WTT Wireless Telecom

PROPOSAL NO. 1—APPROVAL OF THE MEMBERSHIP INTEREST PURCHASE AGREEMENT

This section of the proxy statement describes certain aspects of the sale of the membership interests. However, we recommend that you read carefully the complete Purchase Agreement for the precise terms of the agreement and other information that may be important to you. The Purchase Agreement is included in this proxy statement as Annex A.

Parties to the Transaction

Wireless Telecom Group, Inc.

We are a New Jersey corporation. Together with our subsidiaries, we specialize in the design and manufacture of advanced RF and microwave devices which enable the development, testing and deployment of wireless technology. The Company provides unique, highly customized and configured solutions which drive innovation across a wide range of traditional and emerging wireless technologies. Our shares of common stock are listed on the NYSE American.

Our principal executive office is currently located at 25 Eastmans Road, Parsippany, New Jersey 07054, and our telephone number is 973-386-9696.

Microlab/FXR LLC

Microlab, a New Jersey limited liability company, designs and manufactures a wide selection of RF components and integrated subsystems for signal conditioning and distribution in the wireless infrastructure markets, as well as for use in medical devices. Microlab products are used in small cell deployments, distributed antenna systems, in-building wireless solutions and cellular base-stations, and for ultra-wide band frequency ranges enabling the deployment of commercial wireless networks utilizing new licensed and unlicensed mid-band spectrum allocations.

Microlab’s principal executive office is currently located at 25 Eastmans Road, Parsippany, New Jersey 07054, and its telephone number is 973-386-9696.

RF Industries, Ltd.

RF Industries, a Nevada corporation, designs and manufactures a broad range of interconnect products across diversified, growing markets including wireless/wireline telecom, data communications and industrial. RF Industries products include RF connectors, coaxial cables, data cables, wire harnesses, fiber optic cables, custom cabling, energy-efficient cooling systems and integrated small cell enclosures. RF Industries’ shares of common stock listed on the NASDAQ Global Market.

RF Industries’ principal executive office is currently located at 7610 Miramar Road, Building 6000, San Diego, California, 92126-4204, and its telephone number is 858-549-6340.

Background of the Sale Transaction

The Board regularly reviews and assesses the Company’s performance, risks, opportunities and strategy. Additionally, the Board and management periodically review and evaluate industry developments and strategic opportunities and alternatives available to the Company as part of the Company’s efforts to strengthen its business and enhance value for its shareholders. Opportunities and alternatives considered at times by the Board and management included, among other things, potential acquisitions of other companies and other strategic transactions.

On March 8, 2021, Timothy Whelan, the Company’s chief executive officer and a member of the Board, participated in a previously scheduled call with Rob Dawson, the President and CEO of RF Industries, and two representatives from B. Riley Securities, Inc. In their conversation, Mr. Dawson verbally raised the topic of interest from RF Industries to possibly acquire the Company’s Microlab business. They discussed current market dynamics, each of their business product solutions, and the potential rationale for a combination of the Microlab product portfolio with the RF Industries product portfolio in combined sales channels. Following that discussion, the Companies signed a non-disclosure agreement and some high-level Microlab financial information was shared with RF Industries. On or about March 31, 2021 Mr. Dawson contacted Mr. Whelan and verbally shared an initial indication of interest for the purchase of the Microlab business by RF Industries for $17.5 million cash and potential contingent consideration of $5 million based upon certain milestones.

After discussions with the Chairman of the Board, Mr. Whelan arranged for three investment banking firms to make presentations to the Board of Directors on April 13 and 14, 2021 to discuss strategic alternatives for the possible sale of Microlab.

Following its April 15, 2021, regular meeting of the Board of Directors, the Board moved to executive session to discuss the verbal indication of interest and the need to retain an investment banking firm to assist with a strategic process to determine other parties who may be interested in the Company’s Microlab business and evaluate alternatives in connection with a possible transaction. The Board authorized management to retain Craig-Hallum Capital Group LLC (“Craig-Hallum”) to assist the Company in evaluating its options in connection with a possible sale of the Company’s Microlab business. The Board also asked directors Alan Bazaar and Allan Weinstein to act as an informal M&A committee to work with management during the strategic process and as requested with respect to M&A matters going forward.

The Company retained Craig-Hallum as its exclusive financial advisor in connection with the possible sale of Microlab on April 23, 2021. From April 26 through May 10, 2021, Craig-Hallum worked with management and Bryan Cave Leighton Paisner LLP (“BCLP”), the Company’s outside counsel, to conduct due diligence with management, develop a financial model and other financial analysis, prepare marketing materials and a confidential information presentation (the “CIP”), collect data room documentation and organize the data room and prepare a list of potential buyers.

From May 10 to August 30, 2021, Craig-Hallum approached various potential buyers on behalf of the Company. From May 17 to August 30, 2021, Craig-Hallum worked with management and BCLP to coordinate potential buyers’ review of the CIP, preliminary due diligence by potential buyers and management presentations. In addition to RF Industries, Craig-Hallum’s strategic process included outreach to 34 additional potential buyers, of which two were unresponsive, 19 received high-level marketing materials but did not move forward with non-disclosure agreements, and 13 signed non-disclosure agreements and received the CIP but did not submit an indication of interest. Craig-Hallum also had multiple interactions with RF Industries beginning on May 3, 2021 and provided information including the CIP to RF Industries pursuant to the non-disclosure agreement previously executed by RF Industries and the Company. In late July 2021, Mr. Dawson and Mr. Whelan discussed RF Industries’ continued interest in the Microlab business, including additional negotiations of the purchase price and structure of the purchase consideration.

On August 12, 2021, at the direction of the Board, Mr. Whelan spoke with Mr. Dawson. In their conversation, Mr. Dawson confirmed RF Industries’ interest in a potential acquisition of the Company’s Microlab business, and outlined his thoughts regarding the strategic fit between Microlab and RF Industries. Mr. Dawson and Mr. Whelan continued discussing valuation and structure of a potential transaction, and Mr. Whelan advised Mr. Dawson that RF Industries should submit a detailed written offer to Craig-Hallum.

On August 24, 2021, Mr. Dawson sent a written non-binding preliminary term sheet to the Company for the purchase of Microlab for $24.25 million, which compared to RF Industries’ initial indication of interest represented an approximately 38% increase in cash consideration at closing and an increase of approximately 8% in total consideration, with no milestone-based contingencies to the purchase value. The Board discussed the non-binding preliminary term sheet at a meeting held on August 24, 2021 and discussed a possible counter offer to address transaction structure, certainty and timing. The Board authorized management to work with Craig-Hallum and BCLP to draft a counter offer in the form of a non-binding letter of intent. On August 26, 2021, Craig-Hallum spoke with Mr. Dawson regarding the counter offer and forwarded the counter offer non-binding letter of intent to Mr. Dawson on August 26, 2021.

On August 30, 2021, Mr. Dawson sent a revised unsigned non-binding term sheet and included a draft exclusivity agreement to be executed along with the proposed term sheet. On August 31, 2021, management discussed the revised term sheet with Mr. Bazaar, Mr. Weinstein, Craig-Hallum and BCLP. The Company responded with an updated non-binding letter of intent sent by Craig-Hallum to Mr. Dawson on September 1, 2021. On September 3, 2021, Mr. Whelan and a representative of Craig-Hallum spoke with Mr. Dawson and reviewed the key elements in the letter of intent. The conversations included discussion and negotiations regarding the ability to preserve flexibility around any strategic discussions outside of Microlab, due diligence, timing, working capital, representations and warranties insurance provisions, non-compete and non-solicit provisions, termination fees and the timing, conditions and scope of exclusivity limited to Microlab. The parties reached agreement on the terms of the letter of intent and executed it on September 15, 2021.

From September 15 through December 16, 2021, the parties negotiated a definitive agreement and RF Industries conducted confirmatory due diligence including completion of a quality of earnings report, bank audits and due diligence by RF Industries’ insurance company for purposes of the representations and warranties insurance provisions. On November 9, 2021, following its regular meeting, the Board met in executive session with BCLP to discuss the status of the proposed transaction, including the timeline, comparison of initial offer to final offer and estimated net proceeds, as well as open issues, among other things. The directors asked questions and management and BCLP answered and discussed directors’ questions about the proposed transaction. Throughout the process, management regularly consulted with and updated the informal M&A committee and sought guidance from Messrs. Bazaar and Weinstein. On November 30, 2021, Mr. Whelan held a call with Mr. Dawson to discuss and negotiate open issues on the Purchase Agreement and possible alternatives for resolving same. Mr. Whelan consulted with Craig-Hallum, BCLP and the informal M&A committee regarding the issues discussed during the call.

On December 7, 2021, the Board called a special meeting, which included Craig-Hallum and BCLP, to review the strategic process summary and timeline, offer price, material deal terms and open transaction issues, among other things. The Board also was provided an overview of Board fiduciary duties in M&A transactions, a summary of the Purchase Agreement, the draft Purchase Agreement, draft resolutions to approve the transaction and a draft press release. The directors asked questions and discussion ensued.

On the morning of December 16, 2021, the Board held a special meeting to discuss the current status of the proposed transaction. BCLP reviewed in detail with the Board its fiduciary duties in M&A transactions and again provided a summary of the Purchase Agreement for review and discussion. The Board also reviewed draft resolutions to approve the Purchase Agreement and discussed expected timing for the approval. The directors asked questions and discussed the proposed transaction. The meeting was adjourned pending resolution of all outstanding open issues on the Purchase Agreement.

The special Board meeting was reconvened at 9 p.m. ET on December 16, 2021, and the Board reviewed and discussed the status of the Purchase Agreement, schedules and exhibits and the remaining open issues. BCLP reviewed the key terms of the Purchase Agreement with the Board and the Board asked questions and discussed the proposed transaction. The Board also reviewed and discussed its fiduciary duties in connection with proposed transaction and took into consideration the factors deemed relevant by the Board, including the factors described below. After discussion and consideration of the financial and other information presented, the Board unanimously determined that the terms of the draft interest purchase agreement and the transactions contemplated thereby, were fair to, and in the best interests of, the Company and its shareholders, authorized management to negotiate and resolve the remaining non-material open issues and approved the execution and delivery by the Company of the Purchase Agreement, the performance by the Company of its covenants and agreements contained in the purchase agreement and the consummation of the transactions contemplated thereby.

At 9:51 p.m. Pacific Time on December 16, 2021, the Purchase Agreement and related documents were executed and delivered by each of the Company and RF Industries.

On December 17, 2021, the Company and RF Industries each issued a press release announcing the execution of the Purchase Agreement.

On December 20, 2021, the Company and RF Industries each filed a Form 8-K disclosing the Purchase Agreement.

Reasons for the Sale Transaction

The following describes material reasons, factors and information taken into account by our Board of Directors in deciding to adopt and approve the Purchase Agreement, authorize the transactions contemplated by the Purchase Agreement, and recommend that our shareholders adopt and approve the Purchase Agreement and authorize the transactions contemplated thereby.

Our Board of Directors also considered a variety of risks and other potentially negative factors relating to the Sale Transaction, including the following:

The foregoing discussion of the information and factors considered by our Board of Directors is not meant to be exhaustive, but includes the material factors considered by the Board. In view of the variety of factors considered in connection with its evaluation of the Sale Transaction, our Board of Directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to different factors. Our Board of Directors recommended the Purchase Agreement and the Sale Transaction based upon the totality of the information it considered.

The foregoing description of the Board of Directors’ consideration of the factors supporting the Purchase Agreement, the Sale Transaction and the other transactions contemplated by the Purchase Agreement is forward-looking in nature. This information should be read in light of the factors discussed in the section entitled “Cautionary Statement Regarding Forward-Looking Information” beginning on page 5 of this proxy statement.

Recommendation of the Board of Directors

Our Board of Directors has determined that the Sale Transaction is fair to, and in the best interests of, the Company and our shareholders. The Board of Directors unanimously approved the Purchase Agreement, and unanimously recommends that the shareholders vote in favor of the proposal to approve the Purchase Agreement.

Agreements Related to the Purchase Agreement

Voting Agreement

On December 16, 2021, concurrently with our entry into the Purchase Agreement, RF Industries entered into voting and support agreement with our management and directors, and certain of their affiliates, pursuant to which those certain management and director shareholders have agreed, among other things, to vote the shares beneficially owned by the shareholders in favor of the adoption of the Purchase Agreement. These shareholders beneficially owned approximately 11% of our common stock outstanding.

The Company After the Sale Transaction

Following the Sale Transaction, the Company will be comprised of the Boonton, Holzworth and Noisecom brands within our test and measurement product group, and the CommAgility brand within our radio, baseband, and software product group. We believe the Sale Transaction will allow us to prepare for the next stage of transformation with a stronger concentration of revenues and the ability to focus our investments on long-term and high-growth opportunities, including specialized 5G software and services for 5G private networks and test and measurement applications for the satellite communications, semiconductor and aerospace and defense industries. Our Board will continue to evaluate future plans for the Company after the Sale Transaction and has engaged and plans to continue to engage experts and advisors to help the Board and management evaluate the go-forward strategy and potential strategic opportunities.

Effects on the Company if the Sale Transaction is not Completed

If the Sale Transaction is not completed, we currently expect to continue to conduct the Microlab Business, and Microlab will continue to be our wholly-owned subsidiary. We may pursue alternative transactions regarding the sale of Microlab. We will also continue to manage and operate our other businesses.

Financing

The total amount of funds required by RF Industries to pay all the sale consideration in connection with the Sale Transaction is estimated to be approximately $24,250,000. RF Industries expects to finance the sale with cash on hand and bank financing.

Interests of Certain Persons in the Sale Transaction

In connection with the proposed Purchase Agreement, the Compensation Committee established a cash transaction bonus pool in the aggregate amount of approximately $600,000 for certain executives and key employees who are critical to the completion of the Sale Transaction (collectively, the “Sale Transaction Bonuses”). The cash transaction bonuses are anticipated to be paid in connection with the closing of the Sale Transaction. In addition to amounts payable to other executives and key employees our Named Executive Officers Timothy Whelan, our Chief Executive Officer, and Michael Kandell, our Chief Financial Officer, would be eligible to receive $100,000 and $75,000, respectively, payable 50% upon the successful close of the Sale Transaction, and the remaining 50% payable when any indemnification holdback amounts are resolved following the Sale Transaction, and Daniel Monopoli, our Chief Technology Officer, is eligible to receive $50,000 payable upon the successful close of the Sale Transaction.

In addition, the Compensation Committee has full authority to evaluate the performance measurements set which have included Microlab in the expected financial results and consider changes to the vesting and exercisability of awards granted under our incentive plans. The Compensation Committee has not determined whether to exercise its authority to adjust the vesting and exercisability of awards granted under our incentive plans. As of September 30, 2021, options to purchase 2,990,000 shares of our common stock are outstanding, of which 1,720,000 are unvested, 139,836 shares of restricted stock were unvested and 150,000 restricted stock units were unvested under our incentive plans.

Regulatory Approvals

There are no material United States or state regulatory approvals required for the completion of the Sale Transaction.

Appraisal Rights

Under the New Jersey Business Corporation Act, our shareholders are not entitled to appraisal rights in connection with the Sale Transaction.

Material U.S. Federal Income Tax Consequences of the Sale

The Sale Transaction will be treated as a sale of the assets and liabilities of Microlab to RF Industries for U.S. federal and applicable state income tax purposes. The Company has approximately $16.3 million of U.S. federal net operating loss carryforwards and approximately $42.4 million of state net operating loss carryforwards as of December 31, 2020 and immaterial utilization expected for the year ended December 31, 2021. We expect to utilize all of our federal net operating loss carryforwards and approximately 50% of our state net operating loss carryforwards to offset the taxable gain generated from the Sale Transaction.

We do not anticipate any direct tax consequence to the shareholders as a result of the Sale Transaction. Each holder of our common stock is urged to consult his or her own tax advisor as to the federal income tax consequences of the sale, and also as to any state, local, foreign or other tax consequences based on his or her own particular facts and circumstances.

Accounting Treatment of the Sale Transaction

If the sale of Microlab is consummated, it is expected to be accounted for as a sale of membership interest transaction, in conformity with accounting principles generally accepted in the United States of America. At the closing of the sale of Microlab, the excess or shortfall of the purchase price received by us, less transaction expenses, over the carrying value of the membership interests of Microlab, including goodwill allocated to Microlab, will be recognized as a gain or loss for financial accounting purposes. Purchase price adjustments, including the working capital adjustment, if any, in connection with the sale of Microlab will be recorded in subsequent periods, when received or paid. In subsequent reporting periods, the presentation of Microlab for current and prior years, including the gain or loss on sale of its membership interest after the transaction is consummated, will be presented in our financial statements as a discontinued operation for financial accounting purposes.

MEMBERSHIP INTEREST PURCHASE AGREEMENT

The following is a summary of the material terms of the Purchase Agreement. This summary does not purport to describe all the terms of the Purchase Agreement and is qualified in its entirety by reference to the full text of the Purchase Agreement, which is attached as Annex A. We urge you to read the Purchase Agreement carefully and in its entirety because it, and not the summary set forth in this proxy statement, is the legal document that governs the Sale Transaction.

The representations, warranties and covenants contained in the Purchase Agreement were made only for purposes of the Purchase Agreement as of specific dates and may be subject to more recent developments. Such representations, warranties and covenants were made solely for the benefit of the parties to the Purchase Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating risk between the parties instead of establishing these matters as facts, and may apply standards of materiality in a way that is different from what may be viewed as material by you or by other investors. For the foregoing reasons, you should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties or any of their respective subsidiaries or affiliates.

General

Pursuant to the terms of the Purchase Agreement, we agreed to sell to RF Industries all of the issued and outstanding membership interests of Microlab, for an aggregate consideration of $24,250,000, subject to certain adjustments. Microlab designs and manufactures a wide selection of RF components and integrated subsystems for signal conditioning and distribution in the wireless infrastructure markets, as well as for use in medical devices. Microlab products are used in small cell deployments, distributed antenna systems, in-building wireless solutions and cellular base-stations, and for ultra-wide band frequency ranges enabling the deployment of commercial wireless networks utilizing new licensed and unlicensed mid-band spectrum allocations.

Consideration

In consideration for the Sale Transaction, RF Industries has agreed to pay the Company at closing a purchase price of $24,250,000, subject to certain adjustments. The purchase price will be adjusted upward by the amount of net cash position of Microlab as of the closing date, and adjusted downward by (i) certain indebtedness amounts as of the closing date and (ii) accrued and unpaid Sale Transaction expenses, and further adjusted by an amount equal to the working capital excess or shortfall as of the closing date, as applicable.

Closing

The closing is expected to take place electronically on the second business day following the satisfaction or waiver of the closing conditions set forth in the Purchase Agreement; provided, that RF Industries shall not be obligated to close the Sale Transaction for 30 days following the date of the Purchase Agreement.

Representations and Warranties

We made representations and warranties relating to the following matters:

Certain of our representations and warranties in the Purchase Agreement provide exceptions for items that are not reasonably likely to have a “Material Adverse Effect.” For purposes of the Purchase Agreement, “Material Adverse Effect” means any occurrence that has, or could reasonably be expected to have, individually or in the aggregate, a material adverse effect on (a) the results of operations, condition (financial or otherwise), business, cash flows, assets or properties of Microlab and/or the Microlab Business, taken as a whole, or (b) the ability of the Company or Microlab to consummate the transactions contemplated thereby on a timely basis and to perform their respective covenants and obligations hereunder; provided, however, that “Material Adverse Effect” shall not include any occurrence arising out of or attributable to (i) conditions or effects that generally affect the industries in which the Microlab Business operates (including legal and regulatory changes), (ii) general economic conditions or effects resulting from changes in equity or debt markets, in any jurisdiction in which the Microlab Business operates or the global economy generally, including changes in interest or exchange rates, (iii) any outbreak or escalation of hostilities, acts of terrorism, political instability, or other national or international calamity, crisis or emergency, or any governmental or other response to any of the foregoing, (iv) acts of God (including earthquakes, storms, fires, floods and natural or man-made disasters), epidemic, disease outbreak, pandemic (including, for the avoidance of doubt, any occurrence resulting from, arising in connection with or otherwise related to COVID-19), public health emergency, widespread occurrences of infectious diseases or other comparable events, or any escalation or worsening thereof, (v) effects arising from changes or proposed changes in laws, rules, regulations or accounting principles, (vi) the public announcement of the Purchase Agreement or the transactions contemplated hereby, the performance of any party pursuant to the terms of the Purchase Agreement or actions or omissions taken with the prior written consent of RF Industries, or (vii) the failure to meet any projections or forecasts, among other things.

The Purchase Agreement contains representations and warranties made by RF Industries relating to the following matters:

Access to Information

To the extent permitted by applicable law, from the Purchase Agreement date until the earlier of the closing and the termination of the Purchase Agreement, we will, and will cause Microlab to (i) provide RF Industries and its representatives with reasonable access, upon reasonable prior notice and during normal business hours, to the personnel, assets, properties, and books and records of Microlab and the Microlab Business, and (ii) furnish RF Industries and its representatives with such information and data concerning Microlab and the Microlab Business as RF Industries may reasonably request, subject to certain conditions and exceptions as described in the Purchase Agreement.

Conduct of Business Prior to Closing

Except as contemplated by the Purchase Agreement, from the Purchase Agreement date until the earlier of the closing and the termination of the Purchase Agreement, we will, and will cause Microlab to use commercially reasonable efforts to operate Microlab and the Microlab Business in the ordinary course of business in all material respects and consistent with past practice, and preserve intact the Microlab Business’s present business, organization, assets and operations and maintain its relations and goodwill with its material suppliers, customers, employees, and others having a material business relationship with Microlab in all material respects. We agreed not to undertake, and to cause Microlab not to undertake, any of the following actions without the prior written consent of RF Industries, on the terms set forth in the Purchase Agreement:

Shareholder Meeting and Filing of Proxy Statement

We have agreed to file this proxy statement and hold a meeting of our shareholders to approve the Sale Transaction and to use commercially reasonable efforts to solicit proxies in favor of the approval of the Sale Transaction from our shareholders and secure such approval.

Public Announcements

Except to the extent required by applicable law, each party shall consult with the other party before issuing, and give the other party the opportunity to review and comment upon any press release or other public statement with respect to transactions contemplated by the Purchase Agreement (other than public statements that are consistent with prior press releases or other public statements made by the parties).

Transfer Taxes

Any transfer taxes incurred in connection with the Purchase Agreement and the Sale Transaction will be paid 50% by us and 50% by RF Industries.

Release

Effective upon and following the closing and subject to the indemnification obligations and other rights and claims set forth in the Purchase Agreement and the related documents, we, on our own behalf and on behalf of our related parties, have agreed to release Microlab, RF Industries, its affiliates, and each of their representatives and related parties from all claims, dues and demands, proceedings, causes of action, orders, obligations, contracts and agreements, debts and liabilities we have, have ever had or may hereafter have against the released parties on account of or arising out of any matter, cause or occurrence occurring contemporaneously with or prior to the closing.

Non-Solicitation; Non-Competition

We have agreed that, for a period of five years after the closing date, we will not (and will not permit our affiliates or representatives to) hire or solicit or any individual who is an employee, independent contractor or consultant of the Microlab Business as of the closing date or at any time during 2021 or encourage any such individual to leave or hire any individual who has left, except as otherwise described in the Purchase Agreement.

We have agreed that, for a period of five years after the closing date, we will not (and will not permit our affiliates or our or their representatives to) (i) engage in or assist others in engaging in the Microlab Business anywhere in the world; (ii) have an interest in any person that engages in the Microlab Business in any capacity; or (iii) intentionally interfere in any material respect with the business relationships between the Microlab Business and any customers or suppliers of the Microlab Business as of the closing date, except that we may own publicly traded securities of any entity engaged in such business to the extent such investment does not equal or exceed 2% of any class of securities of such entity.

We have agreed that, for a period of five years after the closing date, we will not (and will not permit our affiliates or representatives shall cause our other subsidiaries not to) solicit, entice, divert, or take away, or attempt to solicit, entice, divert or take away, any person who as of the closing date is a customer, vendor, or supplier, or otherwise has a business relationship with Microlab or the Microlab Business or is seeking to establish a business relationship with Microlab or the Microlab Business for purposes of reducing or diverting their business or services from Microlab or the Microlab Business, or take any action that is designed or intended to have the effect of discouraging any such person from maintaining the same business relationship with Microlab or the Microlab Business after the closing date as it maintained with Microlab prior to the closing date.

Notwithstanding anything to the contrary contained in the Purchase Agreement, the parties acknowledged and agreed that the foregoing restrictions will not apply to or restrict any third party which acquires, either directly or indirectly, us through a bona fide arms-length transaction.

Change in Board Recommendation

Subject to certain exceptions described below, the Purchase Agreement provides that neither we, our affiliates nor any of our or their respective directors, officers or representatives will directly or indirectly (i) solicit, initiate, knowingly encourage or knowingly facilitate any Acquisition Proposal (as defined below) or any inquiry, proposal or offer that could reasonably be expected to lead to any Acquisition Proposal, or the making or consummation of any Acquisition Proposal (ii) other than to inform a person of the existence of the non-solicitation obligations in the Purchase Agreement, enter into, continue, or otherwise participate in any discussions or negotiations regarding any Acquisition Proposal (other than a confidentiality agreement in accordance with the Purchase Agreement), (iii) approve, endorse or recommend an Acquisition Proposal or any letter of intent (whether binding or non-binding), memorandum of understanding or other alternative acquisition agreement or that would reasonably be expected to lead Microlab to abandon or terminate its obligations under the Purchase Agreement; or (iv) resolve, propose or agree to do any of the foregoing.

If, at any time prior to obtaining shareholder approval of the Sale Transaction, we receive a bona fide written Acquisition Proposal, so long as such Acquisition Proposal was not solicited in violation of the Purchase Agreement, from any person that our Board has determined in good faith, after consultation with our financial advisor and outside legal counsel, constitutes or would reasonably be expected to result in a Superior Proposal (as defined below), and such action with respect to such Superior Proposal is reasonably likely to be necessary in order for our Board to comply with its fiduciary duties under applicable New Jersey law, then we and our representatives may furnish information with respect to Microlab and the Microlab Business to such person pursuant to an acceptable confidentiality agreement.

All information granted to such person making the Acquisition Proposal must be given to RF Industries (if not already available to RF Industries) prior to, or substantially concurrently with the time it is provided or made available to such person (and in any event within 24 hours), and we are required to keep RF Industries reasonably informed of all material developments and changes regarding such Acquisition Proposal.

The Purchase Agreement prohibits our Board from withholding, withdrawing, modifying or qualifying (or publicly proposing to withhold, withdraw, modify or qualify) in any manner adverse to RF Industries the recommendation that the Company’s shareholders should vote to approve the Purchase Agreement (which we refer to as the “Board recommendation”); from approving or recommending (or publicly declaring advisable) any Acquisition Proposal; failing to include the Board recommendation in the proxy statement or approving or recommending (or publicly declaring advisable or publicly proposing to enter into, any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement, collaboration agreement or other agreement with respect to, or that is intended or would reasonably be expected to lead to, any Acquisition Proposal (other than an acceptable confidentiality agreement).

Notwithstanding the restrictions described above, if, prior to obtaining shareholder approval of the Purchase Agreement, the Company receives an unsolicited bona fide Acquisition Proposal (not obtained in violation of the Purchase Agreement) and the Board concludes in good faith, after consultation with its financial advisor and outside legal counsel, that such Acquisition Proposal would, if consummated, constitute a Superior Proposal, and such action is necessary in order for the directors to comply with their fiduciary duties under applicable New Jersey law, the Board may make an adverse recommendation change or cause the Company to terminate the Purchase Agreement (and pay the termination fee to RF Industries). Similarly, notwithstanding the restrictions in the non-solicitation provision, if, prior to obtaining shareholder approval of the Purchase Agreement, an intervening event occurs and the Board concludes in good faith, after consultation with its financial advisor and outside legal counsel, that (a) such intervening event materially adversely affects the advisability of the Purchase Agreement and from a financial point of view and (b) such action is reasonably likely to be necessary in order for the directors to comply with their fiduciary duties under applicable law, the Board may make an adverse recommendation change.

The ability of the Board to make an adverse recommendation change or terminate the Purchase Agreement as contemplated above is subject to compliance with the provisions of the Purchase Agreement that it first cause Microlab to provide RF Industries at least four business days’ prior written notice advising RF Industries that it intends to take such action, which notice must contain certain specified information; cause Microlab and its representatives to negotiate, to the extent RF Industries so wishes to negotiate, during the four business day period following delivery of the notice of a Superior Proposal or an intervening event, in good faith with RF Industries concerning any revisions to the terms of the Purchase Agreement that RF Industries proposes in response to such Superior Proposal or intervening event, and after complying with these requirements, determine that, in the case of a Superior Proposal, such acquisition proposal continues to constitute a Superior Proposal, and in the case of an intervening event, such intervening event continues to materially adversely affect the advisability of the Purchase Agreement from a financial point of view, in each case after giving due consideration to any changes proposed to be made to the Purchase Agreement by RF Industries in writing.

Under the Purchase Agreement, “Acquisition Proposal” means any bona fide written proposal, inquiry or offer with respect to (A) a merger, consolidation, dissolution, liquidation, recapitalization, reorganization, spin-off, share exchange, or other business combination, tender offer, exchange offer or any transaction involving the purchase or acquisition of 20% or more of Microlab’s membership interests, or (B) a direct or indirect purchase, lease, exclusive license, exchange, transfer or acquisition or disposition of assets of Microlab that account for acquisition of 20% or more of the consolidated net revenues, net income or total assets of Microlab (other than any such proposal or offer made by RF Industries or any of its affiliates).

Under the Purchase Agreement, “Superior Proposal” means any bona fide Acquisition Proposal not solicited in violation of the Purchase Agreement made after the date of the Purchase Agreement that did not arise from or in connection with a breach of the obligations set forth in the Purchase Agreement which the Board concludes in good faith (after consultation with its financial advisor and outside legal counsel), taking into account all financial, legal, regulatory and other aspects of the Acquisition Proposal and the person making the Acquisition Proposal and the likelihood of the proposal being consummated in accordance with its terms, (A) would, if consummated, be more favorable to our shareholders from a financial point of view than the transactions contemplated by the Purchase Agreement and (B) is reasonably likely to be completed in accordance with its terms (provided that for the purpose of this definition, references to “20% or more” in the definition of Acquisition Proposal shall be deemed to be references to “50%”).

Real Property

We do not own any real property. We are not in default under any material leases, nor to our knowledge is any other party in default under any such material leases. Upon close of the Sale Transaction we will enter into a sublease arrangement with Microlab for 51% of our facility located at 25 Eastmans Road Parsippany NJ 07054. The sublease is coterminous with the prime lease and Base Rent and Additional Rent, as defined, will be charged at our cost.

Other Covenants and Agreements

RF Industries and the Company have made certain other covenants to and agreements with each other regarding various other matters, including:

Closing Conditions

RF Industries’ obligation to complete the Sale Transaction is subject to the fulfillment or waiver of the following conditions:

Our obligation to complete the Sale Transaction is subject to the fulfillment or waiver of the following conditions:

Each party’s obligations to complete the Sale Transaction is subject to the fulfillment or waiver of the following conditions:

Termination

The Purchase Agreement may be terminated as follows:

Effect of Termination; Termination Fee

If the Purchase Agreement is terminated, termination fee may be due in the following scenarios:

If the Purchase Agreement is terminated, it becomes void and has no effect apart from those provisions that specifically survive termination, as set forth in the Purchase Agreement.

Indemnification

The representations and warranties set forth in the Purchase Agreement will survive for a period of 12 months from the closing date, other than certain fundamental representations, which will survive for six years. The representations and warranties relating to taxes will survive until sixty (60) days after the expiration of the applicable statute of limitations. The covenants and agreements contained in the Purchase Agreement or any instrument or certificate delivered pursuant to the Purchase Agreement that by their terms contemplate performance after the closing shall survive the closing in accordance with their terms for the maximum time permitted by law; however, the express expiration times laid out in the Purchase Agreement will prevail over the running of an applicable statute of limitations.

After the closing, we will indemnify RF Industries, its affiliates (including Microlab), its and their respective representatives, successors and assigns against any losses, liabilities, expenses of whatever kind (including reasonable attorneys’ fees and accounting fees and the cost of enforcing any right to indemnification), claims, suits, actions, judgments, damages, deficiencies, interest, awards, penalties, and fines arising from, based upon or otherwise in connection with any (i) inaccuracy in or breach of any representation and warranty made by us or Microlab in the Purchase Agreement without regard to materiality, (ii) breach or non-fulfillment of our covenants or agreements without regard to materiality; (iii) pre-closing taxes (as defined in the Purchase Agreement); and (iv) excluded liabilities (as defined in the Purchase Agreement). Additionally, RF Industries will indemnify us and our respective representatives, against any losses, liabilities, expenses of whatever kind (including reasonable attorneys’ fees and accounting fees and the cost of enforcing any right to indemnification), claims, suits, actions, judgments, damages, deficiencies, interest, awards, penalties, and fines arising from, based upon or otherwise in connection with any inaccuracy in or breach of any representation and warranty made by RF Industries in the Purchase Agreement or any certificate delivered pursuant to the Purchase Agreement without regard to materiality, and (ii) breach or non-fulfillment of any covenant or agreement of RF Industries without regard to materiality.

Notwithstanding the foregoing, an indemnifying party will not be liable for any losses arising under each clause (i) above (other than for inaccuracies in or breaches of certain fundamental representations) unless and until the amount of such losses arising from any matter or series of related matters exceeds $150,000 and then for only those losses in excess of $150,000. In no event shall our cumulative indemnification obligations under clause (i) above (other than for inaccuracies in or breaches of certain fundamental representations) exceed $150,000. The maximum aggregate liability of the Company for indemnification claims is capped at the final purchase price. However, nothing in the Purchase Agreement shall limit or prohibit RF Industries’ right to make claims and recover proceeds under the R&W Insurance Policy. Nonetheless, the amount of losses for which indemnification is provided shall be reduced by any insurance proceeds RF Industries actually receives.

Amendments and Waiver

The Purchase Agreement may not be amended, supplemented or modified except by a written instrument signed on behalf of all parties. Any term or condition of the Purchase Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver will be effective, unless set forth in written instrument. No waiver by any party of any term or condition of the Purchase Agreement will be deemed to be a waiver of the same or any other term or condition of the Purchase Agreement on any prior or future breach. No waiver shall be implied by a previous course of dealings between the parties.

Governing Law

The Purchase Agreement is governed by the laws of the state of Delaware, without giving effect to any choice of law or conflict of laws rules or provisions that would cause the application of the laws of any jurisdiction other than the state of Delaware.

Specific Performance

The parties to the Purchase Agreement are entitled to seek an injunction or injunctions to prevent breaches of the Purchase Agreement and to seek to enforce specifically the terms and provisions of the Purchase Agreement, in addition to any other remedy to which any such party is entitled at law, in equity, in contract, in tort or otherwise.

Vote Required and Board Recommendation

The approval of the Purchase Agreement requires the affirmative vote of the holders of a majority of the votes cast by the holders of shares entitled to vote thereon at the Special Meeting.

Our Board of Directors unanimously determined that the Purchase Agreement is fair to, advisable and in the best interests of the Company and our shareholders and recommends that you vote “FOR” the proposal to approve the Purchase Agreement.

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma consolidated balance sheet as of September 30, 2021 and the unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2021 and year ended December 31, 2020 have been derived from the historical consolidated financial statements of the Company, as adjusted to give effect to our sale of all of the outstanding membership interests in Microlab, and are intended to reflect the impact of the Sale Transaction on the Company on a pro forma basis as of and for the periods indicated.

The unaudited pro forma consolidated balance sheet reflects the Sale Transaction as if it had been consummated on January 1, 2020, and includes pro forma adjustments for preliminary estimates made by management.

The unaudited pro forma consolidated financial statements of the Company and its subsidiaries have been prepared using assumptions and estimates that the Company’s management believes are reasonable under the circumstances and are intended for informational purposes only. They are not necessarily indicative of the financial results that would have occurred if the transactions described herein had taken place on the dates indicated, nor are they indicative of the future consolidated results of the Company. However, management believes that the estimates and assumptions used provide a reasonable basis for presenting the significant effects of the sale of Microlab. Management also believes the pro forma adjustments give appropriate effect to the estimates and assumptions and are applied in conformity with accounting principles generally accepted in the United States of America.

The unaudited pro forma financial information should be read in conjunction with the historical consolidated financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company for the nine months ended September 30, 2021 (unaudited) and for the year ended December 31, 2020 (audited), including the related notes, filed with the Securities and Exchange Commission on Form 10-Q on November 10, 2021 and on Form 10-K on March 19, 2021, respectively.