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Exhibit 99.2

 

 

 

July 14, 2009

 

Mr. Robert Placek

Chairman of the Board, President and Chief Executive Officer

Wegener Corporation

11350 Technology Circle

Duluth, Georgia 30097

 

Re:  Letter of Intent to Acquire Wegener Corporation

 

Dear Mr. Placek

 

We are pleased to indicate the interest of Riverside Capital Appreciation Fund V (“ Riverside ”), an affiliate of The Riverside Company, and its portfolio company Sencore Inc. (“ Sencore ” or the “ Buyer ”) to acquire all of the stock of Wegener Corporation (“ Wegener ” or the “ Company ”) as outlined below.

 

1.  

Acquisition of Shares/Consideration.   Subject to satisfaction of the conditions described in this letter, at the closing of the acquisition (the “Closing”), the Buyer would acquire all of the stock of Wegener.  Our current contemplation is that this transaction would be structured as a merger (the “ Merger ”) of an acquisition subsidiary of Sencore with and into Wegener, in which the outstanding shares of the Company’s Common Stock would be converted into the right to receive, in cash, consideration equal to an aggregate of $6.0 million on a cash-free, debt-free basis, which consideration would be reduced by the amount of accrued payables to the extent that they have aged beyond 45 days and which would be expressed as a per share value for purposes of any definitive agreement.

 

 

Our valuation of $6.0 million assumes that the Company is free of all debt, capital leases, taxes payable, accrued transaction expenses and any amounts due to related parties.  Accordingly, the per share consideration would be appropriately reduced to reflect any anticipated amounts of these items as of the Closing.  Our valuation also assumes that the Company will have an appropriate amount of working capital at the Closing.  In general, we calculate working capital on a GAAP basis, consistently applied.  Assuming that the Closing were to take place on or about August 31, 2009, our expectation would be that working capital would be equal to approximately $2.3 million (this calculation would be adjusted to exclude the aged payables, which instead are deducted from the purchase price directly as described above).  As part of the due diligence process, if Buyer identifies a category of asset or liability that is appropriate to reflect in the purchase price calculation, then the consideration payable to the stockholders of the Company (the “ Stockholders ”) will be adjusted accordingly.  The definitive agreement providing for the Merger (the “ Merger Agreement ”) will also include certain protective provisions regarding working capital and other aspects of the capital structure, including (i) interim operating covenants prohibiting non-ordinary course working capital practices, the declaration of dividends and the incurrence of indebtedness and (ii) closing conditions relating to a certain minimum adjusted working capital amount (which would also take into account cash, debt, transaction expenses and other items).  For the avoidance of doubt, the definitions driving the calculations provided in the Merger Agreement will be structured such that there would not be double-counting (for example, if a liability is already included in the definition of “debt” or “aged payables” it would not also be included in the definition of “working capital”).

 

 

 


 

 

2.

Structure .  Although it is our expectation that the transaction would be structured as a merger, we are willing to discuss alternative structures with you to achieve the Closing more promptly, including a tender offer structure.  In any case, we will expect certain significant shareholders, including the Company’s executive officers and directors, to sign appropriate support agreements (providing that they will vote in favor of the Merger and/or tender their shares of Wegener Common Stock in any tender offer) contemporaneously with the execution of the Merger Agreement.

 

3.  

Due Diligence. Following the signing of this letter, Wegener’s board of directors (the “ Board ”) will authorize Wegener management to provide additional information on the Company, as well


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