.50. In
calendar 1998, as of March 27, 1998 (the last trading day prior to the date of
the opinion), the high price was $15.63 and the low price was $12.38. Over the
period from April 8, 1994 to March 27, 1998, Robinson-Humphrey observed that
more than 49% of the outstanding shares were traded in a price range of $8.00
to $12.40. Over the period from January 1, 1997 to March 27, 1998,
Robinson-Humphrey observed that more than 61% of the outstanding shares were
traded in a price range of $8.00 to $12.40.
Valuation Summary of Selected Comparable Publicly-Traded Companies.
Robinson-Humphrey reviewed and compared certain financial, operating and stock
market information of the Company and two groups of publicly-traded companies
in the network solutions industry. The Network Analysis publicly-traded
companies included in Robinson-Humphrey's analysis were Applied Digital Access,
Inc., Concord Communications, Inc., Digital Lightwave, Inc., Hewlett-Packard
Company, Network Associates, Inc., RADCOM Ltd., Tekelec, Inc. and Tektronix,
Inc. The Network Management and Equipment publicly-traded companies included in
Robinson-Humphrey's analysis were the Network Analysis companies plus Dynatech
Corp., Fluke Corp., GenRad, Inc., Keithley Instruments, Inc., MicroTest, Inc.,
Objective Systems Integrators, Inc., Retix Corp., TCSI Corporation, Teradyne,
Inc., Bay Networks, Inc., Cabletron Systems, Inc., Cisco Systems, Inc. and 3Com
Corp. Robinson-Humphrey calculated, among other things, current market price as
a multiple of: (i) book value; (ii) calendar 1997 earnings per share ("EPS");
(iii) estimated calendar 1998 EPS; and (iv) estimated calendar 1999 EPS. The
calendar 1998 and 1999 EPS estimates were based on the mean of publicly
available earnings estimates made by research analysts as provided by First
Call Investor Service. In addition, Robinson-Humphrey calculated, for each of
the publicly-traded companies, firm value (market capitalization plus debt
minus cash) as a multiple of: (i) calendar 1997 revenues; (ii) calendar 1997
15
<PAGE>
EBITDA; and (iii) calendar 1997 EBIT. Robinson-Humphrey averaged the multiples
of the publicly-traded comparable companies in order to apply these multiples
to the Company's values. To accurately reflect average values for statistical
purposes, Robinson-Humphrey excluded certain outlying values that differed from
the relative groupings of the other values. Robinson-Humphrey believes that
these outlying values for certain companies reflect temporary market
aberrations that can skew mean values.
The calendar 1997 price/earnings ratios for the Network Analysis companies
ranged from 18.9x to 61.1x, with an average of 34.6x. The calendar 1997
price/earnings ratios for the Network Management and Equipment companies ranged
from 11.2x to 137.5x, with an average of 30.1x. Robinson-Humphrey noted that
the Company incurred a net loss in calendar 1997 and therefore its calendar
1997 price/earnings ratio was not meaningful.
The estimated calendar 1998 price/earnings ratios for the Network Analysis
companies ranged from 16.4x to 76.6x, with an average of 33.5x. The estimated
calendar 1998 price/earnings ratios for the Network Management and Equipment
companies ranged from 9.1x to 210.4x, with an average of 27.9x. Based on the
Cash Merger Consideration and using the Average Income Projections for the
Company, Robinson-Humphrey calculated a price/earnings multiple of 44.8x for
the Company for calendar 1998.
The estimated calendar 1999 price/earnings ratios for the Network Analysis
companies ranged from 9.5x to 37.7x, with an average of 23.3x. The estimated
calendar 1999 price/earnings ratios for the Network Management and Equipment
companies ranged from 9.5x to 37.7x, with an average of 20.7x. Based on the
Cash Merger Consideration and using the Average Income Projections for the
Company, Robinson-Humphrey calculated a price/earnings multiple of 18.3x for
the Company for calendar 1999.
The current market value to book value multiples for the Network Analysis
companies ranged from 2.0x to 11.9x, with an average of 6.0x. The current
market value to book value multiples for the Network Management and Equipment
companies ranged from 1.4x to 12.8x, with an average of 5.3x. Robinson-Humphrey
noted that the Cash Merger Consideration implied a multiple of pro forma book
value of 3.6x for the Company.
The firm value to calendar 1997 revenue multiples for the Network Analysis
companies ranged from 1.18x to 15.85x, with an average of 3.36x. The firm value
to calendar 1997 revenue multiples for the Network Management and Equipment
companies ranged from 0.59x to 15.85x, with an average of 2.79x. Based on the
Cash Merger Consideration, Robinson-Humphrey calculated a firm value to
calendar 1997 revenue multiple of 1.48x for the Company. The firm value to
calendar 1997 EBITDA multiples for the Network Analysis companies ranged from
10.9x to 66.9x, with an average of 22.8x. The firm value to calendar 1997
EBITDA multiples for the Network Management and Equipment companies ranged from
4.7x and 66.9x, with an average of 16.6x. The firm value to calendar 1997 EBIT
multiples for the Network Analysis companies ranged from 14.9x to 92.3x, with
an average of 28.7x. The firm value to calendar 1997 EBIT multiples for the
Network Management and Equipment companies ranged from 6.0x to 92.3x, with an
average of 22.4x. Robinson-Humphrey noted that the Company incurred negative
EBITDA and an operating loss in calendar 1997 and therefore it could not
calculate firm value to calendar 1997 EBITDA or EBIT multiples for the Company.
Discounted Cash Flow Analysis. Robinson-Humphrey performed a discounted
cash flow analysis using the Average Income Projections for the Company for
fiscal years 1998 through 2001. For the purpose of completing the discounted
cash flow analysis, Robinson-Humphrey projected financial results for the
Company for fiscal year 2002, assuming 20% revenue growth from fiscal year 2001
revenue and margins equivalent to those margins projected by the Company for
fiscal year 2001. Using the discounted cash flow analysis, Robinson-Humphrey
estimated the present value of the future cash flows of the Company set forth
in these projections. Robinson-Humphrey calculated the net present value of
free cash flows (defined as earnings before interest after taxes plus
depreciation and amortization less capital expenditures and any increase in net
working capital) for the fiscal years ended September 30, 1998 through 2002
using discount rates ranging from 15.0% to 27.5%. Robinson-Humphrey calculated
the Company's terminal values in fiscal 2002, based on multiples ranging from
6.0x to 11.0x fiscal 2002 EBIT, with a point estimate of 8.0x fiscal 2002 EBIT.
The discounted cash flow analysis using a terminal value of 8.0x fiscal 2002
EBIT yielded a derived equity value of $15.64 per share for the Company.
Robinson-Humphrey also calculated the Company's terminal values in fiscal 2002,
based on multiples ranging from 4.0x to 7.0x fiscal 2002 EBITDA, with a point
estimate of 6.0x fiscal 2002 EBITDA. The discounted cash flow analysis using a
terminal value of 6.0x fiscal 2002 EBITDA yielded a derived equity value of
$14.84 per share for the Company. Robinson-Humphrey further calculated the
Company's terminal values in fiscal 2002, based on annual free cash flow growth
of 6.0% to 8.0%, with a point estimate of 7.0% annual growth of fiscal 2002
free cash flow. The discounted cash flow analysis using 7.0%
16
<PAGE>
annual growth of fiscal 2002 free cash flow yielded a derived equity value of
$8.37 per share. Robinson-Humphrey noted that all three of the mid-point
valuations derived under the discounted cash flow analysis were lower than the
Cash Merger Consideration.
Comparable Merger and Acquisition Transaction Analysis. Robinson-Humphrey
reviewed and compared 21 selected mergers and acquisitions in the network
solutions industry with the Cash Merger Consideration in relation to certain
financial data of the Company. The transactions reviewed, included: (i) Bay
Networks, Inc.'s proposed acquisition of Netsation; (ii) Clayton Dubilier's
proposed acquisition of Dynatech Corp.; (iii) McAfee Associates, Inc.'s
acquisition of Network General Corp.; (iv) Tivoli Systems, Inc.'s acquisition
of Unison Software; (v) Network General Corp.'s acquisition of Cinco Networks,
Inc.; (vi) Ascend Communications, Inc.'s acquisition of Cascade Communications
Corp.; (viii) 3Com Corp.'s acquisition of US Robotics Corp.; (viii) Network
General Corp.'s acquisition of 3DV Technology; (ix) Compaq Computer Corp.'s
acquisition of Microcom, Inc.; (x) Dynatech Corp.'s acquisition of Itronix
Corp.; (xi) McAfee Associates, Inc.'s acquisition of FSA Corp.; (xii) Computer
Sciences Corp.'s acquisition of Continuum Co., Inc.; (xiii) McAfee Associates,
Inc.'s acquisition of Vycor Corp.; (ixv) Dynatech Corp.'s acquisition of
Synergistic Solutions, Inc.; (xv) IBM Corp.'s acquisition of Tivoli Systems,
Inc.; (xvi) Microtest Inc.'s acquisition of Hotware, Inc.; (xvii) McAfee
Associates, Inc.'s acquisition of Saber Software Corp.; (xix) Microcom, Inc.'s
acquisition of Extension Technology Corp.; (xx) Sybase, Inc.'s acquisition of
Powersoft Corp.; and (xxi) McAfee Associates, Inc.'s acquisition of Brightwork
Development. Robinson-Humphrey calculated, among other things, equity purchase
price as a multiple of: (i) book value; (ii) historical net income; and (iii)
projected net income, and firm value (equity purchase price plus debt less
cash) as a multiple of: (i) revenues; (ii) EBITDA; and (iii) EBIT.
Robinson-Humphrey also calculated the premiums paid on the closing price of the
target's shares at one day, one week and four weeks prior to the announcement.
Robinson-Humphrey averaged the multiples for the comparable merger and
acquisition transactions in order to apply these multiples to the Company's
values. To accurately reflect average values for statistical purposes,
Robinson-Humphrey excluded certain outlying values that differed from the
relative groupings of the other values. Robinson-Humphrey believes that these
outlying values for certain companies reflect temporary market aberrations that
can skew mean values.
The equity purchase price to historical net income multiples ranged from
21.2x to 306.7x, with an average of 38.2x. The firm value to EBITDA multiples
ranged from 9.9x to 144.8x, with an average of 18.0x. The firm value to EBIT
multiples ranged from 12.6x to 213.3x, with an average of 22.7x.
Robinson-Humphrey noted that the Company had negative EBITDA, an operating loss
and a net loss in calendar 1997 and therefore calculations of the Cash Merger
Consideration to these valuation parameters were not meaningful.
The equity purchase price to book value multiples ranged from 2.4x to
17.3x, with an average of 7.7x. Robinson-Humphrey noted that the Cash Merger
Consideration implied a multiple of 3.6x book value for the Company. The firm
value to revenues multiples ranged from 1.08x to 16.78x, with an average of
3.32x. Robinson-Humphrey noted that the Cash Merger Consideration implied a
multiple of 1.48x calendar 1997 revenues for the Company.
The purchase price to estimated current year net income multiples ranged
from 20.4x to 182.7x, with an average of 34.1x. Robinson-Humphrey noted that
the Cash Merger Consideration as a multiple of fiscal 1998 net income under the
Average Income Projections implied a multiple of 68.9x for the Company. The
purchase price to estimated forward year net income multiples ranged from 15.7x
to 101.1x, with an average of 23.1x. Robinson-Humphrey noted that the Cash
Merger Consideration as a multiple of fiscal 1999 net income under the Average
Income Projections implied a multiple of 21.9x for the Company.
Robinson-Humphrey calculated average per share premiums of 28.6%, 27.7%
and 35.7% at one day, one week and four weeks prior to announcement,
respectively. These premiums, based on an announcement date of November 19,
1997, imply per share equity values for the Company of $12.86, $12.13 and
$14.25, respectively, as compared to the Cash Merger Consideration.
Minority Interest Buy-Out Analysis. Robinson-Humphrey prepared an analysis
of the premiums paid in 41 pending and completed minority interest acquisitions
by majority interest holders occurring since June 1992. Such transactions were
(i) Koninklijke KNPBT NV/BT Office Products International, Inc.; (ii) Rayonier
Inc./Rayonier Timberlands LP; (iii) Texas Industries, Inc./Chaparral Steel Co.;
(iv) Orion Capital Corp./Guaranty National Corp.; (v) Gold Kist/Golden Poultry
Company; (vi) Anthem, Inc./Accordia, Inc.; (vii) National Patent
Development/General Physics Corp.; (viii) Mafco Holdings, Inc./Mafco
Consolidated Group; (ix) JW Childs Equity Partners/Central Tractor Farm &
Country; (x) Andrews Group, Inc./ Toy Biz, Inc.; (xi) Monsanto Co./Calgene,
Inc.; (xii) Renco Group, Inc./WCI Steel Inc.; (xiii) Electromagnetic Sciences/
LXE, Inc.; (xiv) CUS Acquisition, Inc./Customedix Corp.; (xv) Chemed
Corp./Roto-Rooter, Inc.; (xvi) Seaboard Acquisition Partners/Seaboard Oil Co.;
(xvii) Novartis AG/SyStexix, Inc.; (xviii) Equity Holdings Ltd./Great American
Mgmt & Inv.
17
<PAGE>
Inc.; (xix) COBE Laboratories/REN Corp-USA; (xx) Investor Group/NCP
International; (xxi) Genzyme Corp./IG Laboratories, Inc. (xxii) SCOR/SCOR US
Corp.; (xxiii) Investor Group/Syms Corp.; (xxiv) Berkshire Hathaway, Inc./GEICO
Corp.; (xxv) Club Meditarranee SA/Club Med Inc.; (xxvi) BIC SA/Bic Corp.;
(xxvii) Fleet Financial Group, Inc./Fleet Mortgage Group, Inc.; (xxviii) Dole
Food Co., Inc./Castle & Cooke Homes, Inc. (xxix) LinPac Mouldings Ltd./Ropak
Corp.; (xxx) Freeman Spogli & Co./Koll Management Services; (xxxi) Investor
Group/LDB Corp.; (xxxii) Investor Group/Enquirer Star Group, Inc.; (xxxiii)
Investor Group/Forum Group, Inc.; (xxxiv) REMEC, Inc./Humphrey, Inc.; (xxxv)
New Marvel Holdings, Inc./Marvel Entertainment Group, Inc.; (xxxvi) Dundee
Bancorp International/Avalon Corp.; (xxxvii) National Mutual Insurance Co.;
(xxxviii) Investor Group/United Medical Corp.; (xxxix) Investor Group/Fretter
Inc.; (xl) WR Grace & Co./ Grace Energy Corp.; (xli) Katy Holdings/Katy
Industries, Inc.
Robinson-Humphrey considered, among other factors, the percentage of the
target's shares held by the acquirer at the time of the announcement, and the
premiums paid based on the closing price of the target's shares at one day, one
week and four weeks prior to the announcement. Robinson-Humphrey calculated
average per share premiums of 30.4%, 35.1% and 38.7% at one day, one week and
four weeks prior to announcement, respectively. These premiums, based on the
announcement date of November 19, 1997, imply per share equity values for the
Company of $13.04, $12.83 and $14.56, respectively, as compared to the Cash
Merger Consideration of $15.90 per share.
Summary
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analysis or of the summary set forth above, without considering
the analysis as a whole, could create an incomplete view of the process
underlying Robinson-Humphrey's opinion. In arriving at its fairness
determination, Robinson-Humphrey considered the results of all such analyses.
Robinson-Humphrey did not separately consider the extent to which any one of
the analyses supported or did not support the Robinson-Humphrey fairness
opinion. No company or transaction used in the above analyses as a comparison
is identical to the Company. The analyses were prepared solely for purposes of
enabling Robinson-Humphrey to provide its opinion to the Special Committee as
to the fairness of the Cash Merger Consideration to be received by the Public
Shareholders in the Merger and do not purport to be appraisals or necessarily
reflect the prices at which businesses or securities actually may be sold.
Analyses based upon forecasts of future results are not necessarily indicative
of actual future results, which may be significantly more or less favorable
than suggested by such analyses. Because such analyses are inherently subject
to uncertainty, being based upon numerous factors or events beyond the control
of the parties or their respective advisors, none of the Company, WG Holding,
Robinson-Humphrey or any other person assumes responsibility if future results
are materially different from those forecast.
As described above, the Robinson-Humphrey opinion was one of the factors
taken into consideration by the Special Committee in making its determination
to recommend that the Board approve the Merger Agreement. The foregoing summary
does not purport to be a complete description of all of the analyses performed
by Robinson-Humphrey, but does include a summary description of all material
analyses, and is qualified by reference to the Robinson-Humphrey opinion set
forth in Appendix B hereto.
Robinson-Humphrey, as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and other valuation services. The Special Committee selected
Robinson-Humphrey as financial advisor to the Special Committee because it is a
nationally recognized investment banking firm that has substantial experience
in transactions similar to the Merger and because of Robinson-Humphrey's
historical investment banking relationship with the Company.
Pursuant to a letter agreement dated December 24, 1997 (the "Engagement
Letter"), the Special Committee engaged Robinson-Humphrey to act as its
financial advisor in connection with any transaction that might be proposed by
WG Holding to acquire the shares of the Company's outstanding Common Stock held
by the Public Shareholders. Pursuant to the terms of the Engagement Letter, the
Company paid Robinson-Humphrey a noncontingent fee of $250,000. In addition,
the Company has agreed to reimburse Robinson-Humphrey for its reasonable
out-of-pocket expenses, including attorney's fees, and to indemnify
Robinson-Humphrey against certain liabilities, including certain liabilities
under the federal securities laws.
18
<PAGE>
Position of WG Holding as to Fairness of the Merger
General.
WG Holding has concluded that the Merger and the Cash Merger Consideration
are fair to the Public Shareholders based upon the following factors: (i) its
familiarity with the Company and its prospects; (ii) the conclusions and
recommendations of the Special Committee and the Board; (iii) the analyses set
forth in the reports prepared by Broadview, which reports are summarized below;
(iv) the fact that the Cash Merger Consideration and the other terms and
conditions of the Merger Agreement were the result of good faith, arm's length
negotiations between the Special Committee and its advisors and the
representatives of WG Holding and its advisors; and (v) the fact that
Robinson-Humphrey issued a fairness opinion to the Special Committee to the
effect that the Cash Merger Consideration is fair to the Public Shareholders
from a financial point of view. See " -- Opinion of Special Committee's
Financial Advisor;" " -- Background of the Merger."
In view of the wide variety of factors considered in connection with its
evaluation of the Merger, WG Holding did not assign specific relative
importance to the analyses or factors considered in reaching its belief as to
fairness. WG Holding recognizes that the interests of WG Holding in the Merger
are not the same as the interests of the Public Shareholders and the foregoing
should not be construed as a recommendation by WG Holding to vote to approve
the Merger Agreement. See " -- Interests of Certain Persons in the Merger" and
" -- Certain Relationships."
Reports of WG Holding's Financial Advisor.
WG Holding retained Broadview to act as its financial advisor in
connection with the Merger. On December 23, 1997, Broadview submitted to WG
Holding the December Broadview Report relating to the possible acquisition by
WG Holding of the equity in the Company not already held by WG Holding.
In connection with preparing the December Broadview Report, Broadview
reviewed the Company's filings with the Commission, the Company's share price
history and current market rating, equity research reports on the Company,
other publicly available information on the Company, information gathered
during Broadview's discussions with the Company's management, information on
publicly traded competitors, information on transactions involving comparable
target companies and information on comparable minority buy-backs. In addition,
the December Broadview Report relied upon the Preliminary Forecasts provided to
Broadview by the Company's management team during the due diligence meeting on
December 18, 1997. See " -- Background of the Merger". The forecasts used by
Broadview in the December Broadview Report did not include any effects of the
Tinwald or Network Intelligence acquisitions which were pending at the time.
The effects of these pending acquisitions were not included because Broadview
concluded that the acquisitions were at an early stage and may or may not have
ultimately been consummated. The December Broadview Report includes discussion
materials on the Company's business and financial outlook and a number of
separate analyses which Broadview relied upon in developing a recommended per
share valuation range for the Company. The following is a summary of the
analyses performed by Broadview in connection with the December Broadview
Report.
Discounted Cash Flow Analysis. Broadview performed an analysis of the
Company's projected future free cash flows in order to obtain a valuation range
for the Company's shares. The analysis was based on the financial forecasts
discussed above and data gathered concerning the worldwide test and measurement
market. A sensitivity analysis was performed applying a range of discount rates
and terminal values. The discounted cash flow analysis provided a range for the
Company's share price from $10.78 per share to $12.82 per share.
Peer Group Performance and Trading Analysis. Broadview analyzed certain
market, balance sheet and performance data for the Company and compared this
information to comparable data for seven other public test and measurement
companies (the "Peer Group"). The comparisons were based on financial data as
of and for the twelve month reporting periods prior to the date of the document
for both the Company and its Peer Group. By applying the median valuation
multiples of the Peer Group (which included multiples of revenue, EBITDA,
projected calendar 1998 earnings and projected calendar 1999 earnings) to the
relevant Company figures, this analysis indicated a valuation range for the
Company of between $9.65 per share to $11.29 per share.
Comparable Acquisitions Analysis. Broadview performed an analysis of
prices paid in merger, acquisition and investment transactions announced since
January 1992 involving test and measurement companies with similar businesses
and financial profiles. Median multiples or revenue and EBITDA were applied to
the relevant Company data to arrive at a valuation range. This range was $5.81
per share to $15.44 per share.
19
<PAGE>
Control Premium Analysis. Broadview performed an analysis of public
takeover transactions in the United States, public takeover transactions in the
technology sector in the United States and transactions involving the purchase
of publicly held minority interests by a majority shareholder. The premiums
were determined relative to the target's share price one, twenty and sixty
trading days prior to announcement. This analysis indicated a premium range of
9% to 27% on the share price twenty trading days prior to announcement, the
most relevant measure for valuation purposes. When applied to the Company's
share price prior to the public announcement of a possible transaction, this
indicated a valuation range for the Company from $10.86 per share to $12.70 per
share.
Based on these analyses, the December Broadview Report recommended that
any offer by WG Holding to acquire the remaining equity in the Company be in
the range of $12.00 to $13.50 per share. The December Broadview Report also
noted that the present and the past performance of the Company indicated that
the Company could face a number of significant challenges in the near and
long-term future which could materially affect its business and financial
performance.
After delivery of the WG Holding Proposal to the Special Committee,
Broadview had discussions with Robinson-Humphrey during January, February and
March 1998 with respect to certain principles and methodologies underlying the
valuation of the Company. Broadview also met with the Company's management team
on February 24, 1998 to discuss and gather further information on the financial
and operational outlook for the Company. In particular, Broadview obtained
additional information regarding the financial impact of the acquisition of
Tinwald, the timing and strategy of the Company's new product launches
necessary to sustain the forecasted growth by management, and the Company's
ongoing negotiations to acquire Network Intelligence. At this meeting,
Broadview also discussed with the Company's management the Base Income
Projections. The Company also provided Broadview with detailed historical,
year-to-date and projected financial data, including statistics related to
revenue and profitability by product as well as the Company's order book. Based
on the historical data provided by the Company, Broadview performed sensitivity
analyses with respect to the Base Income Projections. As a result of these
analyses and its review of the information provided by the Company and, with
the assistance of WG Holding, Broadview adjusted the Base Income Projections to
reflect potential delays in product releases, increased spending in connection
with establishing a sales and marketing infrastructure and accelerating
research and development expenses and, based on these contingencies, qualified
with the assistance of WG Holding, prepared the Adjusted Income Projections.
See "Certain Forward Looking Information."
Based on this additional information, on March 9, 1998, Broadview
submitted additional discussion materials (the "March Broadview Report") to WG
Holding which discussed the most recent information and reviewed results of
various valuation analyses based on the Adjusted Income Projections. The March
Broadview Report included a number of analyses which separately reviewed the
analyses included in the December Broadview Report. The following is a summary
of the analyses performed by Broadview in the March Broadview Report.
Discounted Cash Flow Analysis. Broadview performed an analysis of the
Company's forecasted future free cash flows in order to obtain a valuation
range for the Company's shares. The analysis was based on the Adjusted Income
Projections and data gathered concerning the worldwide test and measurement
market. A sensitivity analysis was performed applying a range of discount rates
and terminal values. The discounted cash flow analysis provided a range for the
Company's share price from $11.61 per share to $14.16 per share.
Peer Group Performance and Trading Analysis. Broadview analyzed certain
market, balance sheet and performance data for the Company and compared this
information to comparable data for eight public test and measurement and
network management software companies (the "Peer Group"). The comparisons were
based on financial data as of and for the twelve month reporting periods prior
to the date of the document for both the Company and its Peer Group. By
applying the valuation multiples of the Peer Group (which included multiples of
revenue and projected calendar 1999 earnings) to the relevant Company figures,
this analysis indicated a valuation range for the Company from $7.34 per share
to $15.82 per share.
Comparable Acquisitions Analysis. Broadview performed an analysis of
prices paid in merger, acquisition and investment transactions announced since
January 1992 involving test and measurement companies with similar businesses
and financial profiles. Median multiples of revenue and EBITDA were applied to
the relevant Company figures and, due to the lack of profitability of the
Company, a single point valuation estimate based on revenue was calculated.
This estimate was $14.11 per share.
Control Premium Analysis. Broadview performed an analysis of minority
buy-out transactions in the United States and the premium paid to minority
shareholders relative to the target's share price twenty and sixty trading days
prior to announcement of an intent to acquire the minority interests. These
precedent transactions indicated a median premium of 27% and 30%, respectively.
When applied to the Company's relevant share prices, this indicated a valuation
range for the Company from $13.36 per share to $14.18 per share.
20
<PAGE>
Notwithstanding the separate factors which are summarized above, Broadview
believes that its analyses should be considered in their entirety and that
selecting portions of its analyses and only certain of the factors considered
by it, without considering all analyses and factors, could create an incomplete
view of the valuation process. The ranges of valuations resulting from any
particular analysis described above should not be taken to be Broadview's view
of the actual value of the Company.
In performing its analyses, Broadview made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of the Company. The analyses
performed by Broadview are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than those
suggested by such analyses. Broadview's various analyses indicated a price
range for the shares held by the Public Shareholders from $7.34 to $15.82 per
share.
The December Broadview Report and the March Broadview Report are not
fairness opinions and Broadview has not rendered an opinion with respect to the
fairness of the Cash Merger Consideration to the Public Shareholders from a
financial point of view.
Pursuant to a letter agreement dated December 5, 1997 (the "Broadview
Engagement Letter"), WG Holding engaged Broadview to act as its financial
advisor in connection with WG Holding's consideration of a transaction in which
WG Holding would acquire the shares of the Company's Common Stock not owned by
WG Holding. Broadview is a leading international investment banking firm
exclusively serving the IT, communications and media industries and is, as part
of its investment banking business, continually engaged in the valuation of
businesses and their securities, especially in the context of merger,
acquisition and investment transactions. Since October 1997, Broadview has been
advising WG Holding in connection with a business combination between WG
Holding and Wavetek Corporation. See " -- Conduct of the Company's Business
After the Merger." WG Holding engaged Broadview in connection with the
potential acquisition of the remaining equity in the Company based upon
Broadview's experience in the industry and WG Holding's existing relationship
with Broadview. Pursuant to the terms of the Broadview Engagement Letter, WG
Holding has agreed to pay Broadview a fixed fee of $300,000, which fee is
payable in the event a transaction is completed. WG Holding has also agreed to
reimburse Broadview for its reasonable out-of-pocket expenses, including
attorneys' fees, and to indemnify Broadview against certain liabilities,
including certain liabilities under the federal securities laws. In addition to
the fees to be paid to Broadview pursuant to the Broadview Engagement Letter,
WG Holding has agreed to pay Broadview a fee of $1,750,000 if the merger
between WG Holding and Wavetek is consummated, and WG Holding has agreed to
reimburse Broadview for its reasonable out-of-pocket expenses incurred in
connection with its services, including attorneys' fees, and to indemnify
Broadview against certain liabilities in connection with its financial advisory
services relating to the Wavetek merger.
Copies of the December Broadview Report and the March Broadview Report are
attached as exhibits to the Schedule 13E-3. See "Available Information." The
December Broadview Report and the March Broadview Report are also available for
inspection and copying at the principal offices of the Company during the
Company's regular business hours by any shareholder of the Company or such
shareholder's representative who has been so designated in writing. A copy of
such materials will be provided to any shareholder or any representative of the
shareholder who has been so designated in writing upon written request and at
the expense of the requesting shareholder or representative. The summaries set
forth herein do not purport to be a complete description of the December
Broadview Report and the March Broadview Report as set forth in the exhibits to
the Schedule 13E-3.
Purpose and Reasons for the Merger
The purpose of the Merger is to enable WG Holding, which currently owns
approximately 62% of the outstanding Common Stock, to acquire 100% of the
ownership of the Company pursuant to a transaction in which the Public
Shareholders will receive the Cash Merger Consideration. Among the worldwide
operations of WG Holding, the Company is the only entity controlled directly or
indirectly by WG Holding that is a public company with public shareholders
holding a minority equity interest. The Board believes that the respective
long-term business objectives of the Company and WG Holding can best be
achieved by more closely coordinating the activities and operations of the WG
Holding affiliated group of companies. In this regard, the Board believes that
the operations of the Company can be more efficiently integrated with the
worldwide operations of WG Holding as a private, wholly owned subsidiary. By
aligning the interest and ownership of the Company and the other WG Holding
affiliated companies, internationally coordinated programs for research and
development, product manufacturing, marketing and sales can be implemented. In
addition, the integration of the Company's operations with WG Holding's other
manufacturing and sales affiliates is expected to eliminate potential conflicts
of interest that now exist among the Company and other WG Holding affiliates
related to access to proprietary information and the allocation of the
benefits, through licensing agreements and other arrangements, of proprietary
product developments. The Board
21
<PAGE>
also believes that the integration of the Company, as a private enterprise,
into WG Holding is expected to provide the Company with access to greater
financial and technical resources that will permit the Company to better meet
the competitive demands of its industry which increasingly entail shorter
product life cycles, require larger amounts of capital for product development
and coordinated worldwide marketing and sales efforts.
Interests of Certain Persons in the Merger
In considering the recommendations of the Special Committee and the Board
with respect to the Merger Agreement, shareholders should be aware that certain
officers and directors of the Company are also officers and directors of WG
Holding or its affiliates or otherwise have interests in connection with the
Merger which may present them with actual or potential conflicts of interest as
summarized below. The Special Committee and the Board were aware of these
interests and considered them among the other matters described under "Special
Factors -- The Special Committee's and the Board's Recommendation."
Directors Affiliated with WG Holding
Peter Wagner. Peter Wagner, a director of the Company, is the President,
Chief Executive Officer and a Managing Director of WG Holding, and is also an
officer and director of WGMC.
Rolf Schmid. Rolf Schmid, a director of the Company, is the Chief
Financial Officer and a Managing Director of WG Holding and an officer and
director of WGMC.
Joachim Simmross. Joachim Simmross, a director of the Company, is a member
of the Supervisory Board of WG Holding, which supervises and monitors the
management of WG Holding by its Managing Directors. In addition, Mr. Simmross
is a director of Hannover Finanz GmbH, an entity that owns approximately 27% of
WG Holding. Mr. Simmross holds an option to purchase 2,000 shares of Common
Stock at an exercise price of $14.31 per share. See " -- Treatment of Stock
Options."
Albrecht L. Wandel. Albrecht L. Wandel, the Chairman of the Board of
Directors of the Company, is the Chairman of the Supervisory Board of WG
Holding, and owns approximately 17% of WG Holding. Certain of Mr. Wandel's
family members also own interests in WG Holding. Mr. Wandel served as the
President, Chief Executive Officer and a Managing Director of WG Holding prior
to Mr. Wagner's appointment to that position in February 1998.
The Company's Chief Executive Officer
Gerry Chastelet. Gerry Chastelet, a director of the Company, is also the
President and Chief Executive Officer of the Company and an officer and
director of WGMC. Mr. Chastelet owns 1,257 shares of Common Stock and holds
options to purchase 109,000 shares of Common Stock with exercise prices of
$9.75 and $14.31 per share. See " -- Treatment of Stock Options."
Change in Control Agreement. Mr. Chastelet also has an agreement with the
Company that provides, among other things, that if any person (including WG
Holding) acquires more than 25% of the Company's outstanding voting securities
after December 31, 1995, he would be entitled to certain benefits upon the
termination of his employment, including a severance payment equal to two times
his annual salary and acceleration of the vesting of all of his outstanding
options. Upon the consummation of the Merger, the change of control event
specified in this agreement will occur. Currently Mr. Chastelet is discussing
with WG Holding his employment opportunities with the Company after the
completion of the Merger.
Members of the Special Committee
Sidney Topol and Richard E. Pospisil were appointed to serve as members of
the Special Committee on November 18, 1997. Messrs. Topol and Pospisil have
served as directors of the Company since May 1994. Neither of these directors
are employees of the Company nor employees or directors of WG Holding or WGMC.
At the request of the Board, Mr. Pospisil served as the acting Chief Executive
Officer of the Company from September through November 1995 and was paid
$140,000 for his services. In addition, during the Company's fiscal year ended
September 30, 1996, Mr. Pospisil provided technical and managerial consulting
services to the Company and was paid $25,000 in consulting fees.
Pursuant to the Company's compensation policy for directors who are not
employees of the Company, Messrs. Topol and Pospisil each receive $17,000 per
year in directors' fees, payable quarterly, and $1,500 per day for attending
special Board meetings or special Board committee meetings held on days other
than the dates of regular or special Board meetings. Since October 1, 1996,
Messrs. Topol and Pospisil have each received a total of $37,750 in directors'
fees and per diem payments for attending special meetings of the Board and
Board committees.
22
<PAGE>
For his service as Chairman of the Special Committee, the Company paid Mr.
Topol $50,000, and for his service as a member of the Special Committee, the
Company paid Mr. Pospisil $30,000. These payments to Messrs. Topol and Pospisil
were not dependent upon a favorable recommendation by the Special Committee
respecting the Merger Agreement or successful consummation of the Merger. In
addition, the Company reimbursed Messrs. Topol and Pospisil for the
out-of-pocket expenses they incurred in performing services as members of the
Special Committee.
Each member of the Special Committee, as an outside director, is entitled
to participate in the Company's Outside Director Stock Option Plan (the
"Directors' Plan"), pursuant to which an option to purchase 2,000 shares is
automatically granted to an outside director upon his initial election to the
Board and an option to purchase 2,000 shares is automatically granted to an
outside director upon his annual re-election to the Board. As a result of
option grants under the Directors' Plan, Messrs. Topol and Pospisil each hold
options to purchase 7,000 shares of Common Stock at exercise prices ranging
from $9.25 to $14.31 per share. See " -- Treatment of Stock Options."
Indemnification
The Merger Agreement requires that the Company and WG Holding provide
indemnification for a period of six years from the Effective Time to the
current and former directors and officers of the Company against liabilities
(including reasonable attorneys' fees) relating to actions or omissions arising
out of such person's being a director, officer, employee or agent of the
Company at or prior to the Effective Time (including the transactions
contemplated by the Merger Agreement).
Treatment of Stock Options
Prior to the Effective Time, the Company has agreed, pursuant to the terms
of the Merger Agreement, to take all necessary action to cancel all outstanding
options to purchase Common Stock, whether or not exercisable. Upon the
surrender and cancellation of each such option after the Effective Time, each
holder thereof shall be entitled to receive an amount in cash equal to the
product of (i) the excess of $15.90 over the exercise price per share of Common
Stock issuable pursuant to such option and (ii) the number of shares of Common
Stock subject to such option at the time of such termination regardless of
whether such option is exercisable. See "The Merger -- Termination of the
Company Stock Options" and "Principal Shareholders and Stock Ownership of
Management." As of April 30, 1998, there were options outstanding to purchase
an aggregate of 802,375 shares of Common Stock at a weighted average exercise
price of $12.88 per share, which options were held by 255 persons.
Certain of the directors and executive officers of the Company hold
options to purchase Common Stock that will be terminated upon the effectiveness
of the Merger. The following table sets forth information as to the options
outstanding on April 30, 1998 held by each director and executive officer and
the cash payment that each of them will receive upon completion of the Merger.
<TABLE>
<CAPTION>
Options Outstanding
-----------------------------
Name of Holder Exercisable Unexercisable Cash Payment
- ----------------------------------- ------------- --------------- -------------
<S> <C> <C> <C>
Albrecht Wandel ............. -- -- --
Richard E. Pospisil ......... 4,400 2,600 $ 29,860
Gerry Chastelet ............. 38,020 70,980 510,750
Rolf Schmid ................. -- -- --
Joachim Simmross ............ -- 2,000 3,180
Sidney Topol ................ 4,400 2,600 29,860
Peter Wagner ................ -- -- --
E. Jay Bowers ............... 10,883 25,717 29,365
John T. Goehrke ............. 8,225 33,275 69,585
Adelbert Kuthe .............. 10,162 20,338 97,015
Richard L. Popp ............. 10,000 40,000 207,500
</TABLE>
Market Prices of Common Stock and Dividends
The Common Stock is traded on the NASDAQ National Market (symbol: WGTI).
The following table sets forth the high and low closing prices for each
quarterly period for the two most recent fiscal years and the first two
quarters of the current fiscal year.
23
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
---------------------------------------------------------------------
1996 1997 1998
---------------------- ----------------------- ----------------------
High Low High Low High Low
----------- ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
First Quarter .......... $ 13.25 $ 9.00 $ 31.50 $ 17.25 $ 13.75 $ 8.50
Second Quarter ......... 16.88 9.00 30.25 18.75 15.63 12.38
Third Quarter .......... 19.75 14.13 23.75 8.50
Fourth Quarter ......... 19.75 13.25 13.25 8.88
</TABLE>
On November 18, 1997, the last trading day prior to the announcement by
the Company of the formation of the Special Committee in anticipation of
receiving a possible proposal from WG Holding to acquire the outstanding Common
Stock not owned by WG Holding, the closing price per share of Common Stock as
reported by NASDAQ was $10.00. On January 9, 1998, the last trading day prior
to the announcement by the Company that WG Holding had submitted a proposal to
acquire, through a merger, all of the outstanding Common Stock of the Company
(other than the shares held by WG Holding) for a cash price of $13.00 per
share, the closing price per share of Common Stock reported by NASDAQ was
$12.63. On March 17, 1998, the last trading day prior to the announcement by
the Company that the Special Committee and WG Holding had reached an agreement
in principle on a cash price of $15.90 per share for the acquisition of the
shares of Common Stock not owned by WG Holding, the closing price per share of
Common Stock reported by NASDAQ was $13.13. On March 27, 1998, the last trading
day prior to the announcement of the execution of the Merger Agreement, the
closing price per share of Common Stock as reported by NASDAQ was $15.25. On
June , 1998, the last trading day prior to printing of this Proxy Statement,
the closing price per share of Common Stock as reported by NASDAQ was $ .
On May 8, 1998, the Company had approximately 1,300 shareholders of which
approximately 49 were record holders of Common Stock.
The Company has never paid any cash dividends on its Common Stock. Under
the Merger Agreement, the Company has agreed not to pay any dividends on the
Common Stock prior to the Effective Time.
Purchases of Common Stock by the Company and WG Holding
Since October 1, 1995, the Company has purchased 100,000 shares of Common
Stock at a price of $12 7/8 per share. This purchase occurred in open market
transactions in December 1995. Since October 1, 1995, WG Holding has purchased
316,900 shares of Common Stock in open market transactions. Neither the Company
nor WG Holding have purchased Common Stock within sixty (60) days of the date
of this Proxy Statement.
The following table summarizes all purchases of Common Stock by WG Holding
from October 1, 1995 to the present:
<TABLE>
<CAPTION>
Range of Price Average Price
per Share Paid per Share Paid
Number of Shares by Purchaser by Purchaser
Purchased During Quarter During Quarter
------------------ ---------------- ---------------
<S> <C> <C> <C>
Fiscal Year 1996-1st Qtr ........ 2,500 $ 10.00 $ 10.00
Fiscal Year 1997-1st Qtr ........ 13,500 $ 27.50-28.00 $ 27.80
Fiscal Year 1997-2nd Qtr ........ 65,500 $ 22.50-24.50 $ 24.10
Fiscal Year 1997-3rd Qtr ........ 130,100 $ 9.25-13.50 $ 11.71
Fiscal Year 1997-4th Qtr ........ 140,000 $ 9.44-12.75 $ 10.11
</TABLE>
Certain Relationships
A WG Holding affiliate (the "Processing Affiliate") provides certain order
processing, billing, currency conversion and collection services to the
Company. For these services, the Company pays the Processing Affiliate a
quarterly fee of 1.25% of the net wholesale price of products manufactured and
sold internationally by the Company and 0.7% of products sold by the Company in
the United States. The Company also pays WG Holding a license fee of 2.25% of
the net sales price of products manufactured and sold by the Company for the
right to use certain WG Holding trademarks. The Company incurred expenses of
$1,570,000 for the fiscal year ended September 30, 1996 ("Fiscal 1996"),
$1,361,000 for the fiscal year ended September 30, 1997 ("Fiscal 1997") and
$703,000 for the six month period ended March 31, 1998 (the "Interim Period")
related to these services and license fees.
The Company sells products internationally primarily to distributors
affiliated with WG Holding. The Company's revenues from sales to WG Holding
affiliates were $25,900,000 in Fiscal 1996, $25,545,000 in Fiscal 1997 and
$11,262,000
24
<PAGE>
in the Interim Period. The Company also purchases products manufactured by WG
Holding affiliates for resale in the United States. The Company purchased
products from WG Holding affiliates in the amount of $7,207,000 in Fiscal 1996,
$9,365,000 in Fiscal 1997 and $8,000,200 in the Interim Period.
The Company has marketing offices in Switzerland, Italy, Singapore and the
United Kingdom which are leased from WG Holding affiliates and staffed by
employees of several WG Holding affiliates. The Company paid such WG Holding
affiliates an aggregate of $712,000 in Fiscal 1996, $447,000 in Fiscal 1997 and
$347,000 in the Interim Period for rent and reimbursement of employee costs
associated with these offices.
In addition, the Company leases its corporate offices and manufacturing
facilities from W&G Associates, a North Carolina general partnership owned by
Frank Goltermann and certain members of his family who are also shareholders of
WG Holding. The Company paid W&G Associates rent of $1,153,000 in Fiscal 1996,
$1,221,000 in Fiscal 1997 and $578,000 in the Interim Period.
Certain Litigation
The Shareholder Litigation consists of five alleged class action
complaints filed in late January 1998 by certain minority shareholders shortly
after the Company's public announcement of the receipt of the WG Holding
Proposal. The defendants include the Company, its individual directors and, in
certain of the actions, WG Holding. The complaints allege that the defendants
breached and will breach their fiduciary duties owed to the Company's minority
shareholders because the WG Holding Proposal is "unfair and grossly inadequate"
and, if accepted, will usurp the benefits of the Company's growth and future
prospects for the defendants' own benefit. The relief sought in the complaints
includes an injunction barring the defendants from accepting the WG Holding
Proposal, or, if the WG Holding Proposal is accepted and the merger transaction
proposed in it is consummated prior to final judment, rescission of the
transaction and an award of damages. To date, the plaintiffs have filed no
motions and have not sought to enjoin the defendants pendente lite from
accepting the WG Holding Proposal. Moreover, the complaints have not been
amended to reflect that WG Holding has agreed to pay the Cash Merger
Consideration. To date, the parties have engaged in limited discovery, and the
defendants have filed motions to dismiss the Shareholder Litigation for failure
to state a claim upon which relief may be granted against the defendants. The
Company, WG Holding and the individual defendants who are currently directors
of the Company believe that the complaints are without merit and intend to
contest the lawsuits vigorously. See " -- The Special Committee's and the
Board's Recommendation -- The Special Committee."
Certain Effects of the Merger
As a result of the Merger, the current shareholders of the Company (other
than WG Holding) will not have an opportunity to continue their equity interest
in the Company and, therefore, will not share in the future earnings and
potential growth of the Company. Upon consummation of the Merger, the Common
Stock will no longer be traded on the NASDAQ National Market, price quotations
will no longer be available and the registration of the Common Stock under the
Exchange Act will be terminated. The termination of registration of the Common
Stock under the Exchange Act will eliminate the requirement to provide
information to the Commission and will make the provisions of the Exchange Act,
such as the short-swing profit recovery provisions of Section 16(b) and the
requirement of furnishing a proxy or information statement in connection with
shareholders meetings, no longer applicable.
At the Effective Time, WG Holding will contribute approximately $35
million to the Company and will own 100% of the equity interest in the Company.
WG Holding will be the sole beneficiary of any future earnings and growth of
the Company and will have the ability to benefit from any corporate
opportunities that may be pursued by the Company in the future. WG Holding will
also bear the risk of any decreases in the value of the Company.
The receipt of cash pursuant to the Merger will be a taxable transaction.
See "Federal Income Tax Consequences."
Conduct of the Company's Business after the Merger
Officers of WG Holding and the Company are continuing to evaluate the
Company's business, assets, practices, operations, properties, corporate
structure, capitalization, management and personnel and to discuss what
changes, if any, will be desirable. Subject to the foregoing, the Company and
WG Holding expect that the day-to-day business and operations of the Company
will be conducted substantially as they are currently being conducted by the
Company. WG Holding does not currently intend to dispose of any assets of the
Company, other than in the ordinary course of business. Additionally, WG
Holding does not currently contemplate any material change in the composition
of the Company's current management, although, after the Merger, the Board of
the Company will consist of Messrs. Wagner, Schmid and Chastelet.
25
<PAGE>
On March 18, 1998, WG Holding and Wavetek Corporation jointly announced
that they had reached an agreement in principle to merge the two companies.
Wavetek Corporation, headquartered in San Diego, California, is a privately
owned global designer, manufacturer and distributor of a broad range of
electronic test instruments, with a primary focus on application-specific
instruments for testing voice, video and data communications equipment and
networks. WG Holding's proposed business combination with Wavetek is unrelated
to and will have no effect on the Merger. If the Wavetek transaction is
consummated, the combined company's management will include officers of WG
Holding and officers of Wavetek and, such officers, will continue to evaluate
the Company's business, assets, practices, operations, properties, corporate
structure, capitalization, management and personnel to determine what, if any
changes, may be desirable at that time.
Certain Forward Looking Information
Certain projections that were furnished to the Special Committee and its
advisors and WG Holding and its advisors are included elsewhere in this Proxy
Statement under the heading "Certain Forward Looking Information."
26
<PAGE>
GENERAL INFORMATION ABOUT THE SPECIAL MEETING
Proxy Solicitation
This Proxy Statement is being delivered to the Company's shareholders in
connection with the solicitation by the Board of proxies to be voted at the
Special Meeting to be held on , July , 1998 at 10:00 a.m., local time, at
. All expenses incurred in connection with solicitation of the
enclosed proxy will be paid by the Company. In addition to solicitation by
mail, officers, directors and regular employees of the Company, who will
receive no additional compensation for their services, may solicit proxies by
mail, telephone, telegraph or personal call. The cost of soliciting proxies
will be borne by the Company. The Company has requested brokers and nominees
who hold stock in their names to furnish this proxy material to their customers
and the Company will reimburse such brokers and nominees for their related
out-of-pocket expenses. This Proxy Statement and the accompanying proxy card
are being mailed to shareholders on or about June , 1998.
Record Date and Quorum Requirement
The Common Stock is the only outstanding voting security of the Company.
The Board has fixed the close of business on May 8, 1998 as the record date
(the "Record Date") for the determination of shareholders entitled to notice
of, and to vote at, the Special Meeting and any adjournment or adjournments
thereof. Each holder of record of Common Stock at the close of business on the
Record Date is entitled to one vote for each share then held on each matter
submitted to a vote of shareholders. At the close of business on the Record
Date, there were 5,288,652 shares of Common Stock issued and outstanding held
by approximately 1,300 shareholders, of which 49 were holders of record.
The holders of a majority of the outstanding shares entitled to vote at
the Special Meeting must be present in person or represented by proxy to
constitute a quorum for the transaction of business. Abstentions are counted
for purposes of determining the presence or absence of a quorum for the
transaction of business.
Voting Procedures
Under North Carolina law, approval of the Merger Agreement will require
the affirmative vote of the holders of a majority of the outstanding shares of
Common Stock entitled to vote at the Special Meeting. A failure to vote or a
vote to abstain will have the same legal effect as a vote cast against
approval. Brokers and, in many cases, nominees will not have discretionary
power to vote on the proposal to be presented at the Special Meeting.
Accordingly, beneficial owners of shares should instruct their brokers or
nominees how to vote.
Under North Carolina law, holders of Common Stock who do not vote in favor
of the Merger Agreement and who comply with certain notice requirements and
other procedures will have the right to dissent and to be paid cash for the
"fair value" of their shares as finally determined under such procedures, which
may be more or less than the Cash Merger Consideration to be received by other
shareholders of the Company under the terms of the Merger Agreement. Failure to
follow such procedures precisely may result in the loss of Dissenters' Rights.
See "Rights of Dissenting Shareholders."
Voting and Revocation of Proxies
A shareholder giving a proxy has the power to revoke it at any time before
it is exercised by filing with the Secretary of the Company an instrument
revoking it or a duly executed proxy bearing a later date or by voting in
person at the Special Meeting. Subject to such revocation, all shares
represented by each properly executed proxy received by the Secretary of the
Company will be voted in accordance with the instructions indicated thereon,
and if no instructions are indicated, will be voted to approve the Merger
Agreement and in such manner as the persons named on the enclosed proxy card in
their discretion determine upon such other business as may properly come before
the meeting or any adjournment thereof.
The shares represented by the accompanying proxy card and entitled to vote
will be voted if the proxy card is properly signed and received by the
Secretary of the Company prior to the Special Meeting.
THE MERGER
The Merger Agreement provides that WGMC, a newly organized North Carolina
corporation that is wholly-owned by WG Holding, will be merged with and into
the Company and that following the Merger, the separate existence of WGMC will
cease and the Company will continue as the surviving corporation. The terms of
and conditions to the Merger are contained in the Merger Agreement which is
included in full as Appendix A to this Proxy Statement. The discussion in this
26
<PAGE>
Proxy Statement of the Merger and the summary description of the principal
terms of the Merger Agreement are subject to and qualified in their entirety by
reference to the more complete information set forth in the Merger Agreement.
Effective Time
The Merger will be effective as soon as practicable following shareholder
approval of the Merger Agreement and upon the filing of Articles of Merger with
the Secretary of State of the State of North Carolina. The Effective Time is
currently expected to occur as soon as practicable after the Special Meeting,
subject to approval of the Merger Agreement at the Special Meeting and
satisfaction or waiver of the terms and conditions set forth in the Merger
Agreement. See "Conditions."
Conversion of Securities
At the Effective Time, subject to the terms, conditions and procedures set
forth in the Merger Agreement, each share of issued and outstanding Common
Stock immediately prior to the Effective Time (other than shares held by WG
Holding and the Dissenting Shares) will, by virtue of the Merger, be converted
into the right to receive the Cash Merger Consideration. Except for the right
to receive the Cash Merger Consideration or, with respect to Dissenting Shares,
the right to receive payment as set forth in Article 13, from and after the
Effective Time, all shares, by virtue of the Merger and without any action on
the part of the holders, will no longer be outstanding and will be canceled and
retired and will cease to exist. Each holder of a certificate formerly
representing any shares (other than shares held by WG Holding or Dissenting
Shares) will after the Effective Time cease to have any rights with respect to
such shares other than the right to receive the Cash Merger Consideration for
such shares upon surrender of the certificate. Each holder of a certificate
representing any Dissenting Shares will have the rights set forth in Article 13
as summarized in this Proxy Statement under "Rights of Dissenting
Shareholders."
No interest will be paid or accrued on the amount payable upon the
surrender of any certificate. Payment to be made to a person other than the
registered holder of the certificate surrendered is conditioned upon the
certificate so surrendered being properly endorsed and otherwise in proper form
for transfer, as determined by the Disbursing Agent. Further, the person
requesting such payment will be required to pay any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of the certificate surrendered or establish to the satisfaction of the
Disbursing Agent that such tax has been paid or is not payable. Within one week
following six months after the Effective Time, the Disbursing Agent, without
further action or request, will deliver to the Company any funds made available
to the Disbursing Agent which have not been disbursed to holders of
certificates formerly representing shares outstanding prior to the Effective
Time, and thereafter such holders will be entitled to look to the Company only
as general creditors with respect to cash payable upon due surrender of their
certificates. Notwithstanding the foregoing, no party to the Merger Agreement
will be liable to any holder of certificates formerly representing shares for
any amount paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
Each share of WGMC's common stock that is issued and outstanding
immediately prior to the Merger will be converted on the Effective Time into
one share of Common Stock of the Company.
Termination of the Company Stock Options
All outstanding stock options to purchase shares of the Common Stock shall
be canceled or terminated as of the Effective Time. The holders shall receive
for each option (regardless of whether such option was then exercisable) cash
equal to the Cash Merger Consideration per option share less the exercise price
of such option multiplied by the total number of shares that are subject to the
option.
Transfer of Shares
No transfers of shares subject to the Cash Merger Consideration will be
made on the stock transfer books at or after the Effective Time. If, after the
Effective Time, certificates representing such shares are presented to the
Company, such shares will be canceled and exchanged for the Cash Merger
Consideration.
Conditions
Each party's respective obligation to effect the Merger is subject to the
satisfaction, at or prior to the Effective Time, of each of the following
conditions: (i) the Merger Agreement and the transactions contemplated therein
shall have been approved, in the manner required by applicable law by the
holders of a majority of the outstanding shares of Common Stock entitled to
vote thereon; (ii) the Secretary of WGMC shall have certified that the Merger
Agreement and the transactions
27
<PAGE>
contemplated therein have been duly adopted by resolutions of WGMC's Board of
Directors and WG Holding, as the sole shareholder of WGMC; (iii) no court,
government or governmental body, agency or instrumentality having or asserting
jurisdiction over the parties ("Governmental Authority") shall have enacted,
issued, promulgated, enforced, or entered any law or order which is in effect
and which has the effect of making illegal or otherwise prohibiting
consummation of the Merger; and (iv) all actions by or in respect of or filings
with any Governmental Authority required to permit the consummation of the
Merger shall have been made or obtained, other than the filing of the Articles
of Merger. The conditions set forth in subparagraphs (iii) and (iv) above may
be waived, at the appropriate party's discretion, to the extent permitted by
applicable law.
In addition to the conditions set forth above, the obligations of the
Company to effect the Merger are subject to the satisfaction, at or prior to
the Effective Time, of each of the following conditions, unless waived by the
Company: (i) the representations and warranties of WGMC and WG Holding in the
Merger Agreement shall be true and correct in all material respects as of the
Effective Time as though made at the Effective Time, except those
representations and warranties which address matters only as of a particular
date which shall remain true and correct as of such date; (ii) WGMC and WG
Holding shall have performed in all material respects their agreements
contained in the Merger Agreement required to be performed at or prior to the
Effective Time; (iii) the Company shall have received a certificate of the
chief executive officer and chief financial officer of WGMC and WG Holding
certifying to the effect of the preceding clauses (i) and (ii); and (iv) the
Company shall have received all documents reasonably requested relating to the
authority of WGMC and WG Holding to enter into the Merger Agreement.
In addition to the conditions set forth above, the obligations of WGMC and
WG Holding to effect the Merger are subject to the satisfaction at or prior to
the Effective Time, of each of the following conditions, unless waived by WGMC
and WG Holding: (i) the representations and warranties of the Company contained
in the Merger Agreement and in any certificate delivered by the Company thereto
shall be true and correct in all respects, except where the breach or
inaccuracy would not, individually or in the aggregate, have a material adverse
effect on the Company, as of the Effective Time, as though all of such
representations and warranties were made by the Company at the Effective Time,
except those representations and warranties which address matters only as of a
particular date which shall remain true and correct on such date; (ii) the
Company shall have performed in all material respects its agreements contained
in the Merger Agreement required to be performed at or prior to the Effective
Time; (iii) WGMC and WG Holding shall have received a certificate of the chief
executive officer and the chief financial officer of the Company certifying, as
applicable, to the effect of the preceding clauses (i) and (ii); (iv) no matter
that would reasonably be expected to affect materially and adversely the
business condition (financial or otherwise) or results of operations of the
Company shall have occurred; (v) the Company shall have delivered cancellation
instruments of all holders of outstanding options under the Company's option
plans as of the Effective Time; (vi) WGMC and WG Holding shall have received
all documents reasonably requested relating to the authority of the Company to
enter into the Merger Agreement, all in the form and substance reasonably
satisfactory to WGMC and WG Holding; and (vii) WG Holding and WGMC shall have
received an opinion of counsel to the Company on matters reasonably requested
by WG Holding.
Representations and Warranties
The Company has made representations and warranties in the Merger
Agreement regarding, among other things, its organization and good standing and
authority to enter into the Merger Agreement, its capitalization, its financial
statements, the absence of certain changes in the business of the Company since
September 30, 1997, the content and submission of forms and reports required to
be filed by the Company with the Commission, requisite governmental and other
consents and approvals, compliance with all applicable laws, absence of
litigation to which the Company is a party, the absence of material violations
of laws and obligations, brokers and finders fees, the absence of defaults
under its organizational documents and material contracts, and the absence of
material undisclosed liabilities.
WGMC and WG Holding have made representations and warranties in the Merger
Agreement regarding, among other things, their organization and good standing
and authority to enter into the Merger Agreement, compliance with all
applicable laws, the absence of any filing with or action by any governmental
authority, other than the filing of the Articles of Merger and compliance with
requirements of the Commission, no violation of the organizational documents of
either WGMC or WG Holding or any applicable governmental regulation, and the
absence of brokers and finders.
The representations and warranties of the parties in the Merger Agreement
will expire upon consummation of the Merger.
28
<PAGE>
Covenants
Pursuant to the Merger Agreement, the Company has agreed that prior to the
Effective Time, the Company shall: (i) conduct business only in the ordinary
course substantially consistent with past practice; (ii) cause a meeting of its
shareholders to be held as soon as reasonably practicable for the purpose of
voting on the approval of the Merger Agreement and the transactions
contemplated therein; (iii) cause the appropriate documents to be filed with
the Commission in accordance with its requirements and without any untrue
statement of material fact or omission of a material fact; (iv) permit WG
Holding and WGMC and their agents access to the books, records and properties
of the Company; and (vi) notify WG Holding and WGMC of certain events. The
Merger Agreement also provides that WG Holding and WGMC shall make no material
misstatement of fact or omit a material fact to be used in the Company's
filings with the Commission and shall notify the Company of certain events.
The parties to the Merger Agreement covenant to (i) use their best efforts
in consummating the transactions contemplated therein, (ii) cooperate with each
other in the consummation of the transactions contemplated in the Merger
Agreement, (iii) consult with each other before making any public announcement
and (iv) take such further actions as may be necessary to consummate the
Merger.
Indemnification
The Merger Agreement provides that the current directors and officers of
the Company will be indemnified for six years from the Effective Time by the
Company and WG Holding with respect to acts or omissions occurring at or prior
to the Effective Time to the fullest extent provided under the Company's
articles of incorporation and bylaws in effect on the date of the Merger
Agreement.
Expenses
The parties have agreed to pay their own costs and expenses in connection
with the Merger Agreement and the transactions contemplated thereby.
Termination, Amendment and Waiver
At any time prior to the Effective Time, the Merger Agreement may be
terminated by the mutual consent of the parties.
Any of the parties may terminate the Merger Agreement prior to the
Effective Time by written notice to the other parties if (i) the Merger is not
completed by October 31, 1998, (ii) approval of the shareholders of the Company
necessary to consummate the Merger has not been obtained or (iii) any court of
competent jurisdiction or other governmental entity issues an order, decree or
ruling or takes any action enjoining, restraining or prohibiting the Merger and
such order, decree, ruling or action becomes final and nonappealable.
Subject to the provisions of applicable law, the Merger Agreement may be
modified or amended, and provisions thereof waived, by written agreement of the
parties. However, after approval of the principal terms of the Merger Agreement
by the shareholders of the Company, no amendment or waiver of a provision may
be made which reduces the amount or changes the form of the Cash Merger
Consideration to be received by the shareholders or that would adversely affect
the shareholders of the Company unless such amendment or waiver of a provision
is approved by the shareholders.
Source of Funds for the Merger
The total amount of funds required to pay the Cash Merger Consideration to
the Public Shareholders, to make cash payments to holders of outstanding
options upon their cancellation and to pay the Company's related fees and
expenses in connection with the Merger is estimated to be approximately $35
million. Such amounts will be provided by an equity contribution to the Company
by WG Holding prior to the consummation of the Merger.
To fund this capital contribution, WG Holding intends to borrow: (i) DM 25
million (approximately $14.1 million based on exchange rates at May 8, 1998)
under a new credit facility (the "New Facility") which WG Holding will enter
into in connection with the Merger with a syndicate of banks for which
Commerzbank AG, Frankfurt, Germany ("Commerzbank"), serves as agent and (ii)
the remaining funds required under an existing credit facility (the "Existing
Credit Facility") that WG Holding has with a syndicate of banks for which
Commerzbank, serves as agent. The New Facility will be for a total amount of DM
25 million, will bear interest at approximately 5.5% per annum and will be due
and payable within five years. WG Holding has in excess of DM 75 million ($42.4
million based on exchange rates at May 8, 1998) of availability under its
Existing Credit Facility. Borrowings under the Existing Credit Facility bear
interest at approximately 6% per annum and
29
<PAGE>
are due and payable (subject to certain prepayment obligations) on December 31,
1999. The Existing Credit Facility is, and the New Facility will be, secured by
substantially all of the assets of WG Holding and its subsidiaries located in
Germany. Other than its plan to repay borrowings under the Existing Credit
Facility and the New Credit Facility out of funds from operations, WG Holding
has no specific plans or arrangements to finance or repay such borrowings.
Expenses of the Transaction
Assuming the Merger is consummated, the estimated costs and fees in
connection with the Merger, financing and the related transactions, which will
be paid by the Company and WG Holding are as follows:
<TABLE>
<CAPTION>
Estimated
Cost or Fee Amount
- --------------------------------------------- ----------
<S> <C>
Financial advisory fees ............... $550,000
Legal fees and expenses ............... 320,000
Special Committee fees ................ 80,000
Printing and mailing expenses ......... 22,500
Commission filing fees ................ 6,370
Disbursing Agent fees ................. 10,000
Miscellaneous ......................... 10,000
--------
Total .............................. 998,870
========
</TABLE>
See "Special Factors -- Opinion of the Special Committee's Financial
Advisor" for a description of the fees to be paid to Robinson-Humphrey in
connection with its engagement. For a description of certain fees paid to the
members of the Special Committee, see "Special Factors -- Interests of Certain
Persons in the Merger."
RIGHTS OF DISSENTING SHAREHOLDERS
Under North Carolina law, holders of Common Stock who do not vote in favor
of the Merger and who comply with certain notice requirements and other
procedures will have the right to dissent and to be paid cash for the "fair
value" of their shares. The "fair value" of the Common Stock as finally
determined under such procedures may be more or less than the $15.90 cash which
the shares held by non-dissenting shareholders will be converted into the right
to receive in the Merger. Failure to follow such procedures precisely may
result in the loss of Dissenters' Rights.
The following discussion is not a complete statement of the law pertaining
to Dissenters' Rights under Article 13 and is qualified in its entirety by the
full text of Article 13 which is reprinted in its entirety as Appendix C to
this Proxy Statement.
A record shareholder may assert Dissenters' Rights as to fewer than all
the shares of Common Stock registered in his name only if he dissents with
respect to all shares beneficially owned by any one person and notifies the
Company in writing of the name and address of each person on whose behalf he
asserts Dissenters' Rights. The rights of a partial dissenter will be
determined as if the shares as to which he dissents and his other shares were
registered in the names of different shareholders. A beneficial owner may
assert Dissenters' Rights as to shares of Common Stock held on his behalf only
if he: (a) submits to the Company the record shareholder's written consent to
the dissent not later than the time the beneficial shareholder asserts
dissenters' rights and (b) asserts Dissenters' Rights with respect to all
shares of which he is the beneficial owner.
A holder of shares of Common Stock wishing to exercise Dissenters' Rights
must: (a) give to the Company, and the Company must actually receive before the
vote on the Merger Agreement is taken, written notice of the holder's intent to
demand payment for his shares if the Merger is consummated and (b) must not
vote his shares in favor of the Merger Agreement. Such notice may be sent to
the Company at the following address: 1030 Swabia Court, Research Triangle
Park, North Carolina 27709-3585, Attn: Bert Kuthe, Secretary. If the Merger
Agreement is approved by holders of the requisite number of outstanding shares
of Common Stock, the Company will, no later than ten days following the
consummation of the Merger, mail a written dissenters' notice to all of its
shareholders who gave the aforementioned notice of intent to demand payment.
Such dissenters' notice will: (a) state where the payment demand must be sent
and where and when certificates for shares must be deposited; (b) supply a form
for demanding payment; (c) set a date by which the Company must receive the
payment demand, which date may not be fewer than 30 nor more than 60 days after
the date on which the dissenters' notice
30
<PAGE>
is sent; and (d) be accompanied by a copy of Article 13. To exercise his
Dissenters' Rights, a shareholder must send a dissenters' notice, must demand
payment and deposit his share certificates in accordance with the terms of the
notice. A shareholder failing to do so will not be entitled to payment for his
shares under Article 13. A shareholder who demands payment and deposits his or
her share certificates in accordance with the terms of the notice will retain
all other rights of a shareholder until consummation of the Merger.
As soon as the Merger is completed, or within 30 days after the Company's
receipt of a payment demand by a shareholder made in compliance with the
above-described procedures, the Company will pay such shareholder the amount
the Company estimates to be the value of his shares, plus interest accrued to
the date of payment. Such payment will be accompanied by: (a) the Company's
balance sheet as of the fiscal year ended September 30, 1997, an income
statement and a statement of cash flows for that year and the latest available
interim financial statements; (b) an explanation of how the Company estimated
the fair value of the shares; (c) an explanation of how the interest was
calculated; (d) a statement of the dissenter's right to notify the Company of
his own estimate of the value of his shares and the amount of interest due if
(i) he believes the amount paid by the Company is less than the fair value of
his shares or that the interest due was incorrectly calculated, (ii) the
Company fails to make a payment within the time period described in the first
sentence of this paragraph, or (iii) the Company, having failed to consummate
the Merger, fails to return deposited share certificates within 60 days after
the date set for demanding payment; and (e) a copy of Article 13.
If: (a) a dissenter believes that the amount paid by the Company is less
than the fair value of his shares, or that the interest due is incorrectly
calculated; (b) the Company fails to make payment within the time period set
forth in the first sentence of the immediately preceding paragraph; or (c) the
Company, having failed to consummate the Merger, fails to return deposited
stock certificates to a dissenter within 60 days after the date set for
demanding payment, the dissenter may notify the Company in writing of his own
estimate of the fair value of his shares and amount of interest due and demand
payment of the amount in excess of the Company's payment to him. A dissenter
will waive his right to demand payment as described in this paragraph, and will
be deemed to have withdrawn his dissent and demand for payment, unless he
notifies the Company of his demand in writing within 30 days after the Company
(x) made payment for his shares or (y) fails to take the actions described in
clauses (b) and (c) of this paragraph, as the case may be.
If a demand for payment as described above remains unsettled, a
shareholder may commence a proceeding within 60 days after the earlier of (i)
the date of the Company's payment to him as described in the second immediately
preceding paragraph, or (ii) the date of his payment demand as described in the
immediately preceding paragraph and file a complaint with the Superior Court
Division of the North Carolina Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who does not commence a proceeding
within this 60 day period will be deemed to have withdrawn his dissent and
demand for payment.
The court may, in its discretion, make all dissenters whose demands remain
unsettled parties to the proceeding as in an action against their shares and
all parties must be served with a copy of the complaint. The jurisdiction of
the Superior Court is plenary and exclusive. The court may appoint one or more
appraisers to receive evidence and recommend a decision on the question of fair
value. Parties to the proceeding are entitled to the same discovery rights as
parties in other civil proceedings. The proceeding will be tried as in other
civil actions; however, since the Company is a "public corporation," no party
to any proceeding described herein will have the right to trial by jury.
Each dissenter made a party to the proceeding by the court will be
entitled to judgment for the amount, if any, by which the court finds that the
fair value of his shares, plus interest, exceeds the amount paid by the
Company. The court may assess the costs of a proceeding described above,
including the compensation and expenses of appointed appraisers, as it finds
equitable. With respect to the fees and expenses of counsel and experts for the
parties to the proceeding, the court may assess such costs as it finds
equitable (a) against the Company, and in favor of any or all dissenters, if it
finds that the Company did not substantially comply with the above-described
procedures or (b) against either the Company or a dissenter or in favor of
either or any other party, if it finds that the party against whom such costs
are assessed acted arbitrarily, vexatiously, or not in good faith with respect
to the dissenters' rights provided under Article 13. In addition, if the court
finds that the services of counsel to any dissenter were of substantial benefit
to other dissenters and that the costs of such services should not be assessed
against the Company, the court may award to such counsel reasonable fees to be
paid out of the amounts owed to the dissenters who were benefited.
The provisions of Article 13 are technical in nature and complex.
Shareholders desiring to exercise Dissenters' Rights and to obtain a
determination of the fair market value of their shares should consult counsel,
since the failure to comply strictly with the provisions of Chapter 13 may
result in a waiver or forfeiture of their Dissenters' Rights.
31
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations relevant to the Merger that are generally applicable to holders
of Common Stock. This discussion is based on currently existing provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), existing and
proposed Treasury Regulations thereunder and current administrative rulings and
court decisions, all of which are subject to change. Any such change, which may
or may not be retroactive, could alter the tax consequences to the holders of
Common Stock as described herein. Special tax consequences not described below
may be applicable to particular classes of taxpayers, including financial
institutions, broker-dealers, persons who are not citizens or residents of the
United States or who are foreign corporations, foreign partnerships or foreign
estates or trusts as to the United States and holders who acquired their stock
through the exercise of an employee stock option or otherwise as compensation.
The receipt of the Cash Merger Consideration in the Merger by holders of
Common Stock will be a taxable transaction for federal income tax purposes.
Except as provided in the following paragraph, each holder's gain or loss per
share will be equal to the difference between $15.90 and the holder's basis per
share in the Common Stock. Such gain or loss generally will be a capital gain
or loss. In the case of individuals, such capital gain will be subject to
maximum federal income tax rates of 20% for Common Stock held for more than 18
months and 28% for Common Stock held for more than one year but for not more
than 18 months. The foregoing discussion may not be applicable to shareholders
who acquired their Common Stock pursuant to the exercise of options or other
compensation arrangements or who are not citizens or residents of the United
States or who are otherwise subject to special tax treatment under the Code.
A holder of Common Stock may be subject to backup withholding at the rate
of 31% with respect to payments of Cash Merger Consideration received pursuant
to the Merger, unless the holder (a) is a corporation or comes within certain
other exempt categories and, when required, demonstrates this fact or (b)
provides a correct taxpayer identification number ("TIN"), certifies as to no
loss of exemption from backup withholding and otherwise complies with
applicable requirements of the backup withholdings rules. To prevent the
possibility of backup federal income tax withholding on payments made to
certain holders with respect to shares of Common Stock pursuant to the Merger,
each holder must provide the Disbursing Agent with his correct TIN by
completing a Form W-9 or Substitute Form W-9. A holder of Common Stock who does
not provide the Company with his or her correct TIN may be subject to penalties
imposed by the Internal Revenue Service (the "IRS"), as well as backup
withholding. Any amount withheld under these rules will be creditable against
the holder's federal income tax liability. The Company (or its agent) will
report to the holders of Common Stock and the IRS the amount of any "reportable
payments," as defined in Section 3406 of the Code, and the amount of tax, if
any, withheld with respect thereto.
The foregoing tax discussion is included for general information only and
is based upon present law. Each holder of the Common Stock should consult such
holder's own tax advisor as to the specific tax consequences of the Merger to
such holder, including the application and effect of federal, state, local and
other tax laws and the possible effect of changes in such tax laws.
32
<PAGE>
BUSINESS OF THE COMPANY
The Company develops, manufactures, markets and supports test,
measurement, diagnostic and monitoring products for local area data networks
("LANs") and wide area data networks ("WANs"). The Company's network analysis
products, which primarily consist of the Domino and DA-3x product families,
enable customers to analyze and solve interoperability and performance problems
across all the principal configurations of network topologies and communication
protocols. In the United States, the Company also markets specialized test,
measurement and monitoring instruments primarily for use by operators of
telecommunication and data transmission systems. These products are primarily
purchased for resale from the foreign manufacturing affiliates of WG Holding,
and include ANT-20, a physical layer test instrument for SDH, SONET and ATM,
and 8610 and 8620 cellular communications test systems.
The Company introduced its first DA-3x product in the fall of 1990. As new
and more advanced networks and communication methods have been developed, the
Company has expanded its DA-3x family through releases of new or enhanced
hardware and software modules. In fiscal 1994, the Company began manufacturing
and distributing its Domino product family, a line of protocol analyzers
designed specifically for use by field technicians who install and maintain
large multi-site LANs and WANs. The Company introduced DominoLANTM, DominoWANTM
and DominioFDDITM in fiscal 1995 followed by DominoWIZARDTM, Domino REMOTE, and
SNA Session Generator in fiscal 1996 and DominoFastEthernet in fiscal 1997.
In fiscal 1997, the Company began development of the NetForce product
line, a proposed new family of products designed to maximize network
availability for network managers through proactive and interactive network
analysis and management tools. Planned for availability in the second half of
fiscal 1998, NetForce Ranger is believed to be the internetworking industry's
first network analysis product that is able to search for, detect, isolate and
pinpoint problems before the network fails. Designed for routed and switched
networks, NetForce Ranger addresses both LANs and WANs.
In January 1998, the Company acquired privately-held Tinwald for
approximately $5.0 million plus possible additional payments conditioned on the
achievement of performance goals. Tinwald is an Ontario, Canada-based developer
of the LinkView family of software analysis tools. Management believes that the
purchase of Tinwald adds a full range of cost effective, highly distributable
set of analysis solutions to the Company's product lines to maximize and
enhance customer network reliability and availability. Products in this new
family include LAN Monitor and Internet Monitor, as well as LinkView Pro and
LinkView Pro with WG Examine.
In March 1998, the Company acquired the assets of privately-held Network
Intelligence for $1.25 million plus possible additional payments conditioned on
the achievement of performance goals. Network Intelligence is a Palo Alto,
California-based network performance management software company. The
technology purchased in this transaction is intended to accelerate the
development of the distributed analysis tools of the NetForce product family.
The Company sells its products and services to domestic end users
principally through its direct sales force, although the Company maintains
indirect distribution channels. Internationally, the Company sells its products
through sales affiliates of WG Holding. The Company's major customers include
AT&T, Cisco Systems, Deutsche Telekom, Embratel, GTE, IBM, MCI, Nortel, NCR,
Telecom Italia and various U.S. government agencies.
Under a contract with WG Holding, the Company serves as the exclusive
United States distributor and servicer of products developed and produced by
foreign manufacturing affiliates of WG Holding. These products are purchased by
the Company at prices established by the manufacturing affiliates and resold by
the Company to U.S. customers. These products consist primatily of test,
measurement and monitoring instruments for telecommunications companies. They
include advanced network test equipment for telecommunications networks,
telecom test systems for cellular networks, hand-held test instruments for
installation and other network system test instruments. The Company markets and
sells these products primarily to large network operators and developers and
manufacturers of communication equipment. Major customers for these products
include AT&T, GTE, MCI, Nortel and Qualcomm.
33
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected historical combined and
consolidated financial data of the Company for each of the five fiscal years
ended September 30, 1997, which are derived from the audited combined and
consolidated financial statements of the Company. The combined and consolidated
financial statements for the five fiscal years ended September 30, 1997 have
been audited by Arthur Andersen LLP, independent auditors. The historical
results of operations of the Company for the six month periods ended March 31,
1997 and 1998 and the historical financial position of the Company as of March
31, 1998 are derived from unaudited consolidated financial statements included
in the Company's Form 10-Q Quarterly Report for the three months ended March
31, 1998, incorporated herein by reference. The consolidated financial
statements include all adjustments, consisting of normal recurring accruals,
which the Company considers necessary for a fair presentation of the
consolidated financial position and consolidated results of operations for
these periods. The data are qualified by reference to, and should be read in
conjunction with, the consolidated financial statements, related notes and
other financial information included in the Company's Form 10-K Annual Report
for the year ended September 30, 1997, incorporated by reference herein.
<TABLE>
<CAPTION>
Six Months Ended March
Fiscal Year Ended September 30, 31,
------------------------------------------------------ -----------------------
1997 1996 1995 1994 1993 1998 1997
---------- ---------- ---------- ---------- ---------- ------------ ----------
(In thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenues:
Nonaffiliates .......................... $29,001 $ 33,186 $23,658 $ 21,785 $18,005 $ 15,556 $13,729
Affiliates ............................. 25,454 25,900 21,604 18,387 15,080 11,262 16,068
------- -------- ------- -------- ------- -------- -------
Total revenues ....................... 54,455 59,086 45,262 40,172 33,085 26,818 29,797
Cost of revenues ........................ 24,381 23,234 16,576 12,731 12,176 13,931 12,372
------- -------- ------- -------- ------- -------- -------
Gross profit ......................... 30,074 35,852 28,686 27,441 20,909 12,887 17,425
Selling, general & admin. expenses ...... 19,360 18,934 15,872 12,984 10,603 9,395 9,807
Product development expenses ............ 10,712 9,804 10,469 9,059 6,545 5,791 4,932
Restructuring charges ................... -- -- 1,279 -- -- -- --
Acquired in-process research and
development and other non-recurring
charges ................................ -- -- -- -- -- 5,825 --
------- -------- ------- -------- ------- -------- -------
Operating income (loss) .............. 2 7,114 1,006 5,398 3,761 (8,124) 2,686
Interest expense ........................ -- -- -- (460) (779) -- --
Interest income ......................... 639 350 313 295 274 285 320
Foreign currency gains (losses) ......... (271) (104) (245) 213 498 34 (270)
------- -------- ------- -------- ------- -------- -------
Income (loss) before income taxes ...... 424 7,360 1,134 5,446 3,754 (7,805) 2,736
Benefit from (provision for) income
taxes .................................. -- (2,208) (98) (2,124) 867 779 (821)
------- -------- ------- -------- ------- -------- -------
Income from continuing operations ....... 424 5,152 1,036 3,322 4,621 (7,026) 1,915
Income from discontinued operations ..... -- -- -- 204 135 -- --
------- -------- ------- -------- ------- -------- -------
Net income (loss) .................... $ 424 $ 5,152 $ 1,036 $ 3,526 $ 4,756 $ (7,026) $ 1,915
======= ======== ======= ======== ======= ======== =======
Per Share Data:
Net income (loss) per share (assuming
dilution) .............................. $ 0.08 $ 0.98 $ 0.20 $ 0.80 $ 1.27 $ (1.33) $ 0.35
Weighted average number of common
shares outstanding (assuming
dilution) .............................. 5,359 5,231 5,245 4,398 3,750 5,274 5,395
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
As of September 30,
-----------------------------------------------------
1997 1996 1995 1994 1993 As of March 31, 1998
---------- ---------- ---------- ---------- --------- ---------------------
(In thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital ................................ $27,036 $24,869 $20,117 $20,041 $ 6,569 $19,986
Total assets ................................... 37,292 34,298 29,344 28,272 20,381 30,300
Short-term debt, including current maturities
of long-term debt ............................. -- -- -- -- 5,978 --
Long-term debt ................................. -- -- -- -- 4,370 --
Shareholders' equity ........................... 30,659 28,822 24,354 23,113 5,303 23,976
</TABLE>
<TABLE>
<CAPTION>
As of
--------------------------------------
September 30, 1997 March 31, 1998
-------------------- ---------------
<S> <C> <C>
Book Value Per Share ......... $ 5.83 $ 4.53
</TABLE>
CERTAIN FORWARD LOOKING INFORMATION
The Company does not, as a matter of course, make public forecasts or
projections of future financial results. However, in December 1997, the
Company's management prepared the Base Income Projections, which are comprised
of a projected income statement for the balance of the fiscal year ending
September 30, 1998 and for each of the three fiscal years ending September 30,
2001 (the "Projection Period") which took into account management's estimate of
the potential effects of the Tinwald acquisition (which was then at the
negotiation stage and was expected to be completed in January 1998) and the
Network Intelligence acquisition (which was then in the early stages of
negotiation but was expected to be completed in the second quarter of fiscal
1998). The Base Income Projections were provided to Broadview and
Robinson-Humphrey in connection with their respective reviews and analyses of
the Company. See "Special Factors -- Background of the Merger."
The principal assumptions made by management of the Company in preparing
the Base Income Projections (which management considered reasonable) were as
follows:
(a) the economic growth in the target markets for the Company's
products would approximate 20% per year;
(b) the Company would maintain its current market share of its
existing markets for the sale of current products;
(c) the Company would gain market shares ranging from 4% to 14% for
products targeted for new markets;
(d) the Company's revenues would increase at approximately the same
rate per year as the anticipated growth in target markets;
(e) the Company's revenues would increase from sales of products to
customers in new targeted markets where the Company would gain market
shares;
(f) the Company's new products, including enhancements to the Domino
product family and the NetForce product family, would be developed and
released as scheduled in fiscal 1998 and 1999;
(g) the Company's estimates of research and development expenses over
the Projection Period would be sufficient to maintain and enhance
existing products and develop new products for release as scheduled;
(h) the Tinwald and Network Intelligence acquisitions would be
successfully completed and integrated into the Company's product
development, marketing and sales efforts in fiscal 1998;
(i) the Company would continue to sell in the United States
complimentary products produced by foreign affiliates of WG Holding and
such product sales would represent approximately 25% of annual projected
revenues;
(j) the Company would continue to be able to attract and retain highly
skilled engineering, marketing, sales and management personnel; and
(k) the Company would not be subject to any significant adverse
competitive developments during the Projection Period.
35
<PAGE>
In late February 1998, following a meeting at the Company's offices on
February 24, 1998 among members of the Company's management and representatives
of Broadview and Robinson-Humphrey, Broadview, based on the information it had
received at that meeting relating to, among other things, the Base Income
Projections and the principal assumptions made by management in preparing them,
performed sensitivity analyses with respect to the Base Income Projections and
reviewed and discussed the assumptions underlying the Base Income Projections
with representatives of WG Holding. As a result of this process, Broadview
adjusted the Base Income Projections to reflect the perceived risk of potential
delays in product releases by the Company, increased spending associated with
establishing a sales and marketing infrastructure and accelerating research and
development expenses, resulting in the Adjusted Income Projections. See
"Special Factors -- Background of the Merger."
Following a meeting on March 11, 1998 at which the Base Income Projections
and the Adjusted Income Projections were discussed at length by the Special
Committee and representatives of WG Holding, it became apparent to the Special
Committee that significant differences existed between management of the
Company and representatives of WG Holding regarding the attainability by the
Company of the Base Income Projections which forecasted more favorable
operating results for the Projection Period than the Adjusted Income
Projections. The Special Committee noted that the differences between the Base
Income Projections and the Adjusted Income Projections discussed at the March
11 meeting related primarily to risks and uncertainties associated with the
attainability of the projected revenues contained in the Base Income
Projections which, in large part, were based on the timing and market
acceptance of planned new product releases. In light of these risks and
uncertainties, the Special Committee determined that it would be appropriate to
prepare a set of income statement projections that represented a balanced
approach between the Base Income Projections and the Adjusted Income
Projections. Accordingly, the Special Committee asked Robinson-Humphrey to
prepare a set of projections representing an average of the Base Income
Projections and the Adjusted Income Projections. The Average Income Projections
were provided to the Special Committee and Broadview. See "Special Factors --
Background of the Merger."
Set forth below are the Revenues, Operating income, Net income and Net
income per share reflected in the Base Income Projections, the Adjusted Income
Projections and the Average Income Projections. The effect of the Company's
then anticipated write-off of approximately $6.3 million of purchased
technology in the second quarter of fiscal 1998 is excluded from each set of
projections.
Base Income Projections
<TABLE>
<CAPTION>
Fiscal Year Ended September 30
-----------------------------------------------------
(In thousands, except for per share amounts)
1998 1999 2000 2001
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Revenues ..................... $ 68,800 $ 90,500 $ 118,600 $ 150,200
Operating income ............. 2,500 6,300 11,400 18,700
Net income ................... 2,300 5,100 8,900 14,500
Net income per share ......... $ 0.44 $ 0.96 $ 1.68 $ 2.46
</TABLE>
Adjusted Income Projections
<TABLE>
<CAPTION>
Fiscal Year Ended September 30
----------------------------------------------------
(In thousands, except for per share amounts)
1998 1999 2000 2001
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Revenues ..................... $ 64,200 $ 80,575 $ 99,944 $ 121,913
Operating income ............. 408 3,343 6,551 10,669
Net income ................... 208 2,800 5,227 8,396
Net income per share ......... $ 0.04 $ 0.53 $ 0.99 $ 1.42
</TABLE>
Average Income Projections
<TABLE>
<CAPTION>
Fiscal Year Ended September 30
-----------------------------------------------------
(In thousands, except for per share amounts)
1998 1999 2000 2001
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Revenues ..................... $ 66,500 $ 85,538 $ 109,272 $ 136,057
Operating income ............. 1,454 4,822 8,976 14,685
Net income ................... 1,254 3,950 7,064 11,448
Net income per share ......... $ 0.24 $ 0.74 $ 1.33 $ 1.94
</TABLE>
36
<PAGE>
None of the projections was derived were prepared with a view to public
disclosure or compliance with published guidelines of the Commission or the
guidelines established by the American Institute of Certified Public
Accountants regarding projections. Arthur Andersen LLP, the Company's
independent auditors, have not performed any procedures with respect to the
projections and assume no responsibility for them. Such forward-looking
statements are subject to risks and uncertainties which could cause actual
results to differ materially from those projected. Such risks and uncertainties
include: the rapidly changing technology for the Company's products; the
Company's ability to anticipate changes in technology and industry standards in
order to continue to develop and introduce both new and enhanced products on a
timely basis and to meet changing customer requirements for network analysis
products; the ability of the Company to integrate successfully into planned new
product releases of the software technology recently acquired from Tinwald and
Network Intelligence; the risks associated with delays in releases of new
products and the fact that such products, when first released, may contain
undetected errors that could require design modifications; the risks associated
with marketing new products to operators of medium and large multi-site local
area and wide area networks and the related longer selling cycles required to
complete sales to these potential users of network analysis and monitoring
products; the difficulty of estimating sales of the Company's products by
foreign sales affiliates of WG Holding with respect to which the Company does
not exercise control; the uncertainties associated with the capital spending
patterns of the Company's customers; the risks related to the Company's
reliance upon a limited number of sole source suppliers; and the risks
associated with the Company's dependence upon its ability to attract and retain
highly skilled engineering, marketing, sales and management personnel.
37
<PAGE>
PRINCIPAL SHAREHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of April 30, 1998 by: (i) each
person known to the Company to beneficially own more than 5% of the Common
Stock; (ii) each director of the Company; (iii) each executive officer named in
the Summary Compensation Table included in the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1997; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Amount and Nature Percent of Total
of Shares
Name of Beneficial Owner Beneficial Ownership(1) Outstanding(1)
- ---------------------------------------------------------------- ------------------------- -----------------
<S> <C> <C>
Wandel & Goltermann Management Holding GmbH(2) ................. 3,285,600 62.1%
Wellington Management(3) ....................................... 422,400 8.0
Albrecht Wandel (2)(4) ......................................... -- --
Richard E. Pospisil(5) ......................................... 4,400 *
Gerry Chastelet(5) ............................................. 42,986 *
Rolf Schmid (2)(4) ............................................. -- --
Joachim Simmross ............................................... -- --
Sidney Topol (5) ............................................... 13,267 *
Peter Wagner (2)(4) ............................................ -- --
E. Jay Bowers(5) ............................................... 12,445 *
John T. Goehrke(5) ............................................. 8,898 *
Adelbert Kuthe(5) .............................................. 12,231 *
Richard L. Popp(5) ............................................. 10,000 *
All Executive Officers and Directors as a Group (15 persons)(6) 137,594 2.6
</TABLE>
- ---------
* Less than 1%
(1) In accordance with the Commission rules, each beneficial owner's holdings
have been calculated assuming full exercise of outstanding options and
exercisable by such holder within 60 days after April 30, 1998, but no
exercise of outstanding options held by any other person. Except as
indicated in the footnotes to this table, the persons named in the table
have sole voting and investment power with respect to all shares of the
Common Stock shown as beneficially owned by them.
(2) The address of Wandel & Goltermann Management Holding GmbH ("WG Holding")
and Messrs. Schmid, Wagner and Wandel is Box 1262, D-72795 Eningen u.A.,
Federal Republic of Germany. WG Holding is a German limited liability
company that directly owns 3,285,600 shares of Common Stock. The officers
of WG Holding are Mr. Wagner who serves as the President, Chief Executive
Officer and a Managing Director, Mr. Schmid who serves as a Managing
Director and Karl-Heinz Eisemann who serves as a Managing Director. In
their capacities with WG Holding, any two of Messrs. Wagner, Schmid and
Eisemann acting together, can exercise voting and investment power with
respect to the shares of Common Stock held directly by WG Holding, and
accordingly, may be deemed to share beneficial ownership of such shares.
Messrs. Wagner, Schmid and Eisemann disclaim individual beneficial
ownership of the shares of Common Stock held directly by WG Holding.
(3) The address of Wellington Management is 75 State Street, 19th Floor, Boston
Massachusetts, 02109.
(4) Excludes shares of Common Stock owned by WG Holding. See Note (1).
(5) Includes for each of these beneficial owners the number of shares set forth
below that are issuable upon exercise of options that are exercisable
within 60 days of April 30, 1998:
<TABLE>
<S> <C> <C> <C>
Richard E. Pospisil ..... 4,400 John T. Goehrke ........ 8,475
Gerry Chastelet ......... 41,729 Adelbert Kuthe ......... 10,620
Sidney Topol ............ 4,400 Richard L. Popp........ 10,000
E. Jay Bowers ........... 12,050
</TABLE>
(6) Includes 123,856 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days of April 30, 1998.
38
<PAGE>
SHAREHOLDER PROPOSALS
The Company's annual meeting of Shareholders is normally held in February
of each year. When the Company received WG Holding's proposal for a proposed
merger in January, 1998, management postponed the annual meeting of
shareholders. If the proposal to approve the Merger is not approved at the
Special Meeting, the annual meeting of shareholders will be held in November,
1998. Proposals of shareholders intended to be presented at the 1998 annual
meeting of shareholders must be submitted, by registered or certified mail, to
the attention of the Company's secretary at its principal executive offices by
September 1, 1998 in order to be considered for inclusion in the Company's
proxy statement and form of proxy for that meeting. If the Merger is
consummated, the annual meeting of shareholders may be scheduled for an earlier
or later date consistent with the Company's organizational documents.
INDEPENDENT AUDITORS
The Consolidated Balance Sheets as of September 30, 1997 and September 30,
1996, and the related Consolidated Statements of Income, Shareholders' Equity
and Cash Flows for each of the three fiscal years in the period ended September
30, 1997, incorporated herein by reference, have been audited by Arthur
Andersen LLP, independent auditors, as stated in their report.
OTHER MATTERS
Management knows of no other business to be presented at the Special
Meeting. If other matters do properly come before the meeting, or any
adjournment or adjournments thereof, it is the intention of the persons named
in the proxy to vote on such matters according to their best judgment unless
the authority to do so is withheld in such proxy.
39
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF
MARCH 28, 1998
AMONG
WANDEL & GOLTERMANN TECHNOLOGIES, INC.
WG MERGER CORP.
AND
WANDEL & GOLTERMANN MANAGEMENT HOLDING GmbH
A-1
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of March 28, 1998, by and
among Wandel & Goltermann Management Holding GmbH, a German limited liability
company ("Holding"), WG Merger Corp., a North Carolina corporation and
wholly-owned subsidiary of Holding ("Merger Subsidiary" or "Merger Sub")
(Holding and Merger Subsidiary are sometimes referred to collectively as
"Buyer"), and Wandel & Goltermann Technologies, Inc., a North Carolina
corporation (the "Company").
WHEREAS:
A. The authorized capital stock of the Company consists of (i) 20,000,000
shares of common stock, $.01 par value (the "Company Common Stock"), of which
5,287,778 shares were issued and outstanding as of close of business on March
27, 1998, and (ii) 2,000,000 shares of Preferred Stock, $.01 par value (the
"Preferred Stock"), of which no shares were issued and outstanding as of the
close of business on March 27, 1998.
B. Holding currently owns, and will own immediately prior to the Effective
Time, 3,285,600 shares of Company Common Stock representing approximately
sixty-two percent (62%) of the total issued and outstanding Company Common
Stock.
C. A special committee of the Board of Directors of the Company appointed
on November 18, 1997 and comprised entirely of directors who are neither
members of management of the Company nor affiliated with Buyer or any Affiliate
of Buyer (other than the Company) (the "Special Committee") has unanimously
determined that the Merger is fair to and in the best interests of the
shareholders of the Company other than Buyer (the "Public Shareholders") and
has unanimously approved this Agreement and unanimously recommends its approval
and adoption by the Board of Directors (the "Board") and by the shareholders of
the Company.
D. The Board, based in part on the recommendation of the Special Committee
and the written opinion of The Robinson-Humphrey Company, LLC, the financial
advisor to the Special Committee (the "Financial Advisor"), has determined that
the Merger is fair to and in the best interests of the Public Shareholders and
has resolved to approve and adopt this Agreement and its contemplated
transactions and, subject to the following terms and conditions, to recommend
the approval and adoption of this Agreement by the shareholders of the Company.
E. The Board, Holding, and Merger Sub each have approved the merger of
Merger Subsidiary with and into the Company (the "Merger") in accordance with
the North Carolina Business Corporation Act (the "NCBCA") and the terms and
conditions provided below, pursuant to which each share (other than shares of
Company Common Stock held by the Company as treasury stock, shares of Company
Common Stock owned by Holding immediately prior to the Effective Time, and
shares of Company Common Stock as to which dissenters' rights have been
perfected in accordance with the NCBCA) shall be converted into the right to
receive the Merger Consideration.
F. Certain capitalized terms are defined in Section 10.1 hereof.
NOW, THEREFORE, in consideration of these premises and the mutual
covenants, representations, warranties, and agreements herein, the parties
agree as follows:
ARTICLE I
THE MERGER
Section 1.1 Company Action.
The Company represents that its Board of Directors, at a meeting called
and held, and relying in part on the unanimous recommendation of the Special
Committee, has (i) unanimously determined that this Agreement and its
contemplated transactions, including the Merger, are fair to and in the best
interests of the Public Shareholders, (ii) unanimously approved and adopted
this Agreement and its contemplated transactions, including the Merger, and
(iii) unanimously resolved to recommend the approval and adoption of this
Agreement and the Merger by the Company's shareholders, provided that such
recommendation may be withdrawn, modified, or amended by the Board if the Board
deems such withdrawal, modification, or amendment necessary in light of its
fiduciary obligations to the Company's shareholders after consultation with
counsel.
Section 1.2 The Merger.
(a) At the Effective Time, Merger Subsidiary will be merged with and into
the Company in accordance with Article 11 of the NCBCA, the separate
existence of Merger Subsidiary shall cease, and the Company shall be the
Surviving Corporation.
A-2
<PAGE>
(b) As soon as practicable after satisfaction of all conditions to the
Merger, or waiver of conditions to the extent permitted herein, the Company
and Merger Subsidiary will file articles of merger ("Articles of Merger")
with the Secretary of State of the State of North Carolina and make all
other filings or recordings required by the NCBCA in connection with the
Merger. The Merger shall become effective when the Articles of Merger are
filed with the Secretary of State of the State of North Carolina or at such
later time as is specified in the Articles of Merger (the "Effective
Time").
(c) After the Effective Time, the Surviving Corporation shall possess all
the rights, privileges, and powers, and be subject to all of the
restrictions, disabilities, and duties of the Company and Merger
Subsidiary, all as provided under the NCBCA.
Section 1.3 Conversion of Shares.
At the Effective Time:
(a) Each share of Company Common Stock (a "Share") which is outstanding
immediately prior to the Effective Time, except as otherwise provided in
Section 1.3(b) or as provided in Section 1.5 with respect to Shares for
which dissenters' rights have been perfected, shall be converted into the
right to receive $15.90 in cash, without interest (the "Merger
Consideration").
(b) Each Share held by the Company as treasury stock immediately prior to
the Effective Time and each share held by Holding immediately prior to the
Effective Time shall be canceled and no payment shall be made for it.
(c) Each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become
one share of common stock of the Surviving Corporation with the same
rights, powers, and privileges as the shares so converted and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation.
Section 1.4 Surrender and Payment.
(a) At or before the Effective Time, the Company shall appoint First
Union National Bank, as agent (the "Exchange Agent"), for the purpose of
exchanging certificates representing Shares for the Merger Consideration.
At or immediately prior to the Effective Time, Holding shall make a capital
contribution to the Company in an amount that, together with funds
available to the Company, is sufficient to permit the Company to make the
aggregate Merger Consideration available to the Exchange Agent in
accordance herewith. At the Effective Time, the Company shall make the
aggregate Merger Consideration available to the Exchange Agent for all
applicable outstanding Shares to be converted in accordance with Section
1.3(a) hereof. At or promptly following the Effective Time, the Company or
Surviving Corporation will send or cause the Exchange Agent to send to each
holder of Shares at the Effective Time a letter of transmittal for use in
such exchange. This letter of transmittal shall specify that the delivery
shall be effected and risk of loss and title shall pass only upon proper
delivery of the certificates representing Shares to the Exchange Agent.
(b) Each holder of Shares that have been converted into a right to
receive Merger Consideration will be entitled to receive the Merger
Consideration payable for such holder's Shares upon surrender to the
Exchange Agent of a certificate or certificates representing such Shares,
together with a properly completed letter of transmittal covering such
Shares. After the Effective Time and until surrendered with the letter of
transmittal, each such certificate shall only represent the right to
receive Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid to a Person
other than the registered holder of the Shares represented by the
certificate(s) surrendered in exchange, it will be a condition to payment
that the certificate(s) surrendered be properly endorsed or otherwise be in
proper form for transfer. Additionally, the Person requesting such payment
must pay to the Exchange Agent any transfer or other taxes required as a
result of payment to a Person other than the registered holder of such
Shares, or establish to the satisfaction of the Exchange Agent that such
tax has been paid or is not payable.
(d) After the Effective Time, no further transfers of Shares will be
registered. After the Effective Time, if certificates representing Shares
are presented to the Surviving Corporation, they will be canceled and
exchanged for the Merger Consideration in accordance with the procedures
set forth in this Article I.
(e) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 1.4(a) that remains unclaimed by the
holders of Shares six (6) months after the Effective Time shall be returned
within one week after the end of the six (6) month period, without further
action or request, to the Surviving Corporation, and any such
A-3
<PAGE>
holder who has not exchanged such Shares for the Merger Consideration in
accordance with this Section prior to that time shall thereafter look only
to the Surviving Corporation for payment of the Merger Consideration in
respect of such Shares. However, neither Buyer nor the Surviving
Corporation shall be liable to any holder of Shares for any amount paid to
a public official pursuant to applicable abandoned property Laws. Any
amounts remaining unclaimed by holders of Shares two years after the
Effective Time (or an earlier date immediately prior to such time as the
amounts would otherwise escheat to or become property of any governmental
entity) shall, to the extent permitted by applicable Law, become the
property of the Surviving Corporation free and clear of any claims or
interest of any Person previously entitled to them. Nothing in this section
limits the obligations of the Buyer under Section 1.4(a).
Section 1.5 Dissenting Shares.
Notwithstanding Section 1.3, Shares outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of this
Agreement or consented in writing and who has demanded payment of the fair
value of such Shares in accordance with the NCBCA shall not be converted into a
right to receive the Merger Consideration, but shall be converted into the
right to receive such consideration as may be determined to be due in respect
of such dissenting Shares pursuant to Article 13 of the NCBCA; provided,
however, that if the holder of such dissenting Shares shall have failed to
perfect or shall have waived, rescinded or otherwise lost (in each such
instance, to the reasonable satisfaction of the Surviving Corporation) its
status as a "dissenter" pursuant to Article 13 of the NCBCA, then such holder
shall forfeit the right to dissent from the Merger and such Shares shall be
deemed to have been converted into the right to receive the Merger
Consideration as of the Effective Time. The Company shall give Buyer prompt
notice of any demands received by the Company for appraisal of Shares, and
Buyer shall have the right to participate in all negotiations and proceedings
with respect to such demands. The Company shall not, except with the prior
written consent of Buyer, make any payment with respect to, or settle, or offer
to settle, any such demands.
Section 1.6 Stock Options and Employee Stock Purchase Plan.
(a) Prior to the Effective Time, the Company shall take all steps
necessary to give written notice to each holder of options granted under
the Wandel & Goltermann Technologies, Inc. Omnibus Stock Plan, as amended
and the Wandel & Goltermann Technologies, Inc. Outside Directors' Stock
Option Plan, as amended (collectively, the "Option Plans") that are
outstanding that: (i) all such options outstanding as of the Effective
Time, whether vested or unvested (collectively the "Options"), shall be
cancelled effective as of the Effective Time and (ii) upon the execution
and delivery to the Company by such holder of an instrument acknowledging
cancellation of all Options held by such holder effective as the Effective
Time ("Cancellation Instrument"), the Company shall pay such holder,
promptly following the Effective Time, an amount determined by multiplying
(a) the excess, if any, of the Merger Consideration over the applicable
exercise price per share of the Options held by such holder by (b) the
number of share such holder could have purchased had such holder exercised
such Options in full immediately prior to the Effective Time (assuming all
such Options were fully vested, including any unvested Options). The Board
or any committee thereof responsible for the administration of the Option
Plan shall take any and all action necessary to effectuate matters
described in this Section 1.6(a) on or before the Effective Time.
(b) Effective at April 1, 1998, the Company shall terminate the Wandel &
Goltermann Technologies, Inc. Employee Stock Purchase Plan, as amended (the
"Purchase Plan"), in accordance with the terms of Article VII of the
Purchase Plan, whereupon the entire amount credited to the "stock purchase
account" of each participant shall be distributed to each such participant.
Section 1.7 Closing.
Subject to the terms and conditions of this Agreement, the Closing of the
Merger (the "Closing") shall take place at the offices of the Company at 1030
Swabia Court, Research Triangle Park, North Carolina, as promptly as
practicable after satisfaction or waiver, if permissible, of the conditions set
forth in Article VIII hereof, or at such other location, time, or date as may
be agreed to in writing by the parties hereto. The date on which the Closing
occurs is hereinafter referred to as the "Closing Date."
A-4
<PAGE>
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Articles of Incorporation.
The articles of incorporation of the Company in effect at the Effective
Time shall be the articles of incorporation of the Surviving Corporation until
amended in accordance with applicable Law.
Section 2.2 Bylaws.
The bylaws of the Company in effect at the Effective Time shall be the
bylaws of the Surviving Corporation until amended in accordance with applicable
Law.
Section 2.3 Directors and Officers.
From and after the Effective Time, until successors are elected or
appointed and qualified in accordance with applicable Law, (i) the directors of
Merger Subsidiary at the Effective Time shall be the directors of the Surviving
Corporation, and (ii) the officers of the Company at the Effective Time shall
be the officers of the Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Holding and Merger Sub that, except
as set forth in the Disclosure Schedule delivered by the Company to Holding
prior hereto (the "Disclosure Schedule"), which shall identify exceptions by
specific Section references:
Section 3.1 Corporate Organization.
The Company and each of its Subsidiaries (the "Company Subsidiaries") has
been duly organized and is validly existing and in good standing under the laws
of the jurisdiction of its organization, has all requisite power and authority
to own, operate and lease its properties and to carry on its business as it is
now being conducted, and is qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of the business conducted by
it or the ownership or leasing of its properties makes such qualification
necessary, other than where failure to be so qualified or licensed,
individually or in the aggregate, would not have a Material Adverse Effect.
Neither the Company nor any Company Subsidiary is in violation of any provision
of its charter or bylaws or other organizational documents, as the case may be.
Section 3.2 Capitalization.
As of the date of this Agreement, the authorized capital stock of the
Company consists in its entirety of (i) 20,000,000 shares of common stock, $.01
par value per share, and (ii) 2,000,000 shares of preferred stock, none of
which are issued and outstanding. As of the date of the Agreement, (i)
5,287,778 shares of Company Common Stock were issued and outstanding, and (ii)
options to acquire 810,251 shares of Company Common Stock were outstanding
under the Company Option Plans. All of the outstanding shares of capital stock
of each of the Company Subsidiaries is owned beneficially and of record by the
Company or a Company Subsidiary free and clear of all liens, charges,
encumbrances, options, rights of first refusal or limitations or agreements
regarding voting rights of any nature. All of the outstanding shares of capital
stock of the Company and each of the Company Subsidiaries have been duly
authorized, validly issued and are fully paid and nonassessable and are not
subject to preemptive rights created by statute, their respective charter or
bylaws or any agreement to which any such entity is a party or by which any
such entity is bound. Except as set forth in Section 1.6(b) and this Section
3.2, there are no options, warrants or other rights (including registration
rights), agreements, arrangements or commitments of any character to which the
Company or any Company Subsidiary is a party relating to the issued or unissued
capital stock, or other interest in, of the Company or any Company Subsidiary
or obligating the Company or any Company Subsidiary to grant, issue or sell any
shares of capital stock of, or other equity interests in, the Company or any
Company Subsidiary, by sale, lease, license or otherwise.
Section 3.3 Authority Relative to this Agreement.
The Company has all requisite corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated on its part hereby to be consummated by the
Company. The execution and delivery of this Agreement by the Company and the
consummation of the transactions contemplated
A-5
<PAGE>
on its part hereby have been duly authorized by all necessary corporate action,
and, other than the approval of the Company's shareholders as provided in
Section 8.1(a) hereof, no other corporate proceedings on the part of the
Company are necessary to authorize the consummation of the transactions
contemplated on its part hereby. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery hereof by Holding and Merger Sub, constitutes the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights generally or by general equity
principles.
Section 3.4 No Violation.
The execution and delivery of this Agreement by the Company do not, the
performance by the Company of its obligations hereunder will not, and the
consummation by the Company of the transactions contemplated to be performed by
it hereby will not (i) violate or conflict with any provision of any Laws in
effect on the date of this Agreement and applicable to the Company or any
Company Subsidiary or by which any of their respective properties or assets is
bound or subject, (ii) require the Company or any Company Subsidiary to obtain
any consent, waiver, approval, license or authorization or permit of, or make
any filing with, or notification to, any Governmental Entities, based on Laws,
rules, regulations and other requirements of Governmental Entities in effect as
of the date of this Agreement (other than (a) filings or authorizations
required in connection or in compliance with the provisions of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the NCBCA and (b) any
other filings and approvals expressly contemplated by this Agreement or listed
in Section 3.4 to the Company Disclosure Schedule), (iii) require the consent,
waiver, approval, license or authorization of any person (other than
Governmental Entities) other than as listed on Section 3.4 of the Company
Disclosure Schedule, (iv) violate, conflict with or result in a breach of or
the acceleration of any obligation under, or constitute a default (or an event
which with notice or the lapse of time or both would become a default) under,
or give to others any rights of, or result in any, termination, amendment,
acceleration or cancellation of, or loss of any benefit or creation of a right
of first refusal, or require any payment under, or result in the creation of a
lien or other encumbrance on any of the properties or assets of the Company or
any Company Subsidiary pursuant to or under any provision of any indenture,
mortgage, note, bond, lien, lease, license, agreement, contract, order,
judgment, ordinance, Company Permit (as defined below) or other instrument or
obligation to which the Company or Company Subsidiary is a party or by which
the Company or any Company Subsidiary or any of their respective properties is
bound or subject to, or (v) conflict with or violate the articles of
incorporation or bylaws, or the equivalent organizational documents, in each
case as amended or restated, of the Company or any of the Company Subsidiaries,
except for any such conflicts or violations described in clause (i) or
breaches, defaults, events, rights of termination, amendment, acceleration or
cancellation, payment obligations or liens or encumbrances described in clause
(iv) that would not have a Material Adverse Effect and except where the failure
to obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications would not, either individually or in the aggregate,
prevent the Company from performing any of its obligations under this Agreement
and would not have a Material Adverse Effect.
Section 3.5 Compliance with Laws.
(a) As of the date of this Agreement, each of the Company and the Company
Subsidiaries holds all licenses, franchises, grants, permits, easements,
variances, exemptions, consents, certificates, identification numbers,
approvals, orders, and other authorizations (collectively, "Company
Permits") necessary to own, lease and operate its properties and to carry
on its business as it is now being conducted and are in compliance with all
Company Permits and all Laws governing their respective businesses, except
where the failure to hold such Company Permits or to so comply,
individually or in the aggregate, would not have a Material Adverse Effect.
(b) Except as set forth in Section 3.5 of the Company Disclosure
Schedule, no action or proceeding is pending or, to the Company's
knowledge, threatened that may result in the suspension, revocation or
termination of any the Company Permit, the issuance of any cease-and-desist
order, or the imposition of any administrative or judicial sanction, and
neither the Company nor any Company Subsidiary has received any notice from
any governmental authority in respect of the suspension, revocation or
termination of any Company Permit, or any notice of any intention to
conduct any investigation or institute any proceeding, in any such case
where such suspension, revocation, termination, order, sanction,
investigation or proceeding would result, individually or in the aggregate,
in a Material Adverse Effect.
Section 3.6 Litigation.
As of the date of this Agreement, except as may be disclosed in the
Company 10-K (as defined below), reports filed on Forms 10-Q or 8-K for periods
subsequent to the period covered by the Company 10-K, in each case filed prior
to the date hereof (such reports and filings, including the Company 10-K,
collectively, the "the Company Current Reports"), or
A-6
<PAGE>
except as set forth on Section 3.6 of the Company Disclosure Schedule, there is
no claim, litigation, suit, arbitration, mediation, action, proceeding, unfair
labor practice complaint or grievance pending or, to the Company's knowledge,
investigation of any kind, at law or in equity (including actions or
proceedings seeking injunctive relief), pending or, to the Company's knowledge,
threatened in writing against the Company or any Company Subsidiary or with
respect to any property or asset of any of them, except for claims,
litigations, suits, arbitrations, mediations, actions, proceedings, complaints,
grievances or investigations which, individually or in the aggregate, would not
have a Material Adverse Effect. Neither the Company nor any Company Subsidiary
nor any property or asset of any of them is subject to any continuing order,
judgment, settlement agreement, injunction, consent decree or other similar
written agreement with or, to the Company's knowledge, continuing investigation
by, any Governmental Entity, or any judgment, order, writ, injunction, consent
decree or award of any Governmental Entity or arbitrator, including, without
limitation, cease-and-desist or other orders, except for such matters which
would not reasonably be expected to have a Material Adverse Effect.
Section 3.7 Financial Statements and Reports.
The Company has made available to Holding true and complete copies (in
each case, as amended) of (i) its Annual Report on Form 10-K for the year ended
September 30, 1997 (the "Company 10-K"), as filed with the Securities and
Exchange Commission (the "Commission") and (ii) all other reports (including
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed by it
with the Commission subsequent to September 30, 1997. The reports referred to
in the immediately preceding sentence (including, without limitation, any
financial statements or schedules or other information included or incorporated
by reference therein) are referred to in this Agreement as the "the Company SEC
Filings." As of the respective times such documents were filed, the Company SEC
Filings complied in all material respects with the requirements of the
Securities Act of 1933, as amended, or the Exchange Act, as the case may be,
and the rules and regulations promulgated thereunder, except for such
noncompliance which, individually or in the aggregate, would not have a
Material Adverse Effect, and did not 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 were made, not misleading. The financial statements of the Company
included in the Company SEC Filings comply as to form in all material respect
with applicable accounting requirements and with the published rules and
regulations of the Commission with respect thereto, were prepared in accordance
with generally accepted accounting principles (as in effect from time to time)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto or, in the case of the unaudited
interim financial statements, as permitted by Form 10-Q of the Commission) and
present fairly the consolidated financial position, consolidated results of
operations and consolidated cash flows of the Company and the Company
Subsidiaries as of the dates and for the periods indicated, except (i) in the
case of unaudited interim consolidated financial statements, to normal
recurring year-end adjustments and any other adjustments described therein and
(ii) any pro forma financial information contained therein is not necessarily
indicative of the consolidated financial position of the Company and the
Company Subsidiaries as of the respective dates thereof and the consolidated
results of operations and cash flows for the periods indicated. No Company
Subsidiary is required to file any form, report or other document with the
Commission.
Section 3.8 Absence of Certain Changes or Events.
Other than as disclosed in the Company Current Reports, or otherwise
disclosed in this Agreement or in Section 3.8 of the Company Disclosure
Schedule, since September 30, 1997 and through the date hereof, the business of
the Company and of each of the Company Subsidiaries has been conducted in the
ordinary course, and there has not been (i) any Material Adverse Effect on the
Company; (ii) any material indebtedness incurred by the Company or any Company
Subsidiary for money borrowed; (iii) any material transaction or commitment,
except in the ordinary course of business or as contemplated by this Agreement,
entered into by the Company or any of the Company Subsidiaries; (iv) any
damage, destruction or loss, whether covered by insurance or not, which,
individually or in the aggregate, would have a Material Adverse Effect on the
Company; (v) any material change by the Company in accounting principles or
methods except insofar as may be required by a change in generally accepted
accounting principles; (vi) any material revaluation by the Company or any
Company Subsidiary of any asset (including, without limitation, any writing
down of the value of inventory or writing off of notes or accounts receivable);
(vii) any mortgage or pledge of any of the assets or properties of the Company
or any Company Subsidiary or the subjection of any of the assets or properties
of the Company or any Company Subsidiary to any material liens, charges,
encumbrances, imperfections of title, security interest, options or rights or
claims of others with respect thereto other than in the ordinary course
consistent with past practice; or (viii) any assumption or guarantee by the
Company or a Company Subsidiary of the indebtedness of any person or entity,
other than in the ordinary course consistent with past practice.
A-7
<PAGE>
Section 3.9 No Undisclosed Material Liabilities.
Except as disclosed in the Company Current Reports, neither the Company
nor any of the Company Subsidiaries has incurred any liabilities of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, that, individually or in the aggregate, would have a Material
Adverse Effect other than (i) liabilities incurred in the ordinary course of
business consistent with past practice since September 30, 1997, (ii)
liabilities that have been repaid, discharged or otherwise extinguished and
(iii) liabilities under or contemplated by this Agreement.
Section 3.10 No Default.
Except as set forth in Section 3.10 of the Company Disclosure Schedule,
neither the Company nor any of the Company Subsidiaries is in default or
violation (and no event has occurred which with notice or the lapse of time or
both would constitute a default or violation) of any term, condition or
provision of (a) its articles of incorporation or bylaws or other
organizational document, (b) indenture, mortgage, note, bond, lien, lease,
license, agreement, contract, order, judgment, ordinance, the Company Permit or
other instrument or obligation to which the Company or Company Subsidiary is a
party or by which the Company or any Company Subsidiary or any of their
respective properties is bound or subject to, or (c) any order, writ,
injunction, decree or Law applicable to the Company or any of the Company
Subsidiaries, except in the case of clauses (b) and (c) above for defaults or
violations which would not have a Material Adverse Effect on the Company.
Section 3.11 Finders' and Bankers' Fees.
Except for the Financial Advisor, a copy of whose engagement agreement has
been provided to Buyer, there is no investment banker, broker, finder, or other
intermediary which has been retained by or is authorized to act on behalf of
the Company, the Special Committee or any Company Subsidiary who might be
entitled to any fee or commission from the Company, Buyer or any of their
respective Affiliates upon consummation of the transactions contemplated by
this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company that:
Section 4.1 Corporate Organization.
Holding is a validly existing limited liability company (GmbH) in good
standing under the laws of Germany. Merger Subsidiary has been duly
incorporated and is validly existing and in good standing under the laws of
North Carolina. Each has all corporate powers and all material governmental
licenses, authorizations, consents, and approvals required to consummate the
transactions contemplated by this Agreement. Since the date of its
incorporation, Merger Subsidiary has not engaged in any material activities
other than in connection with or as contemplated by this Agreement.
Section 4.2 Corporate Authorization.
The execution, delivery, and performance by Holding and Merger Subsidiary
of this Agreement and the consummation of the contemplated transactions
contemplated are within the corporate powers of Holding and Merger Subsidiary
and are duly authorized by all necessary corporate action. This Agreement
constitutes a valid and binding agreement of Holding and Merger Subsidiary
enforceable against them in accordance with its terms, except to the extent
that such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general equity principles.
Section 4.3 Governmental Authorization.
The execution, delivery and performance by Holding and Merger Subsidiary
of this Agreement and the consummation by Holding and Merger Subsidiary of the
transactions contemplated by this Agreement require no action by or in respect
of, or filing with, any Governmental Authority other than (i) the filing of
Articles of Merger in accordance with the NCBCA and (ii) compliance with any
applicable requirements of the Exchange Act.
Section 4.4 Non-Contravention.
The execution, delivery and performance by Holding and Merger Subsidiary
of this Agreement and the consummation by Holding and Merger Subsidiary of the
contemplated transactions contemplated do not and will not (i) contravene or
conflict with organizational documents of Holding or the articles of
incorporation or bylaws of Merger Subsidiary, or (ii) assuming compliance with
the matters referred to in Section 4.3, contravene or conflict with any
material provision of Law or Order binding upon or applicable to Holding or
Merger Subsidiary.
A-8
<PAGE>
Section 4.5 Finders' and Bankers' Fees.
There is no investment banker, broker, finder, or other intermediary which
has been retained by or is authorized to act on behalf of Buyer who is entitled
to any fee or commission from the Company or any of the Company Subsidiaries if
the transactions contemplated by this Agreement are not consummated.
ARTICLE V
COVENANTS OF THE COMPANY
Section 5.1 Conduct of the Company.
From the date of this Agreement until the Effective Time, the Company
shall conduct its business in the ordinary course consistent with past practice
and (except for acts in connection with the Merger) shall use its best efforts
to preserve intact its business relationships with third parties and to keep
available the services of its present officers and employees.
Section 5.2 Shareholder Meeting; Proxy Material.
The Company shall cause a meeting of its shareholders (the "Company
Shareholder Meeting") to be called and held as soon as reasonably practicable
for the purpose of voting on the approval and adoption of this Agreement and
the Merger. The directors of the Company, acting in part in reliance upon the
unanimous recommendation of the Special Committee, shall, subject to their
fiduciary duties after consultation with counsel, recommend approval and
adoption of this Agreement and the Merger by the Company's shareholders. In
connection with this meeting, but subject to the terms hereof, the Company (i)
will promptly prepare and file with the Commission, will use its best efforts
to have cleared by the Commission and will then mail to its shareholders as
promptly as practicable the Company Proxy Statement and all other proxy
materials for such meeting, and will cooperate with Holding to prepare and file
the Schedule 13E-3 Transaction Statement required to be filed by the Company
and Holding pursuant to Section 13(e) of the Exchange Act (the "Schedule
13E-3"), (ii) will use its best efforts to obtain the necessary approvals by
its shareholders of this Agreement and the transactions contemplated hereby and
(iii) will otherwise comply with all legal requirements applicable to such
meeting.
Section 5.3 Disclosure Documents.
(a) Each document required to be filed by the Company with the Commission
in connection with the transactions contemplated by this Agreement (the
"Company Disclosure Documents"), including without limitation the proxy
statement of the Company (the "Company Proxy Statement") to be filed with
the Commission in connection with the Merger, and any amendments or
supplements will, when filed, comply as to form in all material respects
with the applicable requirements of the Exchange Act.
(b) At the time the Company Proxy Statement or any amendment or
supplement is first mailed to shareholders of the Company, at the time such
shareholders vote on adoption of this Agreement, and at the Effective Time,
the Company Proxy Statement, as supplemented or amended if applicable will
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements not misleading in
the light of the circumstances under which they were made. At the time of
the filing of any Company Disclosure Document other than the Company Proxy
Statement and at the time of any distribution, such Company Disclosure
Document will not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements not
misleading in the light of the circumstances under which they were made.
The representations and warranties contained in this Section 5.3(b) will
not apply to statements or omissions included in any Company Disclosure
Documents (including without limitation the Company Proxy Statement) based
upon information furnished to the Company in writing by Buyer specifically
for use therein.
Section 5.4 Access to Information.
From the date of this Agreement until the Effective Time, the Company will
give Buyer, its counsel, financial advisors, auditors, and other authorized
representatives full access to the offices, properties, books and records of
the Company, will furnish to Buyer, its counsel, financial advisors, auditors,
and other authorized representatives such financial and operating data and
other information as such Persons may reasonably request and will instruct the
Company's employees, counsel, financial advisors, and auditors to cooperate
with Buyer in its investigation of the business of the Company; provided that
no investigation pursuant to this Section shall affect any representation or
warranty given by the Company to Buyer hereunder.
A-9
<PAGE>
Section 5.5 Notices of Certain Events.
The Company shall promptly notify Buyer of:
(a) any notice or other communication received by the Company from any
Person alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement; and
(b) any notice or other communication received by the Company from any
Governmental Authority in connection with the transactions contemplated by
this Agreement.
ARTICLE VI
COVENANTS OF BUYER
Section 6.1 Director and Officer Liability.
For six years after the Effective Time, each of the Surviving Corporation
and Holding shall indemnify and hold harmless the present officers and
directors of the Company with respect to acts or omissions occurring at or
prior to the Effective Time to the fullest extent provided under the Company's
articles of incorporation and bylaws in effect on the date hereof. The
provisions of this Section 6.1 are intended to be for the benefit of, and shall
be enforceable by, the indemnified parties referred to in this Section 6.1 and
their heirs and personal representatives, and shall be binding upon Holding and
the Surviving Corporation and their respective successors and assigns.
Section 6.2 Disclosure Documents.
The information with respect to Buyer and its Affiliates that Buyer
furnishes to the Company in writing specifically for use in any Company
Disclosure Document will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements not
misleading in the light of the circumstances under which they were made (i) in
the case of the Company Proxy Statement, at the time the Company Proxy
Statement or any amendment or supplement is first mailed to shareholders of the
Company, at the time the shareholders vote on adoption of this Agreement and at
the Effective Time, and (ii) in the case of any Company Disclosure Document
other than the Company Proxy Statement, at the time of filing, and at the time
of any distribution thereof.
Section 6.3 Notices of Certain Events.
Buyer shall promptly notify the Company of:
(a) any notice or other communication received by Buyer from any Person
alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement; and
(b) any notice or other communication received by Buyer from any
Governmental Authority in connection with the transactions contemplated by
this Agreement.
ARTICLE VII
COVENANTS OF BUYER AND THE COMPANY
Section 7.1 Best Efforts.
Subject to the terms and conditions of this Agreement, each party will use
its best efforts to take, or cause to be taken, all actions and to do, or cause
to be done, all things necessary, proper, or advisable under applicable Laws to
consummate the transactions contemplated by this Agreement.
Section 7.2 Certain Filings.
The Company and Buyer shall cooperate with one another (i) in connection
with the preparation of the Company Disclosure Documents, including without
limitation the Company Proxy Statement and the Schedule 13E-3, (ii) in
determining whether any action by or in respect of, or filing with, any
Governmental Authority is required, or any actions, consents, approvals or
waivers are required to be obtained from parties to any material contracts, in
connection with the consummation of the transactions contemplated by this
Agreement, and (iii) in seeking any such actions, consents, approvals or
waivers or making any such filings, furnishing information required in
connection therewith or with the Company Disclosure Documents and seeking
timely to obtain any such actions, consents, approvals or waivers.
A-10
<PAGE>
Section 7.3 Public Announcements.
Buyer and the Company will consult with each other before issuing any
press release or making any public statement with respect to this Agreement and
the transactions contemplated hereby and, except as may be required by
applicable Law or any agreement with NASDAQ, will not issue any such press
release or make any such public statement prior to such consultation.
Section 7.4 Further Assurances.
After the Effective Time, the officers and directors of the Surviving
Corporation will be authorized to execute and deliver in the name and on behalf
of the Company or Merger Subsidiary any deeds, bills of sale, assignments,
agreements, certificates, other documents, or assurances and to take and do in
the name and on behalf of the Company or Merger Subsidiary any other actions
and things they may deem desirable to vest, perfect, or confirm of record or
otherwise in the Surviving Corporation, any and all right, title, and interest
in, to, and under any of the rights, properties, or assets of the Company
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
ARTICLE VIII
CONDITIONS TO THE MERGER
Section 8.1 Conditions to the Obligations of Each Party.
The obligations of the Company, Holding, and Merger Subsidiary to
consummate the Merger are subject to the satisfaction at or before the
Effective Time of the following conditions, any or all of which may be waived,
in whole or in part, by each of the parties intended to benefit therefrom, to
the extent permitted by applicable Law:
(a) this Agreement and the Merger shall have been approved and adopted by
a majority of all shares of the Company Common Stock entitled to vote
thereon, in accordance with Section 53-11-03 of the NCBCA;
(b) such parties shall have received a copy, certified by the Secretary
of Merger Subsidiary, of consent resolutions duly adopted (and not
subsequently rescinded or modified) by the Board of Directors and sole
shareholder of Merger Subsidiary, by the terms of which resolutions such
Board of Directors shall have adopted and approved this Agreement and the
Merger and recommended the Merger to Holding, as the sole shareholder of
Merger Subsidiary, and Holding shall have adopted and approved this
Agreement and the Merger;
(c) no Governmental Authority shall have enacted, issued, promulgated,
enforced, or entered any Law or Order (whether temporary, preliminary, or
permanent) which is in effect and which has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger; and
(d) all actions by or in respect of or filings with any Governmental
Authority required to permit the consummation of the Merger shall have been
obtained, other than the filing of the requisite Articles of Merger with
the Secretary of State of North Carolina.
Section 8.2 Additional Conditions to the Obligations of Buyer and Merger
Subsidiary.
The obligations of Buyer and Merger Subsidiary to consummate the Merger
are also subject to the satisfaction at or prior to the Effective Time of the
following further conditions, any or all of which may be waived, in whole or in
part, by each of the parties intended to benefit therefrom, to the extent
permitted by applicable Law:
(a) the Company shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time, the representations and warranties of the Company contained
in this Agreement and in any certificate delivered by the Company pursuant
hereto shall be true and correct in all respects, except where the breach
or inaccuracy thereof would not, individually or in the aggregate, have a
Material Adverse Effect, at and as of the Effective Time as if made at and
as of such time, except that those representations and warranties which
address matters only as of a particular date shall remain true and correct
as of such date, and Buyer shall have received a certificate signed by the
chief executive officer and the principal financial officer of the Company
to the foregoing effect;
(b) no Material Adverse Effect shall have occurred;
A-11
<PAGE>
(c) Buyer shall have received or be satisfied that it will receive all
consents and approvals contemplated by Section 3.4 of the Company
Disclosure Schedule and any other consents of third parties necessary in
connection with the consummation of the Merger if the failure to obtain any
such consent or consents would have a Material Adverse Effect;
(d) The Company shall deliver Cancellation Instruments executed by all
holders of Options with respect to all outstanding Options as of the
Effective Time;
(e) Buyer shall have received all documents it may reasonably request
relating to the authority of the Company to enter into this Agreement, all
in form and substance reasonably satisfactory to Buyer; and
(f) Buyer shall have received from Moore & Van Allen, counsel to the
Company, an opinion or opinions dated as of the Effective Time covering
such matters as shall be reasonably requested by Holding.
Section 8.3 Additional Conditions to the Obligations of the Company.
The obligations of the Company to consummate the Merger are also subject
to the satisfaction at or prior to the Effective Time of the following further
conditions, any or all of which may be waived, in whole or in part, by the
Company to the extent permitted by applicable Law:
(a) Buyer and Merger Subsidiary shall have performed in all material
respects all of their respective obligations required to be performed by
them at or prior to the Effective Time, the representations and warranties
of Buyer contained in this Agreement and in any certificate delivered by
Buyer or Merger Subsidiary pursuant hereto shall be true and correct in all
material respects at and as of the Effective Time as if made at and as of
such time, except that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of
such date, and the Company shall have received a certificate signed by the
chief executive officer and chief financial officer of each of Holding and
Merger Subsidiary to the foregoing effect; and
(b) the Company shall have received all documents it may reasonably
request relating to the authority of Buyer or Merger Subsidiary to enter
into this Agreement, all in form and substance reasonably satisfactory to
the Company.
ARTICLE IX
TERMINATION
Section 9.1 Termination.
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time (notwithstanding any approval of this
Agreement by the shareholders of the Company):
(a) by mutual written consent of the Company and Buyer;
(b) by either the Company or Buyer, if the Merger has not been
consummated by October 31, 1998;
(c) by either the Company or Buyer, if there shall be any Law that makes
consummation of the Merger illegal or otherwise prohibited or if any Order
enjoining Buyer or the Company from consummating the Merger is entered and
such Order shall become final and nonappealable; or
(d) by either the Company or Buyer if this Agreement and the Merger shall
fail to be approved and adopted by the shareholders of the Company at the
Company Shareholder Meeting called for such purpose, as set forth in
Section 8.1(a) above.
Section 9.2 Effect of Termination.
If this Agreement is terminated pursuant to Section 9.1, this Agreement
shall become void and of no effect with no liability on the part of any party,
except that the agreements contained in Section 10.5 shall survive the
termination hereof; provided however, that, except as specifically provided,
nothing herein shall relieve any party of liability for any breach of this
Agreement.
A-12
<PAGE>
ARTICLE X
MISCELLANEOUS
Section 10.1 Definitions.
As used in this Agreement, the following terms have the following
respective meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"AFFILIATE" means, with respect to a Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such given Person.
"AGREEMENT" means this Agreement and Plan of Merger, as the same may be
supplemented, modified, or amended from time to time.
"EXPENSES" means all reasonable out-of-pocket expenses (including, without
limitation, all fees and expenses of counsel, accountants, investment bankers,
experts, consultant and commitment fees and other financing fees and expenses)
incurred by Holding, Merger Subsidiary, or the Company, or on behalf of any
such party in connection with or related to the authorization, preparation,
negotiation, execution, and performance of this Agreement, the preparation,
printing, filing, and mailing of the Company Proxy Statement and Schedule
13E-3, the solicitation of the shareholder approvals, and all other matters
related to the consummation of the contemplated transactions.
"GAAP" means United States generally accepted accounting principles
consistently applied.
"GOVERNMENTAL AUTHORITY" means any federal, state, county, local, foreign,
or other governmental or public agency, instrumentality, commission, authority,
board, or body, and any court, arbitrator, mediator, or tribunal.
"LAW" means any code, law, ordinance, regulation, rule, or statute of any
Governmental Authority.
"LIEN" means any security interest, lien, mortgage, deed to secure debt,
deed of trust, pledge, charge, conditional sale, or other title retention
agreement, or other encumbrance of any kind.
"MATERIAL ADVERSE EFFECT" means any matter that would reasonably be
expected to affect materially and adversely the business, condition (financial
or otherwise), or results of operations of the Company and its Subsidiaries
considered as a whole.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or other Governmental Authority.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust, a limited liability company or any other entity or
organization, including a government or political subdivision, or any agency or
instrumentality thereof.
"SUBSIDIARY" OR "SUBSIDIARIES" of any person means any corporation,
partnership, joint venture or other legal entity of which such other person
(either alone or through or together with any other subsidiary) owns, directly
or indirectly, 50% or more of the stock or other equity interests the holders
of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
"SURVIVING CORPORATION" means the Company as the surviving corporation
resulting from the Merger.
A-13
<PAGE>
The following terms are defined in the following Sections of this
Agreement:
<TABLE>
<CAPTION>
Term Section
- ---------------------------------- ----------------------
<S> <C>
"Articles of Merger" 1.2(b)
"Board" Recital C
"Buyer" Opening Paragraph
"Closing" 1.7
"Closing Date" 1.7
"Commission" 3.7
"Company" Opening Paragraph
"Company Common Stock" Recital A
"Company Current Reports" 3.6
"Company Disclosure Documents" 5.3
"Company Option Plans" 1.6
"Company Permits" 3.5
"Company Proxy Statement" 5.3
"Company SEC Filings" 3.7
"Company Shareholder Meeting" 5.2
"Company Subsidiaries" 3.1
"Company 10-K" 3.7
"Exchange Act" 3.4
"Exchange Agent" 1.4(a)
"Effective Time" 1.2(b)
"Merger" Recital E
"Merger Consideration" 1.3(a)
"Merger Subsidiary" Opening Paragraph
"NCBCA" Recital E
"Preferred Stock" Recital A
"Public Shareholders" Recital C
"Schedule 13E-3" 5.2
"Share" 1.3(a)
"Special Committee" Recital C
</TABLE>
Section 10.2 Notices.
Unless otherwise specifically provided herein, any notice, demand,
request, or other communication herein requested or permitted to be given shall
be in writing and may be personally served, sent by overnight courier service,
or sent by telecopy with a confirming copy sent by United States first-class
mail, each with any postage or delivery charge prepaid. For the purposes
hereof, the addresses of the parties (until notice of a change is delivered as
provided in this Section) shall be as follows:
<TABLE>
<S> <C>
If to the Company: Wandel & Goltermann Technologies, Inc.
1030 Swabia Court
Research Triangle Park, NC 27709
Fax: (919) 941-9160
If to Holding or Merger Sub: Wandel & Goltermann Management Holding GmbH
Box 1262
D-72795 Eningen u.A.
Germany
Fax: 011-44-7121-88996
</TABLE>
Any notice provided hereunder shall be deemed to have been given on the
date delivered in person, or on the next business day after deposit with an
overnight courier service, or on the date received by telecopy transmissions.
Section 10.3 No Survival of Representations and Warranties.
The representations and warranties contained herein and in any certificate
delivered shall not survive the Effective Time or the termination of this
Agreement.
A-14
<PAGE>
Section 10.4 Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived prior to the
Effective Time if, and only if, such amendment or waiver is in writing and
signed by all parties hereto, or in the case of a waiver, by the party
against whom the waiver is to be effective; and provided, further, that
after the adoption of this Agreement by the shareholders of the Company, no
such amendment or waiver shall, without the further approval of such
shareholders, alter or change (i) the Merger Consideration or (ii) any of
the terms or conditions of this Agreement if such alteration or change
would adversely affect the Public Shareholders.
(b) No failure or delay by any party in exercising any right, power, or
privilege hereunder shall operate as a waiver nor shall any single or
partial exercise preclude any other or further exercise or the exercise of
any other right, power or privilege. The parties' rights and remedies shall
be cumulative and not exclusive of any rights or remedies provided by law.
Section 10.5 Fees and Expenses.
Except as otherwise provided in this Section, all Expenses incurred in
connection with this Agreement shall be paid by the party incurring such
Expense.
Section 10.6 Successors and Assigns.
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, provided
that no party may assign, delegate, or otherwise transfer any of its rights or
obligations under this Agreement without the consent of the other parties
hereto except that Buyer may transfer or assign, in whole or from time to time
in part, to one or more of its Affiliates, its rights under this Agreement, but
any such transfer or assignment will not relieve Buyer of its obligations under
this Agreement or prejudice the rights of shareholders to receive the Merger
Consideration for Shares properly surrendered in accordance with Section 1.4.
This Agreement shall not be construed so as to confer any right or benefit upon
any person other than the parties to this Agreement, and their respective
successors and assigns.
Section 10.7 Governing Law.
Regardless of the place or places where this Agreement may be executed,
delivered or consummated, this Agreement shall be governed by and construed in
accordance with the Laws of the State of North Carolina, without regard to any
applicable conflicts of Laws.
Section 10.8 Severability.
Any term or provision of this Agreement which is invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the
extent of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
Section 10.9 Headings and Captions.
The headings and captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
Section 10.10 Interpretations.
Neither this Agreement nor any uncertainty or ambiguity shall be construed
or resolved against any party, whether under any rule of construction or
otherwise. No party to this Agreement shall be considered the drafter. The
parties acknowledge and agree that this Agreement has been reviewed,
negotiated, and accepted by all parties and their attorneys and shall be
construed and interpreted according to the ordinary meaning of the words used
so as fairly to accomplish the purposes and intentions of all the parties.
Section 10.11 Counterparts; Effectiveness.
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures were upon the
same instrument. This Agreement shall become effective when each party has
received a counterpart signed by all of the other parties.
A-15
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as of the day and year first above written.
"The Company" "Holding"
WANDEL & GOLTERMANN WANDEL & GOLTERMANN
TECHNOLOGIES, INC. MANAGEMENT HOLDING GmbH
By: /s/ Gerry Chastelet By: /s/ Peter Wagner
------------------------------------ --------------------------------
President/Chief Executive Officer President/Chief Executive Officer
By: /s/ Rolf Schmid
--------------------------------
Chief Financial Officer
Its:
--------------------------------
"Merger Subsidiary"
WG MERGER CORP.
By: /s/ Peter Wagner
--------------------------------
President
A-16
<PAGE>
APPENDIX B
The Robinson-Humphrey Company, Inc.
CORPORATE FINANCE INVESTMENT BANKERS
DEPARTMENT SINCE 1894
March 28, 1998
Special Committee of the Board of Directors
Wandel & Goltermann Technologies, Inc.
1030 Swabia Court
Research Triangle Park, North Carolina 27709-3585
Dear Gentlemen:
We understand that Wandel & Goltermann Technologies, Inc. (the "Company")
and Wandel & Goltermann Management Holding GmbH (the "Buyer") proposed to enter
into an Agreement and Plan of Merger dated as of March 28, 1998 (the "Merger
Agreement"). Pursuant to the Merger Agreement, each share of common stock of
the Company (the "Common Stock") that is not presently held by the Buyer (the
"Minority Shares"), will be converted into the right to receive $15.90 per
share in cash (the "Merger"). We understand that approximately 62.1% of the
outstanding shares of Common Stock are owned by the Buyer. The terms and
conditions of the Merger are more fully set forth in the Merger Agreement.
We have been requested by the Special Committee of the Board of Directors
of the Company to render our opinion with respect to the fairness, from a
financial point of view, of the consideration to be received in the Merger by
the holders of the Minority Shares.
In arriving at the opinion set forth below, we have, among other things:
1. Reviewed certain publicly available information concerning the Company
which we believe to be relevant to our analysis;
2. Reviewed certain internal financial statements and other financial and
operating data concerning the Company prepared by the management of the
Company;
3. Analyzed certain financial assumptions prepared by the Company;
4. Conducted discussions with members of management of the Company
concerning its business, operations and prospects;
5. Reviewed the reported prices and trading activity for the Common Stock;
6. Reviewed the historical market prices and trading activity for the
Company's shares and compared them with those of certain publicly traded
companies which we deemed to be reasonably similar to the Company;
7. Compared the results of operations and present financial condition of
the Company with those of certain publicly traded companies which we
deemed to be reasonably similar to the Company;
8. Reviewed the financial terms to the extent publicly available, of
certain comparable merger and acquisition transactions;
9. Reviewed the financial terms, to the extent publicly available, of
certain comparable minority buy-out transactions;
10. Performed certain financial analyses with respect to the Company's
projected future operating performance, including a discounted cash flow
analysis;
11. Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary.
We have relied upon the accuracy and completeness of the financial and
other information used by us in arriving at our opinion without independent
verification, and have further relied upon the assurances of management of the
Company that
B-1
<PAGE>
they are not aware of any facts that would make such information inaccurate or
misleading. With respect to the financial forecasts of the Company for the
fiscal years 1998 through 2002, we have assumed that the assumptions underlying
the financial forecasts provided to us have been reasonably prepared and
reflect the best currently available estimates and judgments of the management
of the Company as to the future financial performance of the Company. In
arriving at our opinion, we have not conducted an extensive physical inspection
of the properties and facilities of the Company. We have not made nor obtained
any evaluations or appraisals of the assets or liabilities of the Company. Our
opinion is necessarily based upon market, economic and other conditions as they
exist on, and can be evaluated as of, the date of this letter.
In arriving at our opinion, we were not authorized to solicit and did not
solicit, interest from any party with respect to the acquisition of the
Company, any of its assets or minority shares. We have acted as financial
advisor to the Special Committee of the Board of Directors of the Company in
connection with this transaction and will receive a fee for our services. In
addition, the Company has agreed to indemnify us for certain liabilities
arising out of the rendering of this opinion.
We have also performed various investment banking services for the Company
in the past four years (including the Company's initial public offering) and
have received customary fees for such services. In the ordinary course of our
business, we have traded in the Common Stock for our own account and for the
accounts of our customers.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that the consideration to be received by the holders of Minority
Shares pursuant to the Merger Agreement is fair from a financial point of view
to such holders.
This opinion is for the use and benefit of the Special Committee of the
Board of Directors of the Company and the Board of Directors of the Company and
may not be used for any other purpose without our prior written consent. We
hereby consent, however, to the inclusion of this opinion as an exhibit to any
proxy statement distributed in connection with the Merger.
Very truly yours,
/s/ The Robinson-Humphrey Company, LLC
- --------------------------------------
THE ROBINSON-HUMPHREY COMPANY, LLC
B-2
<PAGE>
APPENDIX C
CHAPTER 55, ARTICLE 13 OF THE GENERAL STATUTES OF NORTH CAROLINA
ARTICLE 13.
DISSENTER'S RIGHTS.
PART I. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES.
ss. 55-13-01. Definitions.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when
and in the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion
would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable
under all the circumstances, giving due consideration to the rate
currently paid by the corporation on its principal bank loans, if any,
but not less than the rate provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on
file with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
ss. 55-13-02. Right to Dissent.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his
shares in the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other than
a parent corporation in a merger under G.S. 55-11-04) is a party
unless (i) approval by the shareholders of that corporation is not
required under G.S. 55-11-03(g) or (ii) such shares are then
redeemable by the corporation at a price not greater than the cash to
be received in exchange for such shares;
(2) Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater
than the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed
in cash to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because
it (i) alters or abolishes a preferential right of the shares; (ii)
creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares; (iii) alters or abolishes a preemptive
right of the holder of the shares to acquire shares or other
securities; (iv) excludes or limits the right of the shares to vote
on any matter, or to cumulate votes; (v) reduces the number of shares
owned by the shareholder to a fraction of a share if the fractional
share so created is to be acquired for cash under G.S. 55-6-04; or
(vi) changes the corporation into a nonprofit corporation or
cooperative organization;
C-1
<PAGE>
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the
board of directors provides that voting or nonvoting shareholders are
entitled to dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in
exchange for cash or other property, unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series
which, at the record date fixed to determine the shareholders entitled
to receive notice of and to vote at the meeting at which the plan of
merger or share exchange or the sale or exchange of property is to be
acted on, were (i) listed on a national securities exchange or (ii) held
by at least 2,000 recorded shareholders, unless in either case:
(1) The articles of incorporation of the corporation issuing the shares
provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of the
class or series are required under the plan of merger or share
exchange to accept for the shares anything except:
a. Cash;
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation
which, at the record date fixed to determine the shareholders
entitled to receive notice of and vote at the meeting at which the
plan of merger or share exchange is to be acted on, were either
listed subject to notice of issuance on a national securities
exchange or held of record by at least 2,000 record shareholders;
or
c. A combination of cash and shares as set forth in sub-subdivisions
a, and b, of this subdivision.
ss. 55-13-03. Dissent by Nominees and Beneficial Owners.
(a) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he dissents with respect to
all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of a partial dissenter
under this subsection are determined as if the shares as to which he
dissents and his other shares were registered in the names of different
shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the beneficial
shareholder.
ss. 55-13-04 TO 55-13-19. Reserved for Future Codification Purposes.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS.
ss. 55-13-20. Notice of Dissenters' Rights.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert
dissenters' rights under this Article and be accompanied by a copy of
this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later
than 10 days thereafter notify in writing all shareholders entitled to
assert dissenters' rights that the action was taken and send them the
dissenters' notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he
suffered from such failure in a civil action brought in his own name
within three years after the taking of the corporate action creating
dissenters' rights under G.S. 55-13-02 unless he voted for such
corporate action.
C-2
<PAGE>
ss. 55-13-21. Notice of Intent to Demand Payment.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to
demand payment for his shares if the proposed action is effectuated;
and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a) is
not entitled to payment for his shares under this Article.
ss. 55-13-22. Dissenters' Notice.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall
mail by registered or certified mail, return receipt requested, a
written dissenters' notice to all shareholders who satisfied the
requirement of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after
approval of the board of directors, of the corporate action creating
dissenters' rights under 6.S.55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
ss. 55-13-23. Duty to Demand Payment.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the
terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until
these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for his shares under this Article.
ss. 55-13-24. Share Restriction.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under G.S.
55-13-26.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
canceled or modified by the taking of the proposed corporate action.
ss. 55-13-25. Payment.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each
dissenter who complied with G.S. 55-13-23 the amount the corporation
estimates to be the fair value of his shares, plus interest accrued to
the date of payment.
(b) The payment shall be accompanied by:
C-3
<PAGE>
(1) The corporation's most recent available balance sheet as of the end
of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows
for that year, and the latest available interim financial statements,
if any;
(2) As explanation of how the corporation estimated the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
ss. 55-13-26. Failure to Take Action.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates
and release the transfer restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a
new dissenters' notice under G.S. 55-13-22 and repeat the payment demand
procedure.
ss. 55-13-27. Reserved for Future Codification Purposes.
ss. 55-13-28. Procedure if Shareholder Dissatisfied with Corporation's Offer or
Failure to Perform.
(a) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand
payment of the amount in excess of the payment by the corporation under
G.S. 55-13-25 for the fair value of his shares and interest due, if;
(1) The dissenter believes that the amount offered under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
(3) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within 60 days after
the date set for demanding payment.
(b) A dissenter waives his rights to demand payment under this section
unless he notifies the corporation of his demand in writing (i) under
subdivision (a)(1) within 30 days after the corporation made payment for
his shares or (ii) under subdivisions (a)(2) and (a)(3) within 30 days
after the corporation has failed to perform timely. A dissenter who
fails to notify the corporation of his demand under subsection (a)
within such 30-day period shall be deemed to have withdrawn his dissent
and demand for payment.
ss. 55-13-29. Reserved for Future Codification Purposes.
PART 3. JUDICIAL APPRAISAL OF SHARES.
ss. 55-13-30. Court Action.
(a) If a demand for payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of
(i) the date payment is made under G.S. 55-13-28, or (ii) the date of
the dissenter's payment demand under G.S. 55-13-28 by filing a complaint
with the Superior Court Division of the General Court of Justice to
determine the fair value of the shares and accrued interest. A dissenter
who takes no action within the 60-day period shall be deemed to have
withdrawn his dissent and demand for payment.
(a)(1) Repealed by Session Laws 1997-202, s.4, effective October 1, 1997.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to
the proceeding as in an action against their shares and all parties must
be served with a copy of the complaint. Nonresidents may be served by
registered or certified mail or by publication as provided by law.
C-4
<PAGE>
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (a) is plenary and exclusive. The court may appoint one or
more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in
the order appointing them, or any amendment to it. The parties are
entitled to the same discovery rights as parties in other civil
proceedings. The proceeding shall be tried as in other civil actions.
However, in a proceeding by a dissenter in a corporation that was a
public corporation immediately prior to consummation of the corporate
action giving rise to the right of dissent under G.S. 55-13-02, there is
no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation.
ss. 55-13-31. Court Costs and Counsel Fees.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30 shall
determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and
shall assess the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amount the court finds equitable;
(1) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either or
any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously, or not
in good faith with respect to the rights provided by this Article.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that
the fees for those services should not be assessed against the
corporation, the court may award to these counsel reasonable fees to be
paid out of the amounts awarded the dissenters who were benefited.
C-5
<PAGE>
********************************************************************************
APPENDIX
WANDEL & GOLTERMANN TECHNOLOGIES, INC.
PROXY SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
WANDEL & GOLTERMANN TECHNOLOGIES, INC.
The undersigned hereby appoints Gerry Chastelet and Adelbert Kuthe, and
each of them, proxies, with power of substitution, to represent the undersigned
at the Special Meeting of Shareholders of Wandel & Goltermann Technologies,
Inc., a North Carolina corporation (the "Company"), to be held on , July ,
1998, at at , and at any adjournments thereof, to vote the
number of shares which the undersigned would be entitled to vote if present in
person in such manner as such proxies may determine, and to vote on the
following proposal as specified below by the undersigned.
(1) Proposal to approve an Agreement and Plan of Merger pursuant to which WG
Merger Corp., a newly-formed North Carolina corporation that is a
wholly-owned subsidiary of Wandel & Goltermann Management Holding GmbH, a
German limited liability company ("WG Holding"), will be merged with and
into the Company and each outstanding share of the Company's common stock,
$.01 par value, (other than shares held by WG Holding and shares held by
shareholders who have properly perfected their dissenters' rights) will be
converted into the right to receive $15.90 in cash.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. IN THE ABSENCE OF SPECIFIED DIRECTIONS,
THIS PROXY WILL BE VOTED IN FAVOR OF THE PROPOSAL SET FORTH ABOVE. The proxies
are also authorized to vote in their discretion upon such other manners as may
properly come before the meeting or any adjournment thereof.
In signing as attorney,
administrator, executor, guardian,
trustee or as a custodian for a
minor, please add your title as such.
If a corporation, please sign in full
corporate name and indicate the
signer's office. If a partner, please
sign in the partnership's name.
X
--
X
--
Dated , 1998
------------------------
