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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 11, 1995
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CINCINNATI MICROWAVE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Ohio 31-0903863
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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One Microwave Plaza
Cincinnati, Ohio 45249-8236
(513) 489-5400
(ADDRESS, INCLUDING ZIP CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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JACQUES A. ROBINSON
President and Chief Executive Officer
Cincinnati Microwave, Inc.
One Microwave Plaza
Cincinnati, Ohio 45249-8236
(513) 489-5400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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Please send copies of all communications to:
NEIL GANULIN, ESQ.
Frost & Jacobs
201 East Fifth Street
Cincinnati, Ohio 45202
(513) 651-6800
TIMOTHY E. HOBERG, ESQ.
Taft, Stettinius & Hollister
425 Walnut Street
Cincinnati, Ohio 45202
(513) 381-2838
GARY P. KREIDER, ESQ.
Keating, Muething & Klekamp
One East Fourth Street
Cincinnati, Ohio 45202
(513) 579-6400
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /__________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /__________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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<TABLE>
CALCULATION OF REGISTRATION FEE
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<CAPTION>
<S> <C> <C> <C> <C>
Title of Each Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Price Aggregate Amount of
Registered Registered(1) Per Share(2) Offering Price(2) Registration Fee
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Common Shares, without
par value............ 4,600,000 $16.9375 $77,912,500 $26,867
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</TABLE>
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(1) Includes 600,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Computed solely for the purpose of calculating the registration fee, based
upon the average of the high and low prices per share of $16.9375 on the
Nasdaq National Market on August 4, 1995, pursuant to Rule 457.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 11, 1995
CINCINNATI MICROWAVE, INC.
4,000,000 COMMON SHARES
Of the 4,000,000 Common Shares offered hereby (the "Offering"), 1,000,000
Common Shares are being offered by Cincinnati Microwave, Inc. ("Cincinnati
Microwave" or the "Company") and 3,000,000 Common Shares are being offered by
the Selling Shareholder. The Company will not receive any of the proceeds from
the sale of Common Shares by the Selling Shareholder. The Company's Common
Shares are traded on the Nasdaq National Market under the symbol CNMW. On August
9, 1995, the last reported sales price of the Common Shares on the Nasdaq
National Market was $17.125 per share. See "Price Range of Common Shares."
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING
ON PAGE 4.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
Proceeds to
Price to Underwriting Proceeds to Selling
Public Discount(1) Company(2) Shareholder
<S> <C> <C> <C> <C>
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Per Share.............. $ $ $ $
Total(3)............... $ $ $ $
</TABLE>
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(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company estimated at $441,000. The
Company has agreed to pay all of the expenses of the Selling Shareholder in
connection with the Offering.
(3) The Company and the Selling Shareholder have granted to the Underwriters a
30-day option to purchase up to 600,000 additional Common Shares solely to
cover over-allotments, if any. Of these Common Shares, up to 150,000 may be
purchased from the Company and up to 450,000 may be purchased from the
Selling Shareholder. If the Underwriter exercises this option in full, the
Price to Public will total $ , Underwriting Discount will
total $ , Proceeds to Company will total $ and
the Proceeds to Selling Shareholder will total $ . See
"Underwriting."
The Common Shares are offered by the Underwriters named herein, subject to
receipt and acceptance by them and subject to their right to reject any order in
whole or in part. It is expected that delivery of the certificates representing
such shares will be made against payment therefor at the office of Montgomery
Securities on or about , 1995.
------------------------
MONTGOMERY SECURITIES RONEY & CO.
, 1995.
<PAGE> 3
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"SEC") a registration statement under the Securities Act of 1933 (the
"Securities Act") with respect to the Common Shares offered hereby. This
Prospectus does not contain all of the information set forth in the registration
statement and the exhibits and schedules thereto (together with all amendments,
the "Registration Statement"). For further information with respect to the
Company and such Common Shares, reference is hereby made to the Registration
Statement. The Registration Statement can be inspected without charge at the
office of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and copies may be obtained therefrom at prescribed rates.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the SEC. Such reports,
proxy statements and other information can be inspected and copied at the public
reference facilities of the SEC, Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, as well as the following SEC Regional Offices: 7
World Trade Center, Suite 1300, New York, NY 10048, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies can be
obtained from the SEC by mail at prescribed rates. Requests should be directed
to the SEC's Public Reference Section, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Company's Common Shares are quoted on the Nasdaq
National Market and reports and other information concerning the Company may
also be inspected and copied at the offices of The Nasdaq Stock Market, Inc.,
9513 Key West Avenue, Rockville, Maryland 20850.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the SEC (File
No. 0-13136) and are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 25, 1994.
(2) The Company's Quarterly Reports on Form 10-Q for the periods ended
April 2, 1995 and July 2, 1995.
All reports and other documents subsequently filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this Offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement incorporated herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
is or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the foregoing documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into such documents). Requests for such documents should be submitted to the
Secretary of the Company, at the Company's executive offices at One Microwave
Plaza, Cincinnati, Ohio 45249-8236 or by telephone at (513) 489-5400.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON SHARES
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON SHARES ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE EXCHANGE ACT. SEE "UNDERWRITING."
2
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Company's Consolidated Financial
Statements and Notes thereto, appearing elsewhere in or incorporated by
reference into this Prospectus. Except as otherwise noted, all information in
this Prospectus assumes no exercise of the Underwriters' over-allotment option.
THE COMPANY
Cincinnati Microwave, Inc. designs, manufactures and markets ultrahigh
frequency and microwave wireless communications products. The Company's
principal product line since its inception has been radar warning detectors. The
Company has become a leader in the radar warning detector market by combining
its experience in ultrahigh frequency and microwave wireless technology,
including digital signal processing, with its high volume manufacturing
capabilities. In 1993, the Company introduced its first digital spread spectrum
cordless telephone and its first wireless data modem for use on Cellular Digital
Packet Data ("CDPD") networks. Both of the new product lines leverage the
Company's wireless and digital signal processing expertise and high volume, low
cost manufacturing capabilities.
The Company markets its products both under the ESCORT(R) brand name through
direct advertising and as an OEM supplier. The Company's strategy for entering
new markets is to align with companies that have established sales leadership
and market positions. This strategy is designed to provide broader access to the
end user. Several major suppliers of consumer telephones market the Company's
digital spread spectrum cordless telephones on a private label basis. The
Company has established marketing arrangements with five major cellular service
providers to sell its wireless data modems.
THE OFFERING
<TABLE>
<S> <C>
Common Shares offered by the Company........................ 1,000,000 shares
Common Shares offered by the Selling Shareholder............ 3,000,000 shares
Common Shares outstanding after the Offering................ 15,155,415 shares(1)
Use of Proceeds............................................. To reduce indebtedness and for working
capital and general corporate purposes
Nasdaq National Market Symbol............................... CNMW
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
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DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER JUNE 26, JULY 2,
31, 1990 29, 1991 27, 1992 26, 1993 25, 1994 1994 1995
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<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................... $63,720 $48,292 $51,339 $58,461 $64,708 $ 26,042 $32,665
Gross profit...................... 21,189 15,129 13,520 18,683 14,349 8,534 9,239
Operating loss.................... (3,576 ) (5,330 ) (7,426 ) (3,084 ) (10,024 ) (2,665) (2,160)
Net loss.......................... (5,551 ) (8,821 ) (6,440 ) (1,284 ) (10,260 ) (2,324) (1,365)
Net loss per share................ $ (0.54 ) $ (0.85 ) $ (0.59 ) $ (0.12 ) $ (0.94 ) $ (0.21) $ (0.10)
Weighted average number of shares
outstanding..................... 10,291 10,355 10,919 10,691 10,880 10,852 13,936
</TABLE>
<TABLE>
<CAPTION>
JULY 2, 1995
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ACTUAL AS ADJUSTED(2)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................................... $ 28 $ 8,814
Total assets......................................................................... 38,001 46,787
Short-term debt...................................................................... 9,663 2,750
Long-term lease obligations.......................................................... 962 962
Long-term debt....................................................................... -- --
Shareholders' equity................................................................. 15,559 31,258
</TABLE>
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(1) Based upon Common Shares outstanding as of August 9, 1995. Does not include
3,026,871 Common Shares which underlie outstanding warrants and stock
options.
(2) Adjusted to give effect to the sale of 1,000,000 Common Shares offered by
the Company hereby, at an assumed public offering price of $17.125 per
share, and the application of the estimated net proceeds therefrom. See "Use
of Proceeds" and "Capitalization."
------------------------
The Company's executive offices are located at One Microwave Plaza, Cincinnati,
Ohio 45249-8236. Its telephone number is (513) 489-5400.
3
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RISK FACTORS
Prior to purchasing the Common Shares offered hereby, prospective investors
should carefully consider, together with the other information contained herein,
each of the following risk factors which could, individually or in the
aggregate, have a material adverse effect on the Company's business, financial
condition, including working capital, and results of operations.
HISTORICAL LOSSES; VARIABILITY OF OPERATING RESULTS; SEASONALITY
The Company has not been profitable since 1988. In 1994, the Company
experienced a severe supply shortage of inductors, a critical component of its
digital spread spectrum cordless telephone, and, as a result, the Company's
factory production schedule and cost to fill customer orders were materially and
adversely affected. In addition, several competing radar warning detector
manufacturers announced significant price reductions in the fourth quarter of
1994. In order to maintain its radar warning detector market position, the
Company reacted to this development by introducing a major promotional program
for its retail customers for the month of December. As a result of these events,
the Company's operating results were significantly worse than anticipated.
The Company's future operating results may vary significantly from period
to period as a result of a number of factors, including the volume and timing of
orders received during the period, the timing of new product introductions by
the Company and its competitors, decline in demand for the Company's products,
the impact of price competition on the Company's average selling prices, the
availability and pricing of components for the Company's products, changes in
product or distribution channel mix and product returns. Many of these factors
are beyond the Company's control. The Company's failure to introduce new,
competitive products consistently and in a timely manner could adversely affect
operating results for one or more product cycles. In addition, from time to
time, a significant portion of the Company's sales are derived from a limited
number of customers, the loss of one or more of which could adversely impact
operating results.
The Company must plan production, order components and undertake its
development, sales and marketing activities and other commitments months in
advance. Accordingly, any shortfall in net sales in a given quarter may have a
disproportionately adverse impact on the Company's operating results due to an
inability to adjust expenses or inventory during the quarter to match the level
of net sales for the quarter. Excess inventory could also result in cash flow
difficulties as well as expenses associated with inventory writeoffs.
The Company's business is highly seasonal with a large portion of sales
occurring during the third and, particularly, the fourth quarters. The Company's
inability to supply its products to its customers during the second half of the
year would adversely affect the Company's business, financial condition and
results of operations. In addition, the results of the Company's operations are
subject to changes in consumer demand associated with general economic
conditions and to changes in consumer preferences.
As a result of the foregoing, there can be no assurance that the Company
will be able to achieve profitability or that difficulties will not occur in the
future and adversely affect the Company's business, financial condition,
including working capital, and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
COMPONENT SHORTAGES; RELIANCE ON SOLE OR LIMITED SOURCE SUPPLIERS
The Company's products include a number of high-technology components that
are available from only a few suppliers and, in several cases, a single
supplier. The Company frequently requires large volumes of such components. If
the Company's suppliers are unable to fulfill the Company's needs for such
components, the Company may be unable to fill customer orders and its business,
financial condition, including working capital, and results of operations may be
materially and adversely affected. In 1993, and again in 1994, certain of the
Company's suppliers were unable to deliver sufficient quantities of critical
components to allow the Company to manufacture its products at previously
anticipated volumes. These shortages adversely affected the Company's ability to
4
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manufacture and deliver products and, as a result, had a significant adverse
effect on the Company's business, financial condition, including working
capital, and results of operations. Since part of the Company's strategy is to
shorten product development and introduction cycles, occasions may arise in the
future where the Company's ability to produce products outpaces its suppliers'
ability to supply components. There can be no assurance that the Company can
continue to obtain adequate supplies or obtain such supplies at their historical
cost levels. The Company has no guaranteed supply arrangements with any of its
sole or limited source suppliers, does not maintain an extensive inventory of
components, and customarily purchases sole or limited source components pursuant
to purchase orders placed from time to time in the ordinary course of business.
Moreover, the Company's suppliers may, from time to time, experience production
shortfalls or interruptions which impair the supply of components to the
Company. There can be no assurance that such shortages will not occur in the
future and adversely affect the Company's business, financial condition,
including working capital, and results of operations.
DEPENDENCE ON RADAR WARNING DETECTORS; RELIANCE ON NEW PRODUCTS
Historically, the Company has derived substantially all of its net sales
and all of its operating profits from radar warning detectors. Radar warning
detectors accounted for 79%, 86%, 72% and 80% of the Company's total net sales
for 1992, 1993, 1994 and the first six months of 1995, respectively. The radar
warning detector market has matured and is declining, and competition in this
market is intense. The Company's strategy is to reduce its dependence on radar
warning detectors by developing new products, entering new markets and utilizing
its capabilities in the design and mass production of ultrahigh frequency and
microwave wireless communications products; however, there can be no assurance
that the Company's strategy will be successful.
The Company has developed and introduced two new products: digital spread
spectrum cordless telephones with enhanced range, clarity and security compared
to traditional cordless telephones, and a line of wireless data modems to
transmit data over CDPD networks. The Company believes that its digital spread
spectrum cordless telephones are vital to its future success. To date, the
Company's digital spread spectrum cordless telephone product line has not been
profitable and the Company believes that future profits, if any, will depend on
the success of next generation models which have been introduced recently. The
commercial success of the Company's digital spread spectrum cordless telephone
products is dependent upon strategic relationships with key OEM customers.
Certain of these customers currently possess, or may acquire, the capability to
develop, design and manufacture their own digital spread spectrum cordless
telephone products. Moreover, the success of the wireless data modems is
dependent upon the development, deployment and commercial success of CDPD
networks. A consortium of cellular service providers is presently building CDPD
networks to provide wireless data transfer service, but there can be no
assurance that the networks will be deployed nationally and, if so deployed,
that they will be successful. To date, the Company has sold only a limited
number of its wireless data modem units. There can be no assurance that the
Company will be successful in identifying, developing, manufacturing and
marketing new products, that the Company will not experience difficulties that
could delay or prevent the successful development, introduction and marketing of
these products, or that its new products and product enhancements will
adequately meet the requirements of the marketplace and achieve market
acceptance.
CUSTOMER CONCENTRATION
As the Company's sales mix continues to shift from direct retail business
to OEM and reseller business, the Company expects that sales to certain of its
OEM and reseller customers will account for a material percentage of its net
sales in the foreseeable future and believes that its financial results will
depend in significant part upon the success of these customers as well as the
Company's business with these customers. Although the composition of the group
comprising the Company's important customers may vary from period to period, the
loss of a significant customer or any reduction in orders by any significant
customer may have a material adverse affect on the Company's business, financial
condition, including working capital, and results of operations. The Company's
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<PAGE> 7
ability to increase its sales in the future will depend in part upon its ability
to obtain orders from new customers as well as the financial condition and
success of its customers and the general economy, of which there can be no
assurance.
SHORT PRODUCT LIFE CYCLES
The market for the Company's products is characterized by frequent new
product introductions and rapid product obsolescence. These factors typically
result in short product life cycles. The Company must continually monitor
industry trends and choose new technologies and features to incorporate into its
products. Each new product cycle presents opportunities for current or
prospective competitors of the Company to gain market share. Life cycles of
individual products are typically characterized by steep declines in sales,
pricing and margins toward the end of a product's life, the precise timing of
which may be difficult to predict. As new products are planned and introduced,
the Company attempts to monitor closely the inventory of older products and to
phase out their manufacture in a controlled manner. Nevertheless, the Company
could experience unexpected reductions in sales volume and prices of older
generation products as customers anticipate new products. These reductions could
give rise to charges for obsolete or excess inventory. To the extent that the
Company is unsuccessful in managing product transitions, its business, financial
condition, including working capital, and results of operations could be
materially and adversely affected.
GOVERNMENT REGULATION
Existing, pending or future legislation prohibiting the use, possession or
sale of radar warning detectors or future legislation by states increasing speed
limits could have a material adverse effect on the Company's business.
Currently, there are two jurisdictions in the United States which have specific
prohibitions against the use, possession or sale of radar warning detectors in
automobiles. In addition, two other jurisdictions prohibit the use of radar
warning detectors in large commercial vehicles only and, in January 1994, the
Federal Highway Administration enacted a regulation banning radar warning
detectors from commercial vehicles weighing over 18,000 pounds, from buses
carrying 16 or more passengers and from trucks transporting hazardous materials
on highways funded by the Federal Government. This is, in effect, a ban on use
of such radar warning detectors in all large trucks and buses. Additionally, a
bill currently pending in Congress would eliminate the existing federal
requirement that states comply with national maximum speed limit provisions
before receiving certain federal funds. This bill has passed the Senate and, if
enacted, is likely to result in higher speed limits in some states.
COMPETITION
All markets in which the Company participates are highly competitive, and
many current or prospective competitors, including several of the Company's
significant OEM customers, are substantially larger and possess significantly
greater financial, marketing and technical resources than the Company. The
market for high performance cordless telephones, such as those manufactured by
the Company, is relatively new. Competition in this segment currently is based
primarily on product performance, features and price. The market for wireless
data modems is still developing, and there are current or prospective
competitors who are substantially larger than the Company and possess
significantly greater financial, marketing and technical resources. There can be
no assurance that the Company will be able to compete successfully in either of
these markets.
The market for radar warning detectors is highly competitive, has matured
and is declining. As the market has moved toward lower priced products,
competition has been based primarily on price and, to a lesser degree, product
quality, availability and performance. Lower than expected demand for the
Company's radar warning detectors, coupled with intense price competition in the
radar warning detector market, adversely affected the Company's fourth quarter
1994 results. A recurrence of these conditions would have a material adverse
effect on the business, financial condition, including working capital, and
results of operations of the Company.
6
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DEPENDENCE ON KEY PERSONNEL
The success of the Company is dependent in large part on key management and
technical personnel, especially Jacques A. Robinson, its President and Chief
Executive Officer, and John W. Noland, its Executive Vice President and Chief
Operating Officer. The loss of the services of any of these key personnel could
have a material adverse effect on the Company. Many of the Company's key
personnel would be difficult to replace, and most are not subject to employment
or noncompetition agreements. There can be no assurance that the Company will be
successful in retaining such personnel. In addition, the Company's success
depends significantly upon its ability to continue to attract and retain
qualified management, manufacturing, technical, sales and support personnel for
its operations. There may be only a limited number of persons with the requisite
skills to serve in these positions, and it may become more difficult for the
Company to hire such personnel. Competition for such personnel is intense, and
there can be no assurance that the Company will be successful in attracting or
retaining such personnel. The failure to attract or retain such persons would
materially adversely affect the Company's business, financial condition,
including working capital, and results of operations.
INTELLECTUAL PROPERTY
Although the Company has protected its technologies and products by patent,
copyright, trademark and trade secret laws to the extent that it believes
necessary, the Company's intellectual property rights may be subject to
infringement. There can be no assurance that the Company's measures to protect
its proprietary rights will deter or prevent unauthorized use of the Company's
technology. Furthermore, the laws of certain countries may not protect the
Company's proprietary rights to the same extent as do the laws of the United
States. In addition, the Company may, from time to time, become subject to legal
claims asserting that the Company has violated intellectual property rights of
third parties. In the event a third party were to sustain a valid claim against
the Company and in the event any required license were not available on
commercially reasonable terms, the Company's business, financial condition,
including working capital, and results of operations could be materially and
adversely affected. Litigation, which could result in substantial costs to and
diversion of resources of the Company, may also be necessary to enforce
intellectual property rights of the Company or to defend the Company against
claimed infringement of the rights of others.
VOLATILITY OF STOCK PRICE
The trading price of the Company's Common Shares is subject to wide
fluctuations in response to the Company's operating results, announcements of
technological innovations or new products by the Company or its competitors,
general conditions in the market, changes in earnings estimates by analysts,
failure to meet the revenues or earnings estimates of analysts or other events
or factors. The public stock markets have experienced price and trading volume
volatility in recent months. This volatility has significantly affected the
market prices of securities of many high technology companies for reasons
frequently unrelated to the operating performance of the specific companies. The
market price for the Company's Common Shares has been highly volatile. Future
announcements concerning the Company or its competition, including the results
of technological innovations, new commercial products, government regulations,
developments concerning proprietary rights, component shortages, litigation or
public concern with respect to the Company or its products and other factors
including those described above, may have a significant impact on the market
price of the Common Shares. See "Price Range of Common Shares."
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USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
1,000,000 Common Shares offered by the Company are estimated to be $15.7 million
based upon an offering price of $17.125 per share and after deducting estimated
offering expenses. The Company will not receive any proceeds from the sale of
Common Shares by the Selling Shareholder.
The Company intends to use a portion of the net proceeds to pay off the
then outstanding indebtedness under its revolving bank credit facility (which
was $10.1 million at August 6, 1995). This indebtedness bears interest at a rate
of the prime rate plus 1 1/4% (10% on August 6, 1995), and was incurred for
working capital purposes. $4.0 million of the revolving credit facility matures
on September 30, 1995 and the remaining $7.0 million of such credit facility
matures on June 30, 1996. The Company intends to use the remainder of the net
proceeds for working capital and general corporate purposes. Pending their use,
the proceeds will be placed in short-term, investment grade securities.
PRICE RANGE OF COMMON SHARES
The Common Shares are traded on the Nasdaq National Market under the symbol
CNMW. The following table sets forth for the periods indicated the high and low
sales prices for the Common Shares as reported on the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
--- ----
<S> <C> <C>
1993
First Quarter............................................ 3 3/8 2 1/16
Second Quarter........................................... 3 1/2 1 7/8
Third Quarter............................................ 6 1/8 2 1/4
Fourth Quarter........................................... 11 1/8 4 1/8
1994
First Quarter............................................ 12 7 1/4
Second Quarter........................................... 12 6 1/2
Third Quarter............................................ 10 1/8 5 7/8
Fourth Quarter........................................... 7 1/4 2 1/8
1995
First Quarter............................................ 11 1/4 3 1/2
Second Quarter........................................... 12 1/8 8 3/8
Third Quarter (through August 9, 1995)................... 17 5/8 13 5/8
</TABLE>
On August 9, 1995, the last reported sales price for the Common Shares on
the Nasdaq National Market was $17.125 per share. As of July 2, 1995, there were
approximately 1,100 holders of record of the Common Shares.
DIVIDEND POLICY
Historically the Company has not paid any cash or other dividends. The
Company does not expect to pay dividends in the foreseeable future, but
currently intends to retain any earnings to finance operations and future
growth. Furthermore, the credit facility agreement between the Company and its
bank prohibits the payment of dividends.
8
<PAGE> 10
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
at July 2, 1995, and as adjusted to reflect the receipt by the Company of $15.7
million of net proceeds from the sale of 1,000,000 Common Shares offered by the
Company hereby and the application of the net proceeds therefrom. See "Use of
Proceeds." This table should be read in conjunction with the Company's
Consolidated Financial Statements and related Notes incorporated herein by
reference.
<TABLE>
<CAPTION>
JULY 2, 1995
------------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
SHORT-TERM DEBT:
Bank indebtedness............................................... $ 9,663 $ 2,750
======== ============
LONG-TERM OBLIGATIONS:
Long-term capital lease obligations............................. $ 962 $ 962
Long-term debt.................................................. -- --
------- -----------
Total long-term obligations.................................. $ 962 $ 962
------- -----------
SHAREHOLDERS' EQUITY:
Common shares without par value ($.20 stated value); 20,000,000
shares authorized; 17,053,120 shares issued; 18,053,120
shares issued as adjusted(1)................................. $ 3,411 $ 3,611
Paid-in capital................................................. 6,278 21,777
Retained earnings............................................... 25,556 25,556
Treasury stock at cost, 2,933,175 shares........................ (19,686) (19,686)
------- -----------
Total shareholders' equity................................... 15,559 31,258
------- -----------
Total capitalization......................................... $16,521 $32,220
======== ============
</TABLE>
- ---------------
(1) Includes treasury stock. Of the treasury stock, 1,587,854 Common Shares
underlie outstanding stock options and 1,345,321 Common Shares may be
acquired upon the exercise of outstanding warrants to purchase Common Shares
at $4.00 per share at any time prior to 5:00 p.m., Eastern Standard Time, on
December 31, 1998 (the "Warrants").
9
<PAGE> 11
DILUTION
The net tangible book value of the Company as of July 2, 1995 was $13.1
million or $0.93 per Common Share. Net tangible book value per share is equal to
the Company's total tangible assets less its total liabilities, divided by the
number of Common Shares outstanding. After giving effect to the sale by the
Company of 1,000,000 Common Shares offered hereby at an assumed offering price
of $17.125 and the receipt by the Company of the estimated net proceeds
therefrom, after deducting underwriting discounts and estimated offering
expenses, the net tangible book value of the Company as of July 2, 1995 would
have been $28.8 million or $1.90 per share. This represents an immediate
increase in net tangible book value of $0.97 per share to existing shareholders
and an immediate dilution of $15.23 per share to new investors. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Public offering price per share.......................................... $17.125
Net tangible book value per share before the Offering............... $ 0.93
Increase in net tangible book value per share attributable to new
investors.......................................................... $ 0.97
Net tangible book value per share after the Offering..................... $ 1.90
Dilution of net tangible book value per share to new investors........... $15.23
</TABLE>
The foregoing table does not give effect to the exercise of any of the
Company's 1,345,321 outstanding Warrants. Assuming that all of the outstanding
Warrants were exercised as of July 2, 1995, there would be a net tangible book
value of $34.2 million or $2.07 per share.
10
<PAGE> 12
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data of the Company for the fiscal years 1990 through 1994 and for the six month
periods ended June 26, 1994 and July 2, 1995. The selected consolidated
financial data for the five fiscal years in the period ended December 25, 1994
are derived from the consolidated financial statements of the Company which have
been audited by Price Waterhouse LLP, independent accountants. The selected
consolidated financial data for the six month periods ended June 26, 1994 and
July 2, 1995 are derived from the Company's unaudited consolidated financial
statements. In the opinion of management, the interim financial data reflect all
adjustments, consisting of normal recurring adjustments, necessary for the fair
presentation of such data. The results for the first six months of fiscal 1995
are not necessarily indicative of the results to be expected for the full year.
The information below should be read in conjunction with the Consolidated
Financial Statements and Notes thereto appearing in the Company's Annual Report
on Form 10-K incorporated herein by reference and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this Prospectus. The Company did not pay any cash or other dividends in the
periods presented below.
<TABLE>
<CAPTION>
YEAR ENDED (1) SIX MONTHS ENDED
-------------------------------------------------------- -------------------
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER JUNE 26, JULY 2,
31, 1990 29, 1991 27, 1992 26, 1993 25, 1994 1994 1995
-------- -------- -------- -------- -------- -------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................. $63,720 $48,292 $51,339 $58,461 $64,708 $26,042 $32,665
Cost of sales......................... 42,531 33,163 37,819 39,778 50,359 17,508 23,426
-------- -------- -------- -------- -------- -------- -------
Gross profit...................... 21,189 15,129 13,520 18,683 14,349 8,534 9,239
Operating expenses:
Research & development.............. 4,090 4,843 7,182 8,117 8,449 4,227 3,602
Selling............................. 14,734 10,838 10,707 10,391 12,671 5,705 5,515
Administrative...................... 5,941 4,778 3,057 3,259 3,253 1,267 2,282
-------- -------- -------- -------- -------- -------- -------
24,765 20,459 20,946 21,767 24,373 11,199 11,399
-------- -------- -------- -------- -------- -------- -------
Operating loss...................... (3,576 ) (5,330 ) (7,426 ) (3,084 ) (10,024 ) (2,665 ) (2,160)
Gain on sale of marketable equity
securities.......................... -- -- -- 1,435 -- -- --
Interest expense...................... (350 ) (433 ) (204 ) (521 ) (738 ) (225 ) (559)
Other income (expense), net........... 118 (869 ) (1,128 ) 886 502 566 (84)
-------- -------- -------- -------- -------- -------- -------
Loss from continuing operations
before income taxes............... (3,808 ) (6,632 ) (8,758 ) (1,284 ) (10,260 ) (2,324 ) (2,803)
Income tax benefit.................... (1,198 ) (725 ) -- -- -- -- (1,438)
-------- -------- -------- -------- -------- -------- -------
Loss from continuing operations..... (2,610 ) (5,907 ) (8,758 ) (1,284 ) (10,260 ) (2,324 ) (1,365)
Discontinued operations............... (2,941 ) (2,914 ) 1,449 -- -- -- --
-------- -------- -------- -------- -------- -------- -------
Loss before extraordinary item...... (5,551 ) (8,821 ) (7,309 ) (1,284 ) (10,260 ) (2,324 ) (1,365)
Realization of net operating loss
carryforward........................ -- -- 869 -- -- -- --
-------- -------- -------- -------- -------- -------- -------
Net loss.............................. $(5,551 ) $(8,821 ) $(6,440 ) $(1,284 ) $(10,260) $(2,324 ) $(1,365)
========== ========== ========== ========== ========== ======== ========
Net loss per share:
Continuing operations............... $ (0.25 ) $ (0.57 ) $ (0.80 ) $ (0.12 ) $ (0.94 ) $ (0.21 ) $ (0.10)
Discontinued operations............. (0.29 ) (0.28 ) 0.13 -- -- -- --
Realization of net operating loss
carryforward...................... -- -- 0.08 -- -- -- --
-------- -------- -------- -------- -------- -------- -------
Net loss.......................... $ (0.54 ) $ (0.85 ) $ (0.59 ) (0.12 ) (0.94 ) $ (0.21 ) $ (0.10)
========== ========== ========== ========== ========== ======== ========
Weighted average number of shares
outstanding......................... 10,291 10,355 10,919 10,691 10,880 10,852 13,936
BALANCE SHEET DATA:
Working capital....................... $ 6,398 $ 1,957 $(2,483 ) $ (254 ) $(1,701 ) $ 2,879 $ 28
Total assets.......................... 45,484 38,247 42,512 32,418 32,839 36,191 38,001
Short-term debt....................... 5,400 4,000 6,000 6,001 600 2,196 9,663
Long-term lease obligations........... -- -- -- 418 1,422 1,302 962
Long-term debt........................ -- -- -- -- 7,419 5,065 --
Shareholders' equity.................. 31,832 23,368 17,641 16,830 6,902 14,642 15,559
</TABLE>
- ---------------
(1) In 1991, the Company changed its reporting period to a fiscal year ending
the last Sunday in the calendar year. In addition, pretax restructuring and
impairment charges of approximately $6.9 million were recorded in March
1991.
11
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cincinnati Microwave was founded in 1976 to pioneer the development and
design of consumer radar warning detectors using superheterodyne technology,
which has now become the industry standard for these products. The Company
experienced significant growth and profitability in the 1980s due to the
performance of its products, which attracted many competitors. During this
period, the Company's competitors focused on lower prices while the Company
focused on technological improvements. Consequently, the Company lost
substantial market share to competitors in the late 1980s. In 1991 the Company
adopted a strategy of capitalizing on its expertise in the design and
manufacture of ultrahigh frequency and microwave electronic devices by applying
it to wireless communication products. In 1993 the Company introduced its first
digital spread spectrum cordless telephone and wireless data modem products.
RESULTS OF OPERATIONS
The following table sets forth certain operational data of the Company
expressed as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
---------------------------------- ---------------------
DECEMBER DECEMBER DECEMBER JUNE 26, JULY 2,
27, 1992 26, 1993 25, 1994 1994 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales........................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................... 73.7 68.0 77.8 67.2 71.7
-------- -------- -------- -------- --------
Gross profit................ 26.3 32.0 22.2 32.8 28.3
Research & development........... 14.0 13.9 13.1 16.2 11.0
Selling.......................... 20.8 17.8 19.6 21.9 16.9
Administrative................... 6.0 5.6 5.0 4.9 7.0
-------- -------- -------- -------- --------
Total operating expenses.... 40.8 37.3 37.7 43.0 34.9
-------- -------- -------- -------- --------
Operating loss................... (14.5) (5.3) (15.5) (10.2) (6.6)
========== ========== ========== ======== ========
</TABLE>
The following table shows net sales by product line for the Company, for
the periods indicated (in thousands and as a percentage of total net sales):
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
---------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 27, DECEMBER 26, DECEMBER 25, JUNE 26, JULY 2,
1992 1993 1994 1994 1995
---------------- ---------------- ---------------- ---------------- ----------------
Radar warning detectors... $ 40,509 79% $ 50,125 86% $ 46,602 72% $ 22,012 85% $ 26,089 80%
Cordless telephones....... -- -- 2,705 4 14,060 22 2,556 10 5,877 18
Other(1).................. 10,830 21 5,631 10 4,046 6 1,474 5 699 2
-------- ---- -------- ---- -------- ---- -------- ---- -------- ----
Total..................... $ 51,339 100% $ 58,461 100% $ 64,708 100% $ 26,042 100% $ 32,665 100%
======== ==== ======== ==== ======== ==== ======== ==== ======== ====
</TABLE>
- ---------------
(1) Other sales for 1992, 1993, 1994 and the first six months of 1995 represent
revenue primarily from contract manufacturing activities of the Company.
This activity ceased during the first quarter of 1995. For 1994 and the
interim period of 1995, other sales include sales of wireless data modems of
$368,000 and $248,000, respectively. Other sales for 1992 and 1993 do not
include revenues from sales of home incarceration units to Guardian
Technologies, Inc., which are treated as discontinued operations.
SIX MONTHS ENDED JULY 2, 1995 COMPARED TO SIX MONTHS ENDED JUNE 26, 1994
Cincinnati Microwave's net sales for the six months (27 week period) ended
July 2, 1995 increased 25% to $32.7 million as compared to $26.0 million for the
six months (26 week period) ended June 26, 1994. The increase reflects the
growing market acceptance of the Company's digital spread spectrum cordless
telephone, which resulted in a net sales increase of 130% over the 1994 period,
due to greater telephone unit volume sales. In addition, continued market
acceptance of the
12
<PAGE> 14
new radar detector products introduced in the third quarter of 1994 resulted in
a sales increase of 19%, due to greater radar detector unit volume sales. The
Company's wireless data modem sales are not significant.
The Company's gross profit margin decreased for the six months ended July
2, 1995 as compared to the comparable period of 1994. The primary reasons for
the reduction were start-up costs associated with the Company's new telephone
production lines and the continued shift in the sales mix from direct retail
business to OEM and reseller business. OEMs and resellers accounted for 50% of
total sales in the 1995 period as compared to 40% for the comparable period in
1994.
Operating expenses as a percentage of sales for the 1995 period were lower
than for the comparable period of 1994. The operating expense decline reflects
lower selling and research and development expenses, offset in part by higher
administrative expenses caused by a 1995 change in the method of classifying
such expenses among administrative, selling and research and development
expenses.
Primarily as a result of the sales increase, the operating loss for the
first six months of 1995 was reduced to $2.2 million from $2.7 million for the
comparable period of 1994. Interest expense for the 1995 period was $559,000
versus $225,000 in 1994. The net loss for the first six months of 1995 declined
to $1.4 million from $2.3 million in 1994. In March 1995, as a result of the
closure of the Company's 1991 federal tax return, the Company released certain
tax reserves to income. This adjustment reduced net loss for the first six
months of 1995 by $1.4 million. 1994 six month results included a gain of
$657,000 from a land sale.
YEAR ENDED DECEMBER 25, 1994 COMPARED TO YEAR ENDED DECEMBER 26, 1993
Cincinnati Microwave's net sales of $64.7 million for 1994 were 10.7%
higher than 1993 net sales. This increase was due entirely to increased sales of
the digital spread spectrum cordless telephone product line, offsetting a 7%
sales decline in the radar warning detector product line. The digital spread
spectrum cordless telephone was introduced during the second quarter of 1993 and
had modest sales in 1993. The decline in the radar warning detector net sales
was due to lower unit volume for these products and lower pricing. The Company's
wireless data modem sales for 1994 were insignificant. Testing of the CDPD
networks continues with end-users testing the system for its compatibility with
their business applications. The Company's wireless data modem has been tested
for various industrial and commercial CDPD applications.
The Company's gross profit margin decreased to 22.2% in 1994 from 32.0% in
1993. This decline was caused by two significant factors. During 1994, the
Company experienced significant component delivery problems relating to its
digital spread spectrum cordless telephone product line. This impacted the
factory production schedule and increased the cost to fill customer orders. For
much of the fourth quarter, the Company operated its digital spread spectrum
cordless telephone production line in a stop and start mode, as and when parts
became available, in order to expedite deliveries to its customers. Secondly,
several competing radar warning detector manufacturers made substantial price
reductions during 1994. In order to maintain its market position, the Company
reacted to these developments by introducing a major sales promotional program
for its retail customers for the month of December.
1994 research and development expenses increased $332,000 from 1993. The
Company continued to focus its efforts on new product development and product
improvements. Selling expenses increased $2.3 million from 1993 primarily as a
result of increased advertising for its digital spread spectrum cordless
telephone. Administrative expenses did not fluctuate significantly from the
prior year.
YEAR ENDED DECEMBER 26, 1993 COMPARED TO YEAR ENDED DECEMBER 27, 1992
Cincinnati Microwave's net sales of $58.5 million for 1993 were 13.9%
higher than 1992 net sales due primarily to a 6% increase in units shipped and a
14% increase in the average selling price of units. Products introduced in 1993
included the super wideband radar laser warning detector, a
13
<PAGE> 15
revised laser warning detector, the digital spread spectrum cordless telephone
and a lower cost home incarceration unit. The increase in selling prices
resulted primarily from higher sales prices of new products which replaced lower
priced products with fewer features.
The Company's gross profit margin increased from 26.3% in 1992 to 32.0% in
1993. This increase was due primarily to the installation and utilization of an
automated production process in the second half of 1993. The efficient operation
of this equipment had two positive effects. First, sufficient quantities of
product were manufactured to permit the Company to fill customer orders at a
lower cost. Second, the ability to produce these products in an efficient manner
permitted the Company's research and development group to focus its attention on
product design modifications, which enabled the Company to substantially reduce
its dependence on a single microprocessor supplier who was unable to provide
adequate supply of product in early 1993.
Research and development expenses increased $935,000 from 1992, as the
Company continued to focus its efforts on new product development and product
improvements. Selling and administrative expenses did not fluctuate
significantly from the prior year.
In 1993, the Company sold its investment in the common stock of BI
Incorporated for a gain of $1.4 million. The net proceeds of $7.3 million were
utilized by the Company to pay down the Company's credit facility and vendor
accounts.
Interest expense increased from the prior year by $317,000 due to the
Company's increased borrowings on its credit facility.
Other income of $886,000 fluctuated from other expense recorded in 1992 of
$1.1 million primarily as a result of the gain on the sale of land in the fourth
quarter of 1993 of $741,000 and loss from the diminution of the Company's
long-term investment in Cellular Data, Inc. (CDI) of $1.4 million in 1992.
As a result of the merger of Guardian Technologies, Inc., a wholly owned
subsidiary of the Company, and BI Incorporated, the Company recorded net income
from discontinued operations of $1.4 million in 1992 or $0.13 per share. At
December 31, 1993 and 1992, no significant obligations or assets remain related
to discontinued operations. In 1992, the Company also recorded an extraordinary
item for the realization of a book net operating loss carryforward of $869,000.
14
<PAGE> 16
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain unaudited quarterly financial
information for the past eight quarters (in thousands except for per share data
and as a percentage of net sales):
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------------------------
SEPTEMBER DECEMBER MARCH JUNE 26, SEPTEMBER DECEMBER APRIL 2, JULY 2,
26, 1993 26, 1993 27, 1994 1994 25, 1994 25, 1994 1995 1995
--------- --------- -------- --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $17,545 $22,942 $12,350 $13,692 $15,299 $23,367 $13,648 $ 19,017
Gross profit............. 6,620 8,609 4,025 4,509 2,987 2,828 4,091 5,148
Net income (loss)........ 2,612 2,790 (567 ) (1,757) (3,995 ) (3,941) (582 ) (783)
Net income (loss) per
share.................. 0.24 0.24 (0.05 ) (0.16) (0.37 ) (0.36) (0.04 ) (0.06)
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF NET SALES
------------------------------------------------------------------------------------------------
QUARTER ENDED
------------------------------------------------------------------------------------------------
SEPTEMBER DECEMBER MARCH JUNE 26, SEPTEMBER DECEMBER APRIL 2, JULY 2,
26, 1993 26, 1993 27, 1994 1994 25, 1994 25, 1994 1995 1995
--------- --------- -------- --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................ 100.0% 100.0% 100.0 % 100.0% 100.0 % 100.0% 100.0 % 100.0%
Gross profit............. 37.7 37.5 32.6 32.9 19.5 12.1 30.0 27.1
Net income (loss)........ 14.9 12.2 (4.6 ) (12.8) (26.1 ) (16.9) (4.3 ) (4.1)
</TABLE>
Quarterly earnings per share calculations are based on the weighted average
number of shares outstanding for the quarter then ended. Annual earnings per
share calculations are based on weighted average number of shares outstanding
for the twelve month period then ended. Due to fluctuations in the weighted
average number of shares outstanding, the sum of the earnings per share
calculations for each quarter will not necessarily equal the calculated earnings
per share for the twelve month period.
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its operations through a combination of equity capital
and bank debt. On January 12, 1995, the Company completed an equity rights
offering, receiving net proceeds of $9.3 million. The funds were utilized to
reduce debt and trade payables to vendors and for working capital requirements.
During the first six months of 1995, the Company utilized its line of credit to
finance increased finished goods inventory to meet, in part, the ramp-up in
production to prepare for the fall selling season. As of August 1, 1995 the
Company had borrowed $12.6 million against its $14.0 million credit facility.
The credit facility consists of (i) a $7.0 million revolving credit due June 30,
1996, (ii) a $4.0 million supplemental revolving credit due September 30, 1995,
(iii) a $3.0 million term loan due June 30, 1996 and (iv) a standby letter of
credit facility not to exceed $1.0 million which expires June 30, 1996; however,
the sum of the outstanding principal balance of the revolving credit and the
supplemental revolving credit plus the aggregate stated value of the Company's
outstanding letters of credit shall not exceed $11.0 million at any time. The
credit facility is secured by a first lien on the Company's inventory,
receivables, and equipment and a mortgage on the real estate of the Company. At
period end, shareholders' equity was $15.6 million and the ratio of
debt-to-equity was 1.71 times versus $14.6 million and 1.90 times a year ago.
The Company believes that its working capital and credit facilities and cash
generated from operations, along with the net proceeds from this Offering, will
be sufficient to fund its operations for the forseeable future. The Company
expects to spend approximately $4.1 million for capital equipment during the
last six months of 1995, principally relating to acquiring additional
manufacturing equipment, a portion of which may be financed by equipment lease
financing.
15
<PAGE> 17
BUSINESS
The Company designs, manufactures and markets ultrahigh frequency and
microwave wireless communications products. The Company's principal product line
since its inception has been radar warning detectors. The Company has become a
leader in the radar warning detector market by combining its experience in
ultrahigh frequency and microwave wireless technology, including digital signal
processing, with its high volume manufacturing capabilities. In 1993, the
Company introduced its first digital spread spectrum cordless telephone and its
first wireless data modem. Both of the new product lines leverage the Company's
wireless and digital signal processing expertise and high volume, low cost
manufacturing capabilities.
BUSINESS STRATEGY
The Company's business strategy is to use its core technology in ultrahigh
frequency and microwave circuit design, digital signal processing, digital
spread spectrum capability and digital communication techniques, together with
its experience in short product development cycles and low cost mass production,
to introduce leading edge products early in new market life cycles. Using the
early introduction as a platform to gain a leading market share, the Company
strives to aggressively introduce subsequent versions of the product at lower
prices made possible by greater production volume and manufacturing
efficiencies.
The Company's business strategy includes the following elements:
- Leverage core technology
The Company has considerable experience in the design, development and
manufacture of portable electronic wireless communication devices that operate
in the ultrahigh frequency radio and microwave spectrum, having utilized this
technology in its radar detection products since 1978. The Company is committed
to capitalizing upon its core technology base, as shown by its development of
new products and the expansion and enhancement of its technology base through
significant and ongoing research and development expenditures.
- Emphasize short product development cycles
The Company believes that short product development cycles are essential to
its success. Such cycles enable the Company to capitalize upon the higher
margins that are associated with the introduction of new products and positions
the Company to establish itself as a leader in new markets. Since 1991, the
Company has developed and introduced more than 16 radar warning detector
products, four generations of digital spread spectrum cordless telephones and a
series of wireless data modems.
- Increase manufacturing efficiencies, improve quality and lower product
cost
The Company uses surface mount technology ("SMT") extensively to
manufacture its products. The Company was among the first to utilize SMT to
manufacture consumer radar detection products. SMT is the automated
manufacturing process used to place micro electronic components on printed
circuit boards with a high level of accuracy at a high speed. The use of SMT
enables the Company to design and manufacture products that are compact,
portable and reliable and allows it to achieve manufacturing efficiencies that
result in lower costs. The Company has also developed high speed automated
testing capabilities in order to ensure quality and improve manufacturing
efficiency. Testing procedures have become an integral part of the Company's
manufacturing process encompassing all aspects of the manufacture of its
products, from component to sub-assembly and finished product testing.
16
<PAGE> 18
- Develop strategic alliances
The Company's strategy for entering new markets is to align with companies
that have established sales leadership and market positions. This strategy is
designed to provide broader access to retailers and end users. The Company
developed its digital spread spectrum cordless telephones and wireless data
modems utilizing this teaming approach. With respect to the Company's digital
spread spectrum cordless telephones, this strategy involves selling as an OEM to
major cordless telephone vendors. With respect to the Company's wireless modems,
this strategy involves working with cellular service providers as well as
vendors of services utilizing the CDPD networks.
PRODUCTS AND MARKETS
The Company's products are ultrahigh frequency wireless communication
products that operate in the UHF radio and microwave spectrum. At the present
time, the Company has developed and introduced radar warning detectors, digital
spread spectrum cordless telephones and wireless data modems that utilize the
CDPD networks. These three products are described in more detail below.
CORDLESS TELEPHONES
The market for cordless telephones has grown over the past few years and,
according to industry sources, sales of all cordless telephones exceeded 17
million units in 1994, with approximately 700,000 units in the 900 megahertz
("MHz") segment. Conventional cordless phones, which operate in the 46-49 MHz
segment, may be nearing the mature phase of their product life cycle. The
Company believes that the growth area is in high performance telephones, which
operate in the 900 MHz segment. These high performance telephones can deliver to
a consumer the superior range and clarity required for cordless telephones to
become a true substitute for the traditional corded telephone.
In May 1993, the Company introduced its first digital spread spectrum high
performance cordless telephone. These telephones are sold both under the
ESCORT(R) brand name (the ESCORT(R) 9000 series) and to OEM customers. The
Company's digital spread spectrum cordless telephones offer superior performance
over traditional cordless telephones, specifically in the areas of improved
voice clarity, range and communication security. The term "spread spectrum"
refers to a communications technique that encodes signals to be transceived over
multiple frequencies. Spread spectrum transceivers cause substantially less
interference and are less susceptible to interference than conventional
transceivers such as those used in traditional cordless telephones. Due to the
substantially lower interference, the Federal Communications Commission has
specified operating parameters for the 902-928 MHz band that are highly
advantageous to spread spectrum products. The lower susceptibility to
interference together with the advantageous Federal Communications Commission
operating parameters have enabled the Company to design products that can
achieve significantly greater range than traditional cordless telephones.
Cincinnati Microwave has combined spread spectrum technology with digital signal
processing technology, thereby digitizing the speech and transmitting it as a
high speed data transmission. By using a high speed data transmission, no voice
compression is required, resulting in a voice clarity that is comparable to a
traditional corded telephone. Finally, spread spectrum encoding by its nature
scrambles voice and data resulting in very secure communications.
The Company has recently introduced its next generation of digital spread
spectrum cordless telephone models, both for the Company's retail and OEM
channels. These digital spread spectrum cordless telephones are less expensive
to manufacture and can be sold by the Company at a lower price than its previous
digital spread spectrum cordless telephone products.
WIRELESS DATA MODEMS
In July 1993, Cincinnati Microwave announced that it had developed a series
of wireless data modems to be used in conjunction with the CDPD networks being
deployed by a consortium of
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<PAGE> 19
cellular telephone carriers. CDPD, one of the recognized leading technologies in
wide area wireless data communications, is a digital system that overlays the
cellular voice network and uses the idle times between cellular voice calls to
transmit data. The Company's MC-DART (Mobile Cellular Data Access Radio
Transceiver) wireless data modems enable data to be sent and received using the
CDPD networks without the burden of wires or the costs of circuit switched
connections (the traditional method used for a voice call). In order to enter
this market, the Company has established marketing arrangements with five
leading cellular service providers: Ameritech Mobile Services, Bell Atlantic
Mobile Services, GTE Mobile Communications, McCaw Cellular Communications, Inc.
and Sprint Cellular Communications. Production of the Company's wireless data
modem products commenced in June 1994 and sales to date have been limited.
In June 1995, Bell Atlantic Mobile Services, Firstnet Corporation and the
Company announced that the Company's wireless data modems will provide the
wireless communication link for AireTrans, the nation's first large-scale
deployment of wireless credit card verification using CDPD. The system is now
operational in northern New Jersey and the greater Washington, D.C. and
Baltimore, Maryland metropolitan areas.
CDPD has uses in three broad applications of data networking: mobile
applications -- exchanging data with data sources in motion, such as truck
fleets, portable point of sale devices and credit card verification units; fixed
wireless applications -- exchanging data with data sources which are difficult
or prohibitively expensive to reach, such as utility meters, vending machines
and pipe line pumps; and portable applications -- such as portable computers.
RADAR WARNING DETECTORs
The Company's principal product since its formation has been radar warning
detectors, which use microwave and other technologies to detect and amplify
police radar transmissions. During 1992, the Company also began manufacturing
and selling a laser detection product. The Company's superheterodyne radar
warning detectors use digital signal processing and high gain laser detectors to
detect police radar and laser signals and reject unwanted signals so that early
identification is enhanced.
The Company's radar warning detectors are also being used in conjunction
with the Safety Alert1 system that commenced operations in a number of locales
in 1995. The Safety Alert system utilizes small transmitters that emit a low
power K-band microwave signal which can be mounted on anything that may
constitute a traffic hazard (such as a speeding emergency vehicle, a road
construction site or a locomotive approaching a grade crossing). The Safety
Alert signal is encoded and when detected and decoded by an appropriately
equipped radar warning detector, the signal can provide the driver with more
specific information as to the nature of the traffic hazard, thereby enhancing
driver safety. The Company was the first to offer products specifically designed
to decode Safety Alert signals for drivers and commenced shipping such radar
warning detectors in August 1994 (the PASSPORT(R) 5000) in anticipation of the
system's implementation. The Company plans to add this capability to its entire
radar warning detector product line by the end of 1995. The Company believes
that the Safety Alert systems are in limited use at present.
MARKETING AND SALES
The Company's marketing and sales efforts are differentiated into two
distinct categories: Consumer Products and Commercial Products.
CONSUMER PRODUCTS
The Company's radar warning detector products have traditionally been
marketed under the ESCORT(R) brand name by direct advertising. Through
advertisements placed in national publications, such as "Car and Driver" and
"Road & Track," consumers can reach a dedicated telemarket-
- ---------------
1"Safety Alert" is a trademark of COBRA Electronics Corporation.
18
<PAGE> 20
ing staff (via a toll-free phone number) to obtain additional information or
place orders for the Company's products. The successful introduction of the
evolving series of ESCORT(R) radar warning detectors has provided the Company
with a loyal customer base that can be reached by direct mail efforts for new
radar warning detector products as they become available.
To augment this direct sales channel, the Company has developed a strategic
alliance with Home Shopping Network ("HSN"). The Company's radar warning
detector products are marketed to subscribers of HSN's cable shopping networks.
HSN purchased a substantial part of the Company's radar warning detector output
in 1994 and accounted for 14% of the Company's total net sales. For the first
six months of 1995, HSN purchases have accounted for 16% of the Company's total
net sales. In addition, the Company is actively developing additional alliances
with "sheltered channel" distributors. The Company also sells its radar warning
detectors as an OEM supplier to COBRA Electronics Corporation.
The Company sells its digital spread spectrum cordless telephone primarily
as an OEM as well as under its ESCORT(R) brand. As an OEM, the Company designs,
develops and manufactures digital spread spectrum cordless telephones for
specific customers on a private label basis based upon their specifications.
COMMERCIAL PRODUCTS
The Company's commercial product marketing and sales efforts have evolved
out of its OEM approach to consumer products. At present the Company's one
commercial product is its wireless data modem. The Company was an early active
participant with the CDPD consortium, with its engineers being consulted in the
formation of the CDPD standards. The Company took advantage of this early start
by aligning itself with certain cellular carriers for the marketing of its
wireless data modem. The Company has established marketing arrangements with
five leading cellular service providers: Ameritech Mobile Services, Bell
Atlantic Mobile Services, GTE Mobile Communications, McCaw Cellular
Communications, Inc. and Sprint Cellular Communications. Production of the
Company's wireless data modem products commenced in June 1994 and sales to date
have been limited.
In June 1995, Bell Atlantic Mobile Services, Firstnet Corporation and the
Company announced that the Company's wireless data modems will provide the
wireless communication link for AireTrans, the nation's first large-scale
deployment of wireless credit card verification using CDPD. The system is now
operational in northern New Jersey and the greater Washington, D.C. and
Baltimore, Maryland metropolitan areas.
RESEARCH AND DEVELOPMENT
The Company believes that continued strong investment in research and
development is critical to its long term growth and success. Utilizing its
expertise in ultrahigh frequency and microwave wireless communications and
digital signal processing, the Company intends to continue to develop new
products that strengthen its position in its current markets as well as to enter
new markets. The research and development activities of the Company are directed
toward product development, product improvement, new product screening,
technology development and manufacturing process development. All of the costs
of such research and development activities are expensed as incurred.
As of July 2, 1995, the Company employed 71 people in research and
development functions. The Company's research and development expenditures (in
dollars and as a percentage of net sales) were $7.2 million (14.0%) for fiscal
year 1992; $8.1 million (13.9%) for fiscal year 1993; $8.4 million (13.1%) for
fiscal year 1994; and $3.6 million (11.0%) for the six months ended July 2,
1995.
MANUFACTURING
Cincinnati Microwave designs, manufactures, tests and packages its products
at its plant near Cincinnati, Ohio. All of the Company's products are designed
around the Company's manufacturing processes, which particularly emphasize SMT.
SMT is the automated manufacturing process used to
19
<PAGE> 21
place micro electronic components on printed circuit boards with a high level of
accuracy and at high speed. The use of SMT enables the Company to design and
manufacture products that are compact, portable and reliable and to achieve
manufacturing efficiencies that result in lower costs. The Company believes that
it is important to maintain competitive manufacturing facilities by investing in
advanced manufacturing equipment (particularly SMT and automated test equipment)
and by improving existing and developing new manufacturing processes.
The Company's products include a number of high-technology components that
are available from only a few suppliers and, in several cases, a single
supplier. The Company frequently requires large volumes of such components and,
if the Company's suppliers are unable to fulfill the Company's needs for such
components, the Company may be unable to fill customer orders and its business,
financial condition, including working capital, and results of operations may be
materially and adversely affected. In 1993, and again in 1994, certain of the
Company's suppliers were unable to deliver sufficient quantities of critical
components to allow the Company to manufacture its products at previously
anticipated volumes. These shortages adversely affected the Company's ability to
manufacture and deliver products and, as a result, had a significant adverse
effect on the Company's business, financial condition, including working
capital, and results of operations. Since part of the Company's strategy is to
shorten product development and introduction cycles, occasions may arise in the
future where the Company's ability to produce products outpaces its suppliers'
ability to supply components. There can be no assurance that the Company can
continue to obtain adequate supplies or obtain such supplies at their historical
cost levels. The Company has no guaranteed supply arrangements with any of its
sole or limited source suppliers, does not maintain an extensive inventory of
components and customarily purchases sole or limited source components pursuant
to purchase orders placed from time to time in the ordinary course of business.
Moreover, the Company's suppliers may, from time to time, experience production
shortfalls or interruptions which impair the supply of components to the
Company. There can be no assurance that such shortages will not occur in the
future and adversely affect the Company's business, financial condition,
including working capital, and results of operations.
TRADEMARKS AND PATENTS
Cincinnati Microwave has a variety of patents, patent applications,
registered and unregistered trademarks and registered trade names. The Company
does not believe that its ability to compete in any of its product markets is
currently dependent on its patents or patent applications, but does believe that
its rights to, and the goodwill associated with, its ESCORT(R), PASSPORT(R) and
SOLO(R) registered trademarks provide it with a marketing advantage and that its
knowledge and accumulated experience in the design and mass production of
ultrahigh frequency wireless transmitters and receivers incorporating digital
signal processing provide it with a competitive advantage.
Although the Company has protected its technologies and products by patent,
copyright, trademark and trade secret laws to the extent that it believes
necessary, the Company's intellectual property rights may be subject to
infringement. There can be no assurance that the Company's measures to protect
its proprietary rights will deter or prevent unauthorized use of the Company's
technology. Furthermore, the laws of certain countries may not protect the
Company's proprietary rights to the same extent as do the laws of the United
States. In addition, the Company may, from time to time, become subject to legal
claims asserting that the Company has violated intellectual property rights of
third parties. In the event a third party were to sustain a valid claim against
the Company and in the event any required license were not available on
commercially reasonable terms, the Company's business, financial condition,
including working capital, and results of operations could be materially and
adversely affected. Litigation, which could result in substantial costs to and
diversion of resources of the Company, may also be necessary to enforce
intellectual property rights of the Company or to defend the Company against
claimed infringement of the rights of others.
20
<PAGE> 22
COMPETITION
All markets in which the Company participates are highly competitive. The
market for conventional cordless telephones is largely driven by AT&T, followed
by four major brands (Bell South, GE, Panasonic and Sony), several other
Regional Bell brands and a host of minor brands. The market for high performance
cordless telephones, such as those manufactured by the Company, is relatively
new. The Company's major competitors in the high performance cordless telephone
market segment are Panasonic, Uniden and Vtech. Competition in this segment is
currently based primarily on product performance, features and price. Many
current or prospective competitors serving this market are substantially larger
than the Company and possess significantly greater financial, marketing and
technical resources than the Company. There can be no assurance that the Company
will be successful against its competition in this market.
The Company's wireless data modems have been proven fully operational on
commercial CDPD networks. The market for wireless data modems is still
developing, and there are current or prospective competitors, such as Motorola
and PCSI, a subsidiary of Cirrus Logic, who are substantially larger than the
Company and possess significantly greater financial and technical resources.
There can be no assurance that the Company will compete successfully in this
market.
The market for radar warning detectors is highly competitive, has matured
and is declining. As the market has moved toward lower priced products offering
fewer features, competition has been based primarily on price and, to a lesser
degree, product quality, availability and performance. Lower than expected
demand for the Company's radar warning detectors, coupled with intense price
competition in the radar warning detector market, adversely affected the
Company's fourth quarter 1994 results. A recurrence of these conditions would
have a material adverse effect on the Company.
GOVERNMENT REGULATION
Existing, pending or future legislation prohibiting the use, possession or
sale of radar warning detectors or future legislation by states increasing speed
limits could have a material adverse effect on the Company's business.
Currently, there are two jurisdictions in the United States which have specific
prohibitions against the use, possession or sale of radar warning detectors in
automobiles. In addition, two other jurisdictions prohibit the use of radar
warning detectors in large commercial vehicles only and, in January 1994, the
Federal Highway Administration enacted a regulation banning radar warning
detectors from commercial vehicles weighing over 18,000 pounds, from buses
carrying 16 or more passengers and from trucks transporting hazardous materials
on highways funded by the Federal Government. This is, in effect, a ban on use
of such radar warning detectors in all large trucks and buses. A bill currently
pending in Congress would eliminate the existing federal requirement that states
comply with national maximum speed limit provisions before receiving certain
federal funds. This bill has passed the Senate and, if enacted, is likely to
result in higher speed limits in some states.
In addition, radio communications are subject to regulation by United
States and foreign laws and international treaties. The Company's digital spread
spectrum cordless telephones and wireless data modems must conform to domestic
and international requirements established to avoid interference among users of
radio frequencies. Therefore, the Company's opportunities to introduce new
products may be limited to the extent that suitable radio frequencies are not
available.
EMPLOYEES
As of July 2, 1995 the Company had 480 employees: 71 employees in
engineering, 276 employees in manufacturing, 93 employees in sales and marketing
and 40 employees in administration. The Company believes that its relations with
its employees are good. None of the Company's employees is represented by a
labor union or covered by a collective bargaining agreement, and the Company has
never experienced a work stoppage as a result of its employee relations.
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<PAGE> 23
PROPERTIES
Cincinnati Microwave owns its manufacturing and research facilities and
executive offices located on 13 acres of land near the intersection of
Fields-Ertel Road and I-71, approximately twenty miles north of Cincinnati,
Ohio. The building at One Microwave Plaza, built in 1982 and expanded in 1986,
is a modern 172,000 square foot, one-story building.
The Company also owns substantially all of the equipment associated with
its manufacturing, research and testing operations. The Company has acquired
certain equipment through leasing arrangements. All equipment is modern, in good
operating condition and well-maintained and, except for leased equipment, is
currently used as collateral for the line of credit with the current lender.
22
<PAGE> 24
MANAGEMENT
The following table sets forth certain information with respect to the
executive officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------- --- -----------------------------------------------------------
<S> <C> <C>
James L. Jaeger 48 Chairman of the Board
Jacques A. Robinson 48 President, Chief Executive Officer and Director
John W. Noland 54 Executive Vice President, Chief Operating Officer and
Director
R. Gregory Blair 48 Vice President/Product Management
Anita L. Hromish 41 Vice President/Chief Information Officer
Thomas H. Perszyk 47 Vice President/Engineering
Walter P. Masavage 59 Vice President/Finance, Treasurer and Secretary
Robert J. Brockman 50 Vice President/Commercial Products Marketing and Sales
Charles M. Fullgraf 76 Director
Joseph M. O'Donnell 49 Director
Gilbert L. Wachsman 47 Director
Erika Williams 48 Director
</TABLE>
James L. Jaeger is a founder of the Company. In May 1985 he was elected
Chairman of the Board. He also served as Chief Executive Officer of the Company
from June 1983 until June 1988 and from January 1990 through April 22, 1991. He
has been a Director of the Company since 1976. Mr. Jaeger spends substantially
all of his time on activities outside of the Company.
Jacques A. Robinson has been President and Chief Executive Officer of the
Company since April 23, 1991 and President of The Scotcrest Group since its
incorporation in 1989. From July 1987 through February 1991, Mr. Robinson served
as President of Carillon Technology, Inc. (a California company that
manufactured consumer audio technology products). From 1979 through June 1987,
Mr. Robinson held various positions with the General Electric Company; his most
recent position with that company was Vice President and General Manager of the
Consumer Electronics Business Operations. He has been a Director of the Company
since 1991.
John W. Noland has been Executive Vice President and Chief Operating
Officer of the Company since November 1992. Prior to this, Mr. Noland was with
Thomson Consumer Electronics, Inc. (a world wide consumer electronics products
manufacturing and marketing company) serving as Vice President, TV Division
Asia, located in Singapore. In this position, he was responsible for Asian
marketing, product development, design, manufacturing and managing manufacturing
locations in five Asian countries. Mr. Noland was with General Electric
Company's Consumer Electronics Business from 1963 through 1987 and held various
manufacturing positions in the television, audio and communications divisions of
GE. He was general manager of the cathode ray tube manufacturing operations when
Thomson acquired all of GE's consumer electronics business in 1987. He has been
a Director of the Company since November 1992.
R. Gregory Blair is Vice President/Products Management. Mr. Blair joined
the Company in December 1984 as its Director of Manufacturing and in October
1985 was appointed Vice President-Operations. He also served as President and
Chief Operating Officer of Guardian Technologies, Inc., a wholly owned
subsidiary of the Company, from March 1987 to November 1988, and as President
and Chief Operating Officer of CMI Technologies, Inc., a wholly owned subsidiary
of the Company, from November 1988 until September 1991.
Anita L. Hromish is Vice President/Chief Information Officer of the
Company. Ms. Hromish joined the Company in March 1986 and has assumed positions
of increasing responsibility during this time. From 1979 to 1984, Ms. Hromish
was employed by The Procter & Gamble Company
23
<PAGE> 25
("P&G") (a diversified manufacturer of household and industrial products
headquartered in Cincinnati, Ohio) in the Management Systems Division. Ms.
Hromish was appointed Vice President in July 1993.
Thomas H. Perszyk is Vice President/Engineering. Prior to joining the
Company in December 1994, Mr. Perszyk was Senior Resource Manager-Engineering
for Motorola and had 24 years of experience with Motorola in the
electrical/electronics engineering field. Recent product responsibilities
included a wide range of portable communication equipment and involved worldwide
assignments in engineering and manufacturing.
Walter P. Masavage, Vice President/Finance, Treasurer and Secretary, worked
for the General Electric Company for 31 years and Thomson Consumer Electronics,
Inc. (a world wide consumer electronics products manufacturing and marketing
company) for six years in accounting management positions of increasing
responsibility. Before joining Cincinnati Microwave, Mr. Masavage was CFO of
Thomson Consumer Electronics' Canadian affiliate. Mr. Masavage joined the
Company in May 1994 and was appointed Vice President in May 1994 and Treasurer
and Secretary in January 1995.
Robert J. Brockman is Vice President/Commercial Products Marketing and
Sales. After ten years with the Power Generation Division of Babcock & Wilcox (a
manufacturer of steam generating equipment for utility and industial power
generation), as R&D Program Manager, Mr. Brockman joined Bailey Controls Company
(a manufacturer of electronic process control equipment) as Manager, Product
Planning and Marketing. Mr. Brockman then served as Manager, Marketing and Sales
for the General Electric Company's Display Product Operations from 1985 to 1993.
Mr. Brockman joined the Company and was appointed Vice President in June 1994.
Charles M. Fullgraf retired from P&G in 1982 after a 42-year career serving
P&G in various management positions. From 1978 to 1982 Mr. Fullgraf was a Group
Vice President of P&G and served on its Board of Directors. He also served as a
trustee of the P&G Profit Sharing Trust. He has been a Director of the Company
since 1985.
Joseph M. O'Donnell is currently Managing Director of his own consulting
firm. Mr. O'Donnell also has been President and Chief Executive Officer of
Computer Products, Inc. (a multi-national manufacturer of electronic products
and subsystems) since July 1994. Mr. O'Donnell was Chief Executive Officer of
Savin Corporation (a manufacturer of office products and equipment) from October
1993 to February 1994. From June 1990 through July 1992, Mr. O'Donnell was
President and Chief Executive Officer of GO/DAN Industries (a company that
manufactures and markets products for the automotive aftermarket business). From
October 1988 to May 1990, Mr. O'Donnell was Group Vice President of Handy &
Harmon (a company primarily involved in precious metals refining, stamping,
forging and fabrication headquartered in New York, New York); from August 1987
to September 1988 he was President of OD&S Ventures, Inc. (a venture capital
company). He has been a Director of the Company since 1991.
Gilbert L. Wachsman has been President of Wachsman Management Consulting,
Inc., which provides consulting services to retailers and consumer oriented
manufacturers, since 1990. Pursuant to his consulting practice, Mr. Wachsman
served as Vice Chairman of Universal International, Inc. (a wholesaler/retailer
of close-out merchandise) from October 1992 to February 1995. From December 1988
to July 1990, Mr. Wachsman was President of Lieberman Enterprises (a distributor
of pre-recorded music, video and personal computer software); from January 1986
to December 1988 he was President of Child World, Inc. (one of the largest U.S.
toy chains). He has been a Director of the Company since 1991.
Erika Williams is currently President of the Erika Williams Group, a
consulting firm. Ms. Williams also is Chief Operating Officer of System
Integrators, Inc. (a company that designs, manufactures and markets services
publishing systems to the newspaper publishing industry). From 1993 to March
1995, Ms. Williams was Senior Vice President and General Manager of Enterprise
Storage Systems of Amdahl Corporation (a developer and manufacturer of mainframe
computers)
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<PAGE> 26
of Sunnyvale, California. Since 1978, Ms. Williams held various positions with
Amdahl Corporation including the Corporate Officer responsible for product
management of the main frame business, Vice President of Processor Technology
and Development and Director of Product Software and Diagnostics. She has been a
Director of the Company since 1994.
SELLING SHAREHOLDER
James L. Jaeger, a founder of the Company, is offering 3,000,000 Common
Shares hereby. Mr. Jaeger has been Chairman of the Board of the Company since
May 1985. He also served as Chief Executive Officer of the Company from June
1983 until June 1988 and from January 1990 through April 22, 1991. He has been a
Director of the Company since 1976. Prior to the Offering, Mr. Jaeger
beneficially owned 6,127,179 Common Shares which represented 43.3% of the
outstanding Common Shares. After completion of the Offering (assuming no
exercise of the Underwriters' over-allotment option to purchase up to 600,000
Common Shares from the Company and Mr. Jaeger), he will own 3,127,179 Common
Shares which will represent 20.6% of the outstanding Common Shares. The percent
of shares owned prior to the Offering is based on 14,155,415 Common Shares
outstanding on August 9, 1995. The percent of shares owned after the Offering is
based on 15,155,415 shares outstanding. Mr. Jaeger also owns Warrants to
purchase 30,000 Common Shares.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 20,000,000 Common
Shares, without par value and 100,000 Preferred Shares. After giving effect to
the Offering (assuming no exercise of the Underwriters' over-allotment option),
the issued and outstanding capital stock of the Company will consist of
15,155,415 Common Shares. In addition, the Company has 1,345,321 Warrants issued
and outstanding as described below.
The following summary of certain matters relating to the capital stock of
the Company is qualified in its entirety by the provisions of the Company's
Articles of Incorporation and Regulations.
COMMON STOCK
The Company had 14,155,415 Common Shares issued and outstanding immediately
prior to the date of this Prospectus. Holders of Common Shares are entitled to
one vote for each share held of record on all matters submitted to a vote of
shareholders. Shareholders have the right to cumulate their votes in the
election of directors.
Holders of Common Shares are entitled to share in such dividends as the
Board of Directors, in its discretion, may validly declare from funds legally
available. In the event of liquidation, each outstanding Common Share entitles
its holder to participate ratably in the assets remaining after payment of
liabilities.
Shareholders have no preemptive or other rights to subscribe for or
purchase additional shares of any class of stock or any other securities of the
Company, and there are no redemption or sinking fund provisions with regard to
the Common Shares. All outstanding Common Shares are fully paid, validly issued
and non-assessable.
The vote of the holders of 66 2/3% of all outstanding Common Shares is
required to amend the Articles of Incorporation and to approve mergers,
reorganizations, and similar transactions.
PREFERRED STOCK
The Articles authorize the Board of Directors to designate and issue, from
time to time, Preferred Shares in one or more series. The Board of Directors is
authorized, to the extent permitted by applicable law, to fix and determine the
relative rights and preferences of the shares of any series so established with
respect to, among other things, dividend or distribution rights, the
25
<PAGE> 27
dates of payments of dividends or distributions and the dates from which they
are cumulative, liquidation price, redemption rights and price, sinking fund
requirements, conversion or exchange rights and certain other terms of the
Preferred Shares. Because the rights and preferences set by the Board of
Directors for a series of Preferred Shares may be superior to the rights and
preferences of the Common Shares, the issuance of such series may adversely
affect the rights of the holders of Common Shares. As of the date of this
Prospectus, the Board of Directors had not authorized or issued any series of
Preferred Shares and had no plans, agreements or understandings for such
authorization or issuance.
While issuance of Preferred Shares could provide needed flexibility in
connection with possible acquisitions and other corporate purposes, such
issuance also could make it more difficult for a prospective acquiror to acquire
a majority of the outstanding voting shares of the Company and could discourage
an attempt to gain control of the Company. Such authority granted to the Board
of Directors could adversely affect the market price of the Common Shares.
WARRANTS
The Company had 1,345,321 Warrants issued and outstanding immediately prior
to the date of this Prospectus. Each Warrant entitles its holder to purchase one
Common Share at an exercise price of $4.00 at any time prior to 5:00 p.m.,
Eastern Standard Time, on December 31, 1998. Warrant holders have no voting
rights or dividend rights.
PROVISIONS EFFECTING BUSINESS COMBINATIONS
Chapter 1704 of the Ohio Revised Code may be viewed as having an
anti-takeover effect. This statute, in general, prohibits an "issuing public
corporation" (the definition of which would include the Company) from entering
into a "Chapter 1704 Transaction" with the beneficial owner (or affiliates of
such beneficial owner) of 10% or more of the outstanding shares of the
corporation (an "interested shareholder") for at least three years following the
date on which the interested shareholder attains such 10% ownership, unless the
board of directors of the corporation approves, prior to such person becoming an
interested shareholder, either the transaction or the acquisition of shares
resulting in a 10% ownership. A "Chapter 1704 Transaction" is broadly defined to
include, among other things, a merger or consolidation with, sale of substantial
assets to, or the receipt of a loan, guaranty or other financial benefit (which
is not proportionately received by all shareholders) by the interested
shareholder. Following the expiration of such three-year period, a Chapter 1704
Transaction with the interested shareholder is permitted only if either (i) the
transaction is approved by the holders of at least two-thirds of the voting
power of the corporation (or such different proportion as set forth in the
corporation's articles of incorporation), including a majority of the
outstanding shares, excluding those owned by the interested shareholder, or (ii)
the business combination results in the shareholders other than the interested
shareholder receiving a prescribed "fair price" for their shares. One
significant effect of Chapter 1704 is to cause an interested shareholder to
negotiate with the board of directors of a corporation prior to becoming an
interested shareholder.
In addition, Section 1707.043 of the Ohio Revised Code requires a person or
entity that makes a proposal to acquire the control of a corporation to repay to
that corporation any profits made from trades in the corporation's stock within
18 months after making the control proposal.
TRANSFER AGENT AND REGISTRAR
The registrar and transfer agent for the Company's Common Shares is The
State Street Bank and Trust Company, Boston, Massachusetts.
26
<PAGE> 28
UNDERWRITING
Montgomery Securities and Roney & Co. (the "Underwriters") have
individually agreed, subject to the terms and conditions contained in the
Underwriting Agreement, to purchase from the Company and the Selling Shareholder
the number of Common Shares indicated below opposite their respective names at
the public offering price less the underwriting discount set forth on the cover
page of this Prospectus. The Underwriting Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent and
that the Underwriters are committed to purchase all of such Common Shares if any
are purchased.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- --------------------------------------------------------- ----------------
<S> <C>
Montgomery Securities....................................
Roney & Co...............................................
----------------
Total............................................... 4,000,000
=================
</TABLE>
The Underwriters propose to offer the Common Shares to the public on the
terms set forth on the cover page of this Prospectus. The Underwriters may allow
to selected dealers a concession of not more than $ per share, and the
Underwriters may allow, and such dealers may reallow, a concession of not more
than $ per share to certain other dealers. The Common Shares are
offered subject to receipt and acceptance by the Underwriters and to certain
other conditions, including the right to reject an order in whole or in part.
The Company and the Selling Shareholder have granted an option to the
Underwriters, exercisable during the 30-day period immediately after the date of
this Prospectus, to purchase up to 600,000 additional Common Shares to cover
over-allotments, if any, at the same price per share as the initial 4,000,000
shares to be purchased by the Underwriters. To the extent that the Underwriters
exercise this option, each of the Underwriters will be committed, subject to
certain conditions, to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may purchase such
shares only to cover over-allotments made in connection with this Offering.
The Underwriting Agreement provides that the Company and the Selling
Shareholder will indemnify the Underwriters against certain liabilities,
including civil liabilities under the Securities Act, or will contribute to
payments the Underwriters may be required to make in respect thereof.
The Company and each of its officers and directors have agreed that, for a
period of 90 days after the date of this Prospectus, they will not, without the
prior written consent of Montgomery Securities, directly or indirectly, offer
for sale, sell, transfer or otherwise dispose of any securities of the Company
(other than sales by Mr. Jaeger in connection with this Offering).
The rules of the SEC generally prohibit the Underwriters from making a
market in the Company's Common Shares during the "cooling off" period
immediately preceding the commencement of sales in the Offering. The SEC has,
however, adopted an exemption from these rules that permits passive market
making under certain conditions. These rules permit an Underwriter to continue
to make a market in the Company's Common Shares subject to the conditions, among
others, that its bid not exceed the highest bid by a market maker not connected
with the Offering and that its net purchases on any one trading day not exceed
prescribed limits. Pursuant to these exemptions, the Underwriters intend to
engage in passive market making in the Company's Common Shares during the
cooling off period.
The Underwriters have informed the Company that they do not expect to make
sales to accounts over which they exercise discretionary authority in excess of
five percent of the Common Shares offered hereby.
Roney & Co. acted as dealer manager for a rights offering by the Company
during the third and fourth quarters of 1994.
27
<PAGE> 29
LEGAL MATTERS
The validity of the issuance of Common Shares offered hereby will be passed
upon for the Company by Frost & Jacobs, Cincinnati, Ohio. Certain legal matters
in connection with this Offering will be passed upon for the Underwriters by
Taft, Stettinius & Hollister, Cincinnati, Ohio. Certain legal matters in
connection with this Offering will be passed upon for the Selling Shareholder by
Keating, Muething & Klekamp, Cincinnati, Ohio.
EXPERTS
The Consolidated Financial Statements and Notes thereto incorporated in
this Prospectus by reference to the Company's Annual Report on Form 10-K for the
year ended December 25, 1994 have been so incorporated in reliance on the report
of Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
28
<PAGE> 30
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, sales representative, or any other person has been authorized to
give any information or to make any representations in connection with this
Offering other than those contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company, the Selling Shareholder or any of the Underwriters.
This Prospectus does not constitute an offer to sell or a solicitation of any
offer to buy any securities other than the Common Shares to which it relates or
an offer to, or a solicitation of, any person in any jurisdiction where such an
offer or solicitation would be unlawful. Neither the delivery of this Prospectus
nor any sales made hereunder shall, under any circumstances, create an
implication that there has been no change in the affairs of the Company or that
information contained herein is correct as of any time subsequent to the date
hereof.
----------------------------
TABLE OF CONTENTS
----------------------------
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Additional Information.................. 2
Available Information................... 2
Incorporation of Documents by
Reference............................. 2
Prospectus Summary...................... 3
Risk Factors............................ 4
Use of Proceeds......................... 8
Price Range of Common Shares............ 8
Dividend Policy......................... 8
Capitalization.......................... 9
Dilution................................ 10
Selected Consolidated Financial Data.... 11
Management's Discussion and Analysis
of Financial Condition and
Results of Operations................. 12
Business................................ 16
Management.............................. 23
Selling Shareholder..................... 25
Description of Capital Stock............ 25
Underwriting............................ 27
Legal Matters........................... 28
Experts................................. 28
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
4,000,000 COMMON SHARES
------------------------
PROSPECTUS
------------------------
MONTGOMERY SECURITIES
RONEY & CO.
, 1995
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 31
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.(1)
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee...................... $ 26,867
NASD filing fee.......................................................... 8,291
Nasdaq listing fee....................................................... 17,500
Printing and engraving................................................... 95,000
Counsel fees and expenses................................................ 120,000
Accountant's fees and expenses........................................... 40,000
Blue Sky qualification fees and expenses................................. 12,000
Miscellaneous fees and expenses.......................................... 121,342
Total............................................................... $ 441,000
</TABLE>
- ---------------
(1) Estimated, other than SEC registration fee, NASD filing fee and Nasdaq
listing fee. The Company has agreed to pay all of the expenses of the
Selling Shareholder.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
There is no provision in the Company's Amended Articles of Incorporation by
which an officer or director of the Company may be indemnified against any
liability which he may incur in his capacity as such. However, the Company has
indemnification provisions in its Amended Regulations. These provisions provide
that each person who was or is a party or is threatened to be made a party to or
is involved in any threatened, pending or completed action, suit or proceeding
("Proceeding") by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer, employee, or
agent of the Company or, as a director or officer of the Company, is or was
serving at the request of the Company as a director, officer, trustee, employee,
or agent of another corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such Proceeding is alleged action in an official capacity as a
director, officer, trustee, employee or agent or in any other capacity, shall be
indemnified by the Company to the fullest extent authorized by law, including
but not limited to the Ohio General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Company to provide broader indemnification
rights than such law permitted the Company to provide prior to such amendment),
against all expenses, liability and loss (including attorneys' fees, and in
respect of claims not made by or in the right of the Company, judgments, fines,
excise taxes or penalties and amounts paid or to be paid in settlement) actually
and reasonably incurred by such person in connection with any such Proceeding;
provided, however, that the Company shall indemnify any such person seeking
indemnity in connection with an action, suit or proceeding initiated by such
person only if such action, suit or proceeding initiated by such person was
authorized by the Board of Directors.
In the event that any claim for indemnification is not paid in full by the
Company within 30 days, the claimant is entitled to bring suit against the
Company to recover the amount not paid and, if the claimant is successful, the
cost of the proceeding that was required to order that payment. In addition, the
rights to reimbursement under these indemnification provisions represent a
contract right that entitles the indemnified party to bring suit to enforce the
indemnification provisions as if such provisions were set forth in a separate
written contract between the Company and the party to be indemnified. The
Company may purchase and maintain insurance or furnish similar protection on
behalf of any person (qualified to be indemnified) against any liability
asserted against him, and incurred by him in or arising out of his indemnifiable
status, whether or not the Company would have the power to indemnify him against
such liability.
II-1
<PAGE> 32
The Company provides liability insurance for its directors and officers for
certain losses arising from certain claims and charges, including claims and
charges under the Securities Act, which may be made against such persons while
acting in their capacities as directors and officers of the Company.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE OF EXHIBIT
- ------------ -----------------------------------------------------------------------------
<S> <C>
(1) Form of Underwriting Agreement.
(4)(i) Articles of Incorporation of Cincinnati Microwave, Inc., as amended.
(4)(ii) Regulations of Cincinnati Microwave, Inc., as amended.
(5) Opinion of Frost & Jacobs, counsel for the Company, as to the legality of the
Common Shares being registered.
(10)(i)* Amendment to the Company's Agreement with The Scotcrest Group, Inc.
(10)(ii) Bank Credit Agreement, as amended.
(23)(A) Consent of Price Waterhouse LLP.
(23)(B) Consent of Frost & Jacobs is contained in opinion of counsel filed as Exhibit
5.
(24) Powers of Attorney executed by directors and officers.
(99) Form of Indemnification Agreement between the Company and James L. Jaeger.
</TABLE>
- ---------------
*Management contract or compensatory plan or arrangement.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) For purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE> 33
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE> 34
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be filed on its behalf by the undersigned, thereunto duly
authorized in the City of Cincinnati, State of Ohio on the 11th day of August,
1995.
CINCINNATI MICROWAVE, INC.
By: /s/ JACQUES A. ROBINSON
--------------------------------
Jacques A. Robinson
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ JACQUES A. ROBINSON Dated: August 11, 1995
- -------------------------------------
Jacques A. Robinson, President, Chief
Executive Officer, and Director
(principal executive officer)
/s/ WALTER P. MASAVAGE Dated: August 11, 1995
- -------------------------------------
Walter P. Masavage, Vice President/
Finance, Treasurer and Secretary
(principal financial and accounting
officer)
/s/ JAMES L. JAEGER Dated: August 11, 1995
- -------------------------------------
James L. Jaeger
Director
</TABLE>
DIRECTORS:
John W. Noland /s/ JACQUES A. ROBINSON
Charles M. Fullgraf ------------------------
Joseph M. O'Donnell Jacques A. Robinson, as
Gilbert L. Wachsman attorney-in-fact
Erika Williams
Dated: August 11, 1995
II-4
<PAGE> 35
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE OF EXHIBIT
- ------------ -----------------------------------------------------------------------------
<S> <C>
(1) Form of Underwriting Agreement.
(4)(i) Articles of Incorporation of Cincinnati Microwave, Inc., as amended.
(4)(ii) Regulations of Cincinnati Microwave, Inc., as amended.
(5) Opinion of Frost & Jacobs, counsel for the Company, as to the legality of the
Common Shares being registered.
(10)(i)* Amendment to the Company's Agreement with the Scotcrest Group, Inc.
(10)(ii) Bank Credit Agreement, as amended.
23(A) Consent of Price Waterhouse LLP.
23(B) Consent of Frost & Jacobs is contained in opinion of counsel filed as Exhibit
5.
(24) Powers of Attorney executed by directors and officers.
(99) Form of Indemnification Agreement between the Company and James L. Jaeger.
</TABLE>
- ---------------
*Management contract or compensatory plan or arrangement.
II-5
<PAGE> 1
Exhibit 1
4,000,000 SHARES
CINCINNATI MICROWAVE, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
__________, 1995
MONTGOMERY SECURITIES
RONEY & CO.
c/o Montgomery Securities
600 Montgomery Street
San Francisco, California 94111
Dear Sirs:
SECTION 1. Introductory. Cincinnati Microwave, Inc., an Ohio
corporation (the "Company"), proposes to issue and sell 1,000,000 shares of its
authorized but unissued Common Stock (the "Common Stock") and James L. Jaeger
(the "Selling Shareholder") proposes to sell an aggregate of 3,000,000 shares of
the Company's issued and outstanding Common Stock to Montgomery Securities and
Roney & Co. ("you" or the "Underwriters"). Said aggregate of 4,000,000 shares
are herein called the "Firm Common Shares." In addition, the Company and the
Selling Shareholder propose to grant to you an option to purchase up to 600,000
additional shares of Common Stock (the "Optional Common Shares"), as provided in
Section 5 hereof. The Firm Common Shares and, to the extent such option is
exercised, the Optional Common Shares are hereinafter collectively referred to
as the "Common Shares."
You have advised the Company and the Selling Shareholder that
you propose to make a public offering of their respective portions of the Common
Shares on the effective date of the registration statement hereinafter referred
to, or as soon thereafter as in your judgment is advisable.
-1-
<PAGE> 2
The Company and the Selling Shareholder hereby confirm their
respective agreements with respect to the purchase of the Common Shares by you
as follows:
SECTION 2. Representations and Warranties of the Company and
the Selling Shareholder. Each of the Company and the Selling Shareholder
represents and warrants to each of the Underwriters that:
(a) A registration statement on Form S-3 (File No. 33-___) with
respect to the Common Shares has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, and has been filed with the Commission. The
Company has prepared and has filed or proposes to file prior to the
effective date of such registration statement an amendment or
amendments to such registration statement, which amendment or
amendments have been or will be similarly prepared. There have been
delivered to you two signed copies of such registration statement and
amendments, together with two copies of each exhibit filed therewith.
Conformed copies of such registration statement and amendments (but
without exhibits) and of the related preliminary prospectus have been
delivered to you in such reasonable quantities as you have requested.
The Company will next file with the Commission one of the following:
(i) prior to effectiveness of such registration statement, a further
amendment thereto, including the form of final prospectus, or (ii) a
final prospectus in accordance with Rules 430A, 434 and 424(b) of the
Rules and Regulations. As filed, such amendment and form of final
prospectus, or such final prospectus, shall include all Rule 430A
Information and, except to the extent that you shall agree in writing
to a modification, shall be in all substantive respects in the form
furnished to you prior to the date and time that this Agreement was
executed and delivered by the parties hereto, or, to the extent not
completed at such date and time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company shall have previously
advised you in writing would be included or made therein.
The term "Registration Statement" as used in this Agreement shall mean
such registration statement at the time such registration statement
becomes effective and, in the event any post-effective amendment
thereto becomes effective prior to the First Closing Date (as
hereinafter defined), shall also
-2-
<PAGE> 3
mean such registration statement as so amended; provided,
however, that such term shall also include all Rule 430A Information
deemed to be included in such registration statement at the time such
registration statement becomes effective as provided by Rule 430A of
the Rules and Regulations and all information contained in a Term
Sheet deemed to be included in such registration statement at the time
it becomes effective as provided by Rule 434 of the Rules and
Regulations. The term "Preliminary Prospectus" shall mean any
preliminary prospectus referred to in the preceding paragraph and used
on the basis of Rule 430 of the Rules and Regulations and any
preliminary prospectus included in the Registration Statement at the
time it becomes effective that omits Rule 430A Information. The term
"Term Sheet" as used in this Agreement shall mean a term sheet
containing the information specified in Rule 434(b) of the Rules and
Regulations. The term "Prospectus" as used in this Agreement shall
mean the prospectus relating to the Common Shares in the form in which
it is first filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations, the most recent Preliminary Prospectus and the
Term Sheet, taken together, at the time the Term Sheet is first filed
with the Commission pursuant to Rule 424(b) of the Rules and
Regulations, or, if no filing pursuant to Rule 424(b) of the Rules and
Regulations is required, shall mean the form of final prospectus
included in the Registration Statement at the time such registration
statement becomes effective. The term "Rule 430A Information" means
information with respect to the Common Shares and the offering thereof
permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A of the Rules and Regulations.
Any reference herein to any Preliminary Prospectus or the Prospectus,
or any information included therein, shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to
Form S-3 under the Act, as of the date of such Preliminary Prospectus
or Prospectus, as the case may be.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus has conformed in all material respects to the requirements
of the Act and the Rules and Regulations and, as of its date, has not
included any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and at
the time the Registration Statement becomes effective, and
-3-
<PAGE> 4
at all times subsequent thereto up to and including each Closing Date
hereinafter mentioned, the Registration Statement and the Prospectus,
and any amendments or supplements thereto, will contain all material
statements and information required to be included therein by the Act
and the Rules and Regulations and will in all material respects conform
to the requirements of the Act and the Rules and Regulations, and
neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will include any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, no representation or warranty of the Company
contained in this subsection 2(b) shall be applicable to information
contained in or omitted from any Preliminary Prospectus, the
Registration Statement, the Prospectus or any such amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter or by the Selling
Shareholder specifically for use in the preparation thereof. The
documents incorporated by reference in the Prospectus, when they were
filed with the Commission, conformed in all material respects to the
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations of the Commission
thereunder, and none of such documents contained an untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(c) The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than the
subsidiaries listed on Exhibit 1 to this Agreement. None of the
Company's subsidiaries currently conducts any business, has any
material assets or liabilities or is, in any way, individually or in
the aggregate, with all of the Company's other subsidiaries, material
to the business, financial condition or results of operations of the
Company. The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of Ohio, with full
power and authority (corporate and other) to own and lease its
properties and conduct its business as described in the Prospectus; the
Company is in possession of and operating in compliance with all
authorizations, licenses, permits, consents, certificates and orders
material to the conduct of its businesses, all of which are valid and
in full force and effect; the Company is duly qualified to do business
and in good standing as a foreign corporation in each jurisdiction in
which the ownership or leasing of properties or the conduct of its
business requires such qualification, except for
-4-
<PAGE> 5
jurisdictions in which the failure to so qualify would not have a
material adverse effect upon the Company; and no proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing,
or seeking to revoke, limit or curtail, such power and authority or
qualification.
(d) The Company has an authorized and outstanding capital stock
as set forth under the heading "Capitalization" in the Prospectus; the
issued and outstanding shares of Common Stock have been duly authorized
and validly issued, are fully paid and nonassessable, are duly listed
on The Nasdaq Stock Market, have been issued in compliance with all
federal and state securities laws, were not issued in violation of or
subject to any preemptive rights or other rights to subscribe for or
purchase securities, and conform to the description thereof contained
in the Prospectus. Except as disclosed in or contemplated by the
Prospectus and the financial statements of the Company, and the related
notes thereto, included in the Prospectus, the Company does not have
any outstanding options to purchase, or any preemptive rights or other
rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible
securities or obligations. The description of the Company's stock
option, stock bonus and other stock plans or arrangements, and the
options or other rights granted and exercised thereunder, set forth in
the Prospectus accurately and fairly presents the information required
to be shown with respect to such plans, arrangements, options and
rights.
(e) The Common Shares to be sold by the Company have been duly
authorized and, when issued, delivered and paid for in the manner set
forth in this Agreement, will be duly authorized, validly issued, fully
paid and nonassessable, and will conform to the description thereof
contained in the Prospectus. No preemptive rights or other rights to
subscribe for or purchase exist with respect to the issuance and sale
of the Common Shares by the Company pursuant to this Agreement. No
shareholder of the Company has any right which has not been waived to
require the Company to register the sale of any shares owned by such
shareholder under the Act in the public offering contemplated by this
Agreement. No further approval or authority of the shareholders or the
Board of Directors of the Company will be required for the transfer and
sale of the Common Shares to be sold by the Selling Shareholder or the
issuance and sale of the Common Shares to be sold by the Company as
contemplated herein.
(f) The Company has full legal right, power and
-5-
<PAGE> 6
authority to enter into this Agreement and perform the transactions
contemplated hereby. This Agreement has been duly authorized, executed
and delivered by the Company and constitutes a valid and binding
obligation of the Company in accordance with its terms. The making and
performance of this Agreement by the Company and the consummation of
the transactions herein contemplated will not violate any provisions of
the Articles of Incorporation or the Code of Regulations of the
Company, and will not conflict with, result in the breach or violation
of, or constitute, either by itself or upon notice or the passage of
time or both, a default under any agreement, mortgage, deed of trust,
lease, franchise, license, indenture, permit or other instrument to
which the Company is a party or by which the Company or any of its
property may be bound or affected, any statute or any authorization,
judgment, decree, order, rule or regulation of any court or any
regulatory body, administrative agency or other governmental body
applicable to the Company or any of its properties. No consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body is required for the
execution and delivery of this Agreement or the consummation of the
transactions contemplated by this Agreement, except for compliance with
the Act, the Blue Sky laws applicable to the public offering of the
Common Shares by the Underwriters and the clearance of such offering
with the National Association of Securities Dealers, Inc. (the "NASD").
(g) Price Waterhouse LLP, who have expressed their opinion with
respect to the financial statements filed with the Commission as a part
of the Registration Statement and included in the Prospectus and in the
Registration Statement, are independent accountants as required by the
Act and the Rules and Regulations.
(h) The financial statements of the Company, and the related
notes thereto, included in the Registration Statement and the
Prospectus present fairly the financial position of the Company as of
the respective dates of such financial statements, and the results of
operations and changes in financial position of the Company for the
respective periods covered thereby. Such statements and related notes
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis and, with respect to the
annual financial statements, have been so certified by the independent
accountants named in subsection 2(g). No other financial statements or
schedules are required to be included in the Registration Statement.
The selected financial data set forth in the Prospectus under the
captions
-6-
<PAGE> 7
"Capitalization" and "Selected Financial Data" fairly present the
information set forth therein on the basis stated in the Registration
Statement.
(i) Except as disclosed in the Prospectus, and except as to
defaults which individually or in the aggregate would not be material
to the Company, the Company is not in violation or default of any
provision of its Articles of Incorporation or Code of Regulations, nor
is it in breach of or default with respect to any provision of any
agreement, judgment, decree, order, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument to which it
is a party or by which it or any of its property is bound; and there
does not exist any state of facts which constitutes an event of default
on the part of the Company as defined in such documents or which, with
notice or lapse of time or both, would constitute such an event of
default.
(j) There are no contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to
the Registration Statement by the Act or by the Rules and Regulations
which have not been described or filed as required. The description of
contracts in the Prospectus are accurate and complete; all such
contracts are in full force and effect on the date hereof; and neither
the Company nor, to the best of the Company's knowledge, any other
party is in breach of or default under any of such contracts.
(k) There are no legal or governmental actions, suits or
proceedings pending or, to the best of the Company's knowledge,
threatened to which the Company is or may be a party or of which
property owned or leased by the Company is or may be the subject, or
related to environmental or discrimination matters, which actions,
suits or proceedings might, individually or in the aggregate, prevent
or adversely affect the transactions contemplated by this Agreement or
result in a material adverse change in the condition (financial or
otherwise), properties, business, results of operations or prospects of
the Company; and no labor disturbance by the employees of the Company
exists or is imminent which might be expected to affect adversely such
condition, properties, business, results of operations or prospects.
The Company is not a party or subject to the provisions of any material
injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body.
(l) The Company has good and marketable title to all the
properties and assets reflected as owned in the financial
-7-
<PAGE> 8
statements hereinabove described (or elsewhere in the Prospectus),
subject to no lien, mortgage, pledge, charge or encumbrance of any kind
except (i) those, if any, reflected in such financial statements (or
elsewhere in the Prospectus), or (ii) those which are not material in
amount and do not adversely affect the use made and proposed to be made
of such property by the Company. The Company holds its leased
properties under valid and binding leases, with such exceptions as are
not materially significant in relation to the business of the Company.
Except as disclosed in the Prospectus, the Company owns or leases all
such properties as are necessary to its operations as now conducted or
as proposed to be conducted.
(m) Since the respective dates as of which information is given
in the Registration Statement and Prospectus, and except as described
in or specifically contemplated by the Prospectus: (i) the Company has
not incurred any material liabilities or obligations, indirect, direct
or contingent, or entered into any material verbal or written agreement
or other transaction which is not in the ordinary course of business or
which could result in a material reduction in the future earnings of
the Company; (ii) the Company has not sustained any material loss or
interference with its business or properties from fire, flood,
windstorm, accident or other calamity, whether or not covered by
insurance; (iii) the Company has not paid or declared any dividends or
other distributions with respect to its capital stock and the Company
is not in default in the payment of principal or interest on any
outstanding debt obligations; (iv) there has not been any change in the
capital stock (other than upon the sale of the Common Shares hereunder
and upon the exercise of options and warrants described in the
Registration Statement) or indebtedness material to the Company (other
than in the ordinary course of business); and (v) there has not been
any material adverse change in the condition (financial or otherwise),
business, properties, results of operations or prospects of the
Company.
(n) Except as disclosed in or specifically contemplated by the
Prospectus, the Company has sufficient trademarks, trade names, patent
rights, mask works, copyrights, licenses, approvals and governmental
authorizations to conduct its business as now conducted; the expiration
of any trademarks, trade names, patent rights, mask works, copyrights,
licenses, approvals or governmental authorizations would not have a
material adverse effect on the condition (financial or otherwise),
business, results of operations or prospects of the Company; and the
Company has no knowledge of any material
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<PAGE> 9
infringement by it of trademark, trade name rights, patent rights, mask
works, copyrights, licenses, trade secret or other similar rights of
others, and there is no claim being made against the Company regarding
trademark, trade name, patent, mask work, copyright, license, trade
secret or other infringement which could have a material adverse effect
on the condition (financial or otherwise), business, results of
operations or prospects of the Company.
(o) The Company has not been advised, and has no reason to
believe, that it is not conducting business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it
is conducting business, including, without limitation, all applicable
local, state and federal environmental laws and regulations; except
where failure to be so in compliance would not materially adversely
affect the condition (financial or otherwise), business, results of
operations or prospects of the Company.
(p) The Company and its subsidiaries have filed all necessary
federal, state and foreign income and franchise tax returns and have
paid all taxes shown as due thereon; and the Company has no knowledge
of any tax deficiency which has been or might be asserted or threatened
against the Company or its subsidiaries which could materially and
adversely affect the business, operations or properties of the Company
and its subsidiaries.
(q) The Company is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(r) The Company has not distributed and will not distribute
prior to the First Closing Date any offering material in connection
with the offering and sale of the Common Shares other than the
Prospectus, the Registration Statement and the other materials
permitted by the Act.
(s) The Company maintains insurance of the types and in the
amounts generally deemed adequate for its business, including, but not
limited to, insurance covering real and personal property owned or
leased by the Company against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect.
(t) The Company has at no time during the last five years (i)
made any unlawful contribution to any candidate for foreign office, or
failed to disclose fully any contribution in violation of law, or (ii)
made any payment to any federal
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<PAGE> 10
or state governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof.
(u) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected
to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of the Common Shares.
SECTION 3. Representations, Warranties and Covenants of the Selling
Shareholder.
(a) The Selling Shareholder represents and warrants to, and
agrees with, each of the Underwriters that:
(i) Such Selling Shareholder has, and on the First Closing
Date and the Second Closing Date hereinafter mentioned will
have, good and marketable title to the Common Shares proposed
to be sold by such Selling Shareholder hereunder on such
Closing Dates and full right, power and authority to enter into
this Agreement and to sell, assign, transfer and deliver such
Common Shares hereunder, free and clear of all voting trust
arrangements, liens, encumbrances, equities, security
interests, restrictions and claims whatsoever; and upon
delivery of and payment for such Common Shares owned by the
Selling Shareholder hereunder, the Underwriters will acquire
good and marketable title thereto, free and clear of all liens,
encumbrances, equities, claims, restrictions, security
interests, voting trusts or other defects of title whatsoever.
(ii) Such Selling Shareholder has executed and delivered a
Custody Agreement and Power of Attorney (the "Shareholder
Agreement") and in connection herewith such Selling Shareholder
further represents, warrants and agrees that such Selling
Shareholder has deposited in custody, under the Shareholder
Agreement, with the agent named therein (the "Agent") as
custodian, certificates in negotiable form for the Common
Shares to be sold hereunder by such Selling Shareholder, for
the purpose of further delivery pursuant to this Agreement.
Such Selling Shareholder agrees that the Common Shares to be
sold by such Selling Shareholder on deposit with the Agent are
subject to the interests of the Company and the Underwriters,
that the arrangements made for such custody are to that extent
irrevocable, and that the obligations
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<PAGE> 11
of such Selling Shareholder hereunder shall not be terminated,
except as provided in this Agreement or in the Shareholder
Agreement, by any act of such Selling Shareholder, by operation
of law, by the death or incapacity of such Selling Shareholder
or by the occurrence of any other event. If the Selling
Shareholder should die or become incapacitated, or if any other
event should occur, before the delivery of the Common Shares
hereunder, the documents evidencing Common Shares then on
deposit with the Agent shall be delivered by the Agent in
accordance with the terms and conditions of this Agreement as
if such death, incapacity or other event had not occurred,
regardless of whether or not the Agent shall have received
notice thereof. This Agreement and the Shareholder Agreement
have been duly executed and delivered by or on behalf of such
Selling Shareholder and the form of such Shareholder Agreement
has been delivered to you.
(iii) The performance of this Agreement and the Shareholder
Agreement and the consummation of the transactions contemplated
hereby and by the Shareholder Agreement will not result in a
breach or violation by such Selling Shareholder of any of the
terms or provisions of, or constitute a default by such Selling
Shareholder under, any indenture, mortgage, deed of trust,
trust (constructive or other), loan agreement, lease,
franchise, license or other agreement or instrument to which
such Selling Shareholder is a party or by which such Selling
Shareholder or any of its properties is bound, any statute, or
any judgment, decree, order, rule or regulation of any court or
governmental agency or body applicable to such Selling
Shareholder or any of his properties.
(iv) Such Selling Shareholder has not taken and will not
take, directly or indirectly, any action designed to or which
has constituted or which might reasonably be expected to cause
or result in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Common Shares.
(v) Each Preliminary Prospectus and the Prospectus, insofar
as it has related to such Selling Shareholder has conformed in
all material respects to the requirements of the Act and the
Rules and Regulations and has not included any untrue statement
of a material fact or omitted to state a material fact
necessary to make the
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<PAGE> 12
statements therein not misleading in light of the circumstances
under which they were made; and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement
thereto, as it relates to such Selling Shareholder, will
include 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 not misleading.
(b) The Selling Shareholder agrees with the Company and the
Underwriters not to offer to sell, sell or contract to sell or
otherwise dispose of any shares of Common Stock or securities
convertible into or exchangeable for any shares of Common Stock, for a
period of ninety (90) days after the first date that any of the Common
Shares are released by you for sale to the public, without the prior
written consent of Montgomery Securities, which consent may be withheld
at the sole discretion of Montgomery Securities.
SECTION 4. Representations and Warranties of the Underwriters. The
Underwriters represent and warrant to the Company and to the Selling Shareholder
that the information set forth (i) on the cover page or in the Term Sheet of the
Prospectus with respect to price, underwriting discounts and commissions and
terms of offering and (ii) under "Underwriting" in the Prospectus was furnished
to the Company by and on behalf of the Underwriters for use in connection with
the preparation of the Registration Statement and the Prospectus and is correct
in all material respects.
SECTION 5. Purchase, Sale and Delivery of Common Shares. On the basis
of the representations, warranties and agreements herein contained, but subject
to the terms and conditions herein set forth, (i) the Company agrees to issue
and sell to the Underwriters 1,000,000 of the Firm Common Shares, and (ii) the
Selling Shareholder agrees to sell to the Underwriters 3,000,000 of the Firm
Common Shares. The Underwriters agree, individually and not jointly, to purchase
from the Company and the Selling Shareholder, respectively, the number of Firm
Common Shares described below. The purchase price per share to be paid by the
Underwriters to the Company and to the Selling Shareholder, respectively, shall
be equal to the initial price to the public per share less an amount per share
equal to the per share underwriting discount. The initial price to the public,
which shall be a fixed price, and the underwriting discount will be determined
by separate agreement among the Company, the Selling Shareholder and the
Underwriters in substantially the form set forth as Schedule B hereto on the
basis of the reported prices of the Common Stock on the Nasdaq National Market
("Nasdaq") immediately prior to the determination. Such
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<PAGE> 13
initial public offering price shall not be higher than the last sale price of
the Common Stock of the Company as reported by Nasdaq immediately prior to such
determination of the initial public offering price.
The obligation of each Underwriter to the Company shall be to purchase from the
Company that number of full shares which (as nearly as practicable, as
determined by you) bears to 1,000,000 the same proportion as the number of
shares set forth opposite the name of such Underwriter in Schedule A hereto
bears to the total number of Firm Common Shares. The obligation of each
Underwriter to the Selling Shareholder shall be to purchase from the Selling
Shareholder that number of full shares which (as nearly as practicable, as
determined by you) bears to 3,000,000 the same proportion as the number of
shares set forth opposite the name of such Underwriter in Schedule A hereto
bears to the total number of Firm Common Shares.
Delivery of certificates for the Firm Common Shares to be purchased by the
Underwriters and payment therefor shall be made at the offices of Montgomery
Securities, 600 Montgomery Street, San Francisco, California (or such other
place as may be agreed upon by the Company and you) at such time and date, not
later than the third full business day following the first date that any of the
Common Shares are released by you for sale to the public, as you shall
designate by at least 48 hours prior notice to the Company (or at such other
time and date, not later than one week after such third full business day as
may be agreed upon by the Company and you) (the "First Closing Date");
provided, however, that if the Prospectus is at any time prior to the First
Closing Date recirculated to the public, the First Closing Date shall occur
upon the later of the third full business day following the first date that any
of the Common Shares are released by you for sale to the public or the date
that is 48 hours after the date that the Prospectus has been so recirculated.
Delivery of certificates for the Firm Common Shares shall be made by or on
behalf of the Company and the Selling Shareholder to you, for your respective
accounts against payment by you of the purchase price therefor by certified or
official bank checks payable in next day funds to the order of the Company and
of the Agent in proportion to the number of Firm Common Shares to be sold by the
Company and the Selling Shareholder, respectively. The certificates for the Firm
Common Shares shall be registered in such names and denominations as you shall
have requested at least two full business days prior to the First Closing Date,
and shall be
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<PAGE> 14
made available for checking and packaging on the business day preceding the
First Closing Date at a location in New York, New York, as may be designated by
you. Time shall be of the essence, and delivery at the time and place specified
in this Agreement is a further condition to the obligations of the Underwriters.
In addition, on the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company and the Selling Shareholder hereby grant an option to you to purchase,
up to an aggregate of 600,000 Optional Common Shares at the purchase price per
share to be paid for the Firm Common Shares, for use solely in covering any
over-allotments made by you in the sale and distribution of the Firm Common
Shares. The option granted hereunder may be exercised at any time (but not more
than once) within 30 days after the first date that any of the Common Shares are
released by you for sale to the public, upon notice by you to the Company and
the Selling Shareholder setting forth the aggregate number of Optional Common
Shares as to which you are exercising the option, the names and denominations in
which the certificates for such shares are to be registered and the time and
place at which such certificates will be delivered. Such time of delivery (which
may not be earlier than the First Closing Date), being herein referred to as the
"Second Closing Date," shall be determined by you, but if at any time other than
the First Closing Date shall not be earlier than three nor later than five full
business days after delivery of such notice of exercise. Unless otherwise agreed
in writing between the Company and the Selling Shareholder, the number of
Optional Common Shares to be sold by the Company shall be determined by
multiplying the aggregate number of Optional Common Shares by a fraction, the
numerator of which is the number of Firm Common Shares sold by the Company and
the denominator of which is 4,000,000 (subject to rounding down to the nearest
whole share to eliminate any fractional share); all remaining Optional Common
Shares shall be sold by the Selling Shareholder. The number of Optional Common
Shares to be purchased by each Underwriter shall be determined by multiplying
the aggregate number of Optional Common Shares to be sold pursuant to such
notice of exercise by a fraction, the numerator of which is the number of Firm
Common Shares to be purchased by such Underwriter as set forth opposite its name
in Schedule A and the denominator of which is 4,000,000 (subject to such
adjustments to eliminate any fractional share purchases as you in your
discretion may make). Certificates for the Optional Common Shares will be made
available for checking and packaging on the business day preceding the Second
Closing Date at a location in New York, New York, as may be designated by you.
The manner of payment for and delivery of the Optional Common Shares shall be
the same as for the Firm Common Shares purchased from the Company and the
Selling Shareholder as specified in the two
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<PAGE> 15
preceding paragraphs. At any time before lapse of the option, you may cancel
such option by giving written notice of such cancellation to the Company and the
Selling Shareholder. If the option is cancelled or expires unexercised in whole
or in part, the Company will deregister under the Act the number of Optional
Common Shares as to which the option has not been exercised.
Subject to the terms and conditions hereof, the Underwriters propose to make a
public offering of their respective portions of the Common Shares as soon after
the effective date of the Registration Statement as in your judgment is
advisable and at the public offering price set forth on the cover page or in the
Term Sheet of, and on the terms set forth in, the Prospectus.
SECTION 6. Covenants of the Company. The Company covenants and agrees
that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at
the time and date that this Agreement is executed and delivered by the
parties hereto, to become effective. If the Registration Statement has
become or becomes effective pursuant to Rule 430A of the Rules and
Regulations, or the filing of the Prospectus or the Term Sheet is
otherwise required under Rule 424(b) of the Rules and Regulations, the
Company will file the Prospectus or the Term Sheet, properly completed,
pursuant to the applicable paragraph of Rule 424(b) of the Rules and
Regulations within the time period prescribed and will provide evidence
satisfactory to you of such timely filing. The Company will promptly
advise you in writing (i) of the receipt of any comments of the
Commission, (ii) of any request of the Commission for amendment of or
supplement to the Registration Statement (either before or after it
becomes effective), any Preliminary Prospectus or the Prospectus or for
additional information, (iii) when the Registration Statement shall
have become effective, and (iv) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement or of the institution of any proceedings for that purpose. If
the Commission shall enter any such stop order at any time, the Company
will use its best efforts to obtain the lifting of such order at the
earliest possible moment. The Company will not file any amendment or
supplement to the Registration Statement (either before or after it
becomes effective), any Preliminary Prospectus, any Term Sheet or the
Prospectus of which you have not been furnished with a copy a
reasonable time prior to such filing or to which you reasonably object
or which is not in compliance with the Act and the Rules and
Regulations.
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<PAGE> 16
(b) The Company will prepare and file with the Commission,
promptly upon your request, any amendments or supplements to the
Registration Statement or the Prospectus which in your judgment may be
necessary or advisable to enable you to continue the distribution of
the Common Shares and will use its best efforts to cause the same to
become effective as promptly as possible. The Company will fully and
completely comply with the provisions of Rules 430A and 434 of the
Rules and Regulations with respect to information omitted from the
Registration Statement in reliance upon such Rules.
(c) If at any time during which a prospectus relating to the
Common Shares is required to be delivered under the Act any event
occurs as a result of which the Prospectus, including any amendments or
supplements, would include an 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 not misleading, or if it is
necessary at any time to amend the Prospectus, including any amendments
or supplements, to comply with the Act or the Rules and Regulations,
the Company will promptly advise you thereof and will promptly prepare
and file with the Commission, at its own expense, an amendment or
supplement which will correct such statement or omission or an
amendment or supplement which will effect such compliance and will use
its best efforts to cause the same to become effective as soon as
possible; and, in case any Underwriter is required to deliver a
prospectus nine months or more after the effective date of the
Registration Statement, the Company upon request, but at the expense of
such Underwriter, will promptly prepare such amendment or amendments to
the Registration Statement and such Prospectus or Prospectuses as may
be necessary to permit compliance with the requirements of Section
10(a)(3) of the Act.
(d) As soon as practicable, but not later than 45 days after
the end of the first quarter ending after one year following the
"effective date of the Registration Statement" (as defined in Rule
158(c) of the Rules and Regulations), the Company will make generally
available to its security holders an earnings statement (which need not
be audited) covering a period of 12 consecutive months beginning after
the effective date of the Registration Statement which will satisfy the
provisions of the last paragraph of Section 11(a) of the Act.
(e) During such period as a prospectus is required by law to be
delivered in connection with sales by an Underwriter or dealer, the
Company, at its expense, subject to the provisions of Section 6(c)
hereof, will furnish to you and the
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<PAGE> 17
Selling Shareholder or mail to your order copies of the Registration
Statement, the Prospectus (including the Term Sheet), the Preliminary
Prospectus and all amendments and supplements to any such documents in
each case as soon as available and in such quantities as you and the
Selling Shareholder may request, for the purposes contemplated by the
Act.
(f) The Company shall cooperate with you and your counsel in
order to qualify or register the Common Shares for sale under (or
obtain exemptions from the application of) the Blue Sky laws of such
jurisdictions as you designate, will comply with such laws and will
continue such qualifications, registrations and exemptions in effect so
long as reasonably required for the distribution of the Common Shares.
The Company shall not be required to qualify as a foreign corporation
or to file a general consent to service of process in any such
jurisdiction where it is not presently qualified or where it would be
subject to taxation as a foreign corporation. The Company will advise
you promptly of the suspension of the qualification or registration of
(or any such exemption relating to) the Common Shares for offering,
sale or trading in any jurisdiction or any initiation or threat of any
proceeding for any such purpose, and in the event of the issuance of
any order suspending such qualification, registration or exemption, the
Company, with your cooperation, will use its best efforts to obtain the
withdrawal thereof.
(g) During the period of five years hereafter, the Company will
furnish to each of you: (i) as soon as practicable after the end of
each fiscal year, copies of the Annual Report of the Company containing
the balance sheet of the Company as of the close of such fiscal year
and statements of income, shareholders' equity and cash flows for the
year then ended and the opinion thereon of the Company's independent
public accountants; (ii) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form 10-K,
Quarterly Report on Form 10-Q, Report on Form 8-K or other report filed
by the Company with the Commission, the NASD or any securities
exchange; and (iii) as soon as available, copies of any report or
communication of the Company mailed generally to holders of its Common
Stock.
(h) During the period of ninety (90) days after the first date
that any of the Common Shares are released by you for sale to the
public, without the prior written consent of Montgomery Securities
(which consent may be withheld at the sole discretion of Montgomery
Securities), the Company will
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<PAGE> 18
not (other than pursuant to outstanding stock options and warrants
disclosed in the Prospectus) issue, offer, sell, grant options to
purchase or otherwise dispose of any of the Company's equity securities
or any other securities convertible into or exchangeable with its
Common Stock or other equity security.
(i) The Company will apply the net proceeds of the sale of the
Common Shares sold by it substantially in accordance with its
statements under the caption "Use of Proceeds" in the Prospectus.
(j) The Company will use its best efforts to list, subject to
official notice of issuance, on the Nasdaq National Market, the shares
of Common Stock to be issued and sold by the Company.
You may, in your sole discretion, waive in writing the performance by
the Company of any one or more of the foregoing covenants or extend the time for
their performance.
SECTION 7. Payment of Expenses. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective or is
terminated, the Company and, unless otherwise paid by the Company, the Selling
Shareholder agree to pay, in such proportions as they may agree upon between
themselves, all costs, fees and expenses incurred in connection with the
performance of their obligations hereunder and in connection with the
transactions contemplated hereby, including without limiting the generality of
the foregoing, (i) all expenses incident to the issuance and delivery of the
Common Shares (including all printing and engraving costs), (ii) all fees and
expenses of the registrar and transfer agent of the Common Stock, (iii) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and sale of the Common Shares to you, (iv) all fees and expenses of the
Company's counsel and the Company's independent accountants, (v) all costs and
expenses incurred in connection with the preparation, printing, filing, shipping
and distribution of the Registration Statement, each Preliminary Prospectus and
the Prospectus (including all exhibits and financial statements) and all
amendments and supplements provided for herein, this Agreement, the Selected
Dealers Agreement and the Blue Sky memorandum, provided that the Underwriters
shall be responsible for their own legal fees and out-of-pocket expenses, (vi)
all filing fees, reasonable attorneys' fees and expenses incurred by the Company
or you in connection with qualifying or registering (or obtaining exemptions
from the qualification or registration of) all or any part of the Common Shares
for offer and sale under the Blue Sky laws, which attorneys' fees shall not, in
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<PAGE> 19
the aggregate, exceed fifteen thousand ($15,000) dollars, (vii) the filing fee
of the National Association of Securities Dealers, Inc. and listing fee of the
Nasdaq National Market, and (viii) all other fees, costs and expenses referred
to in Item 14 of the Registration Statement. The Underwriters will deem the
Company to be the primary obligor with respect to all costs, fees and expenses
to be paid by the Company and by the Selling Shareholder. Except as provided in
this Section 7, Section 9 and Section 11 hereof, you shall pay all of your own
expenses, including the fees and disbursements of your counsel (excluding those
relating to qualification, registration or exemption under the Blue Sky laws and
the Blue Sky memorandum referred to above). This Section 7 shall not affect any
agreements relating to the payment of expenses between the Company and the
Selling Shareholder.
The Selling Shareholder will pay (directly or by reimbursement) all fees and
expenses incident to the performance of his obligations under this Agreement
which are not otherwise specifically provided for herein, including but not
limited to (i) any fees and expenses of counsel for such Selling Shareholder;
(ii) any fees and expenses of the Agent; and (iii) all expenses and taxes
incident to the sale and delivery of the Common Shares to be sold by such
Selling Shareholder to you hereunder.
SECTION 8. Conditions of the Obligations of the Underwriters. The
obligations of the Underwriters to purchase and pay for the Firm Common Shares
on the First Closing Date and the Optional Common Shares on the Second Closing
Date shall be subject to the accuracy of the representations and warranties on
the part of the Company and the Selling Shareholder herein set forth as of the
date hereof and as of the First Closing Date or the Second Closing Date, as the
case may be, to the accuracy of the statements of Company officers and the
Selling Shareholder made pursuant to the provisions hereof, to the performance
by the Company and the Selling Shareholder of their respective obligations
hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 P.M., Washington, D.C. Time, on the date of this
Agreement, or at such later time as shall have been consented to by
you; if the filing of the Prospectus, or any supplement thereto, or of
the Term Sheet is required pursuant to Rule 424(b) of the Rules and
Regulations, such filing shall have been made in the manner and within
the time period required by Rule 424(b) of the Rules and Regulations;
and prior to such Closing Date, no stop order suspending the
effectiveness of
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<PAGE> 20
the Registration Statement shall have been issued and no proceedings
for that purpose shall have been instituted or shall be pending or, to
the knowledge of the Company, the Selling Shareholder or you, shall be
contemplated by the Commission; and any request of the Commission for
inclusion of additional information in the Registration Statement, or
otherwise, shall have been complied with to your satisfaction.
(b) You shall be satisfied that since the respective dates as
of which information is given in the Registration Statement and
Prospectus, (i) there shall not have been any change in the capital
stock (other than pursuant to the exercise of outstanding options and
warrants disclosed in the Prospectus) of the Company or any of its
subsidiaries or any material change in the indebtedness (other than in
the ordinary course of business) of the Company or any of its
subsidiaries, (ii) except as set forth or contemplated by the
Registration Statement or the Prospectus, no material verbal or written
agreement or other transaction shall have been entered into by the
Company or any of its subsidiaries which is not in the ordinary course
of business or which could result in a material reduction in the future
earnings of the Company and its subsidiaries, (iii) no loss or damage
(whether or not insured) to the property of the Company or any of its
subsidiaries shall have been sustained which materially and adversely
affects the condition (financial or otherwise), business, results of
operations or prospects of the Company and its subsidiaries, (iv) no
legal or governmental action, suit or proceeding affecting the Company
or any of its subsidiaries which is material to the Company and its
subsidiaries or which affects or may affect the transactions
contemplated by this Agreement shall have been instituted or
threatened, and (v) there shall not have been any material change in
the condition (financial or otherwise), business, management, results
of operations or prospects of the Company and its subsidiaries which
makes it impractical or inadvisable in the judgment of the
Representatives to proceed with the public offering or purchase the
Common Shares as contemplated hereby.
(c) There shall have been furnished to you on each Closing
Date, in form and substance satisfactory to you, except as otherwise
expressly provided below:
(i) An opinion of Frost & Jacobs, counsel for the Company,
addressed to the Underwriters and dated the First Closing Date,
or the Second Closing Date, as the case may be, to the effect
that:
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<PAGE> 21
(1) The Company has been duly incorporated and is
validly existing as a corporation in good standing under
the laws of the State of Ohio and has full corporate power
and authority to own its properties and conduct its
business as described in the Registration Statement;
(2) The authorized, issued and outstanding capital
stock of the Company is as set forth under the caption
"Capitalization" in the Prospectus; all necessary and
proper corporate proceedings have been taken in order to
authorize validly such authorized Common Stock; all
outstanding shares of Common Stock have been duly and
validly issued, are fully paid and nonassessable, were not
issued in violation of or subject to any preemptive rights
or other rights (of which such counsel has knowledge) to
subscribe for or purchase any securities and conform to the
description thereof contained in the Prospectus; and,
without limiting the foregoing, there are no preemptive or
other rights to subscribe for or purchase any of the Common
Shares to be sold by the Company hereunder;
(3) The certificates evidencing the Common Shares to
be delivered hereunder are in due and proper form under
Ohio law, and when duly countersigned by the Company's
transfer agent and registrar, and delivered to you or upon
your order against payment of the agreed consideration
therefor in accordance with the provisions of this
Agreement, the Common Shares represented thereby will be
duly authorized and validly issued, fully paid and
nonassessable, will not have been issued in violation of
or subject to any preemptive rights or other rights (of
which such counsel has knowledge) to subscribe for or
purchase securities and will conform in all respects to
the description thereof contained in the Prospectus;
(4) Except as disclosed in or specifically
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contemplated by the Prospectus, or pursuant to certain
specifically identified Company benefit plans, to the best
of such counsel's knowledge, there are no outstanding
options, warrants or other rights calling for the issuance
of, and no commitments, plans or arrangements to issue,
any shares of capital stock of the Company or any security
convertible into or exchangeable for capital stock of the
Company;
(5) (a) The Registration Statement has become
effective under the Act, and, to the best of such
counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement or
preventing the use of the Prospectus has been issued
and no proceedings for that purpose have been
instituted or are pending or contemplated by the
Commission; any required filing of the Prospectus, the
Term Sheet and any supplement thereto pursuant to Rule
424(b) of the Rules and Regulations has been made in
the manner and within the time period required by such
Rule 424(b);
(b) The Registration Statement, the Prospectus and
each amendment or supplement thereto (except for the
financial statements and schedules included therein as
to which such counsel need express no opinion) comply
as to form in all material respects with the
requirements of the Act and the Rules and Regulations;
(c) To the best of such counsel's knowledge, there
are no franchises, leases, contracts, agreements or
documents of a character required to be disclosed in
the Registration Statement or Prospectus or to be
filed as exhibits to the Registration Statement which
are not disclosed or filed, as required;
(d) To the best of such counsel's knowledge, there
are no legal or governmental actions, suits or
proceedings pending or threatened against the Company
which are required to be described in the Prospectus
which are not described as required; and
(e) The documents incorporated by
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<PAGE> 23
reference in the Prospectus (except for any financial
statements and schedules included in such documents as
to which such counsel need express no opinion), when
they were filed with the Commission, complied as to
form in all material respects with the requirements of
the Exchange Act and the rules and regulations of the
Commission thereunder; and such counsel has no reason
to believe that any of such documents (except for any
financial statements and schedules included in such
documents as to which such counsel need express no
opinion), when they were so filed, contained an untrue
statement of a material fact or omitted to state a
material fact necessary in order to make the
statements therein, in the light of the circumstances
under which they were made when such documents were so
filed, not misleading.
(6) The Company has corporate power and authority to
enter into this Agreement and to sell and deliver the
Common Shares to be sold by it to the Underwriters; this
Agreement has been duly and validly authorized by all
necessary corporate action by the Company, has been duly
and validly executed and delivered by and on behalf of the
Company, and is a valid and binding agreement of the
Company in accordance with its terms, except as
enforceability may be limited by general equitable
principles, bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights
generally and except as to those provisions relating to
indemnity or contribution for liabilities arising under the
Act as to which no opinion need be expressed and subject to
such other customary exceptions as may be stated by such
counsel which are reasonably acceptable to counsel for the
Underwriters; and no approval, authorization, order,
consent, registration, filing, qualification, license or
permit of or with any court, regulatory, administrative or
other governmental body is required for the execution and
delivery of this Agreement by the Company or the
consummation of the transactions contemplated by this
Agreement, except such as have been obtained and are in
full force and effect under the Act and such as may be
required under applicable Blue Sky laws in connection with
the purchase and
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<PAGE> 24
distribution of the Common Shares by the Underwriters and
the clearance of such offering with the NASD;
(7) The execution and performance of this Agreement
and the consummation of the transactions herein
contemplated will not conflict with, result in the breach
of, or constitute, either by itself or upon notice or the
passage of time or both, a default under, any agreement,
mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument known to such counsel
to which the Company is a party or by which the Company or
any of its property may be bound or affected which is
material to the Company, or violate any of the provisions
of the Articles of Incorporation or Code of Regulations of
the Company or, so far as is known to such counsel, violate
any statute, judgment, decree, order, rule or regulation of
any court or governmental body having jurisdiction over the
Company or any of its property;
(8) The Company is not in violation of its Articles of
Incorporation or its Code of Regulations;
(9) To the best of such counsel's knowledge, no
holders of securities of the Company have rights which have
not been waived to the registration of shares of Common
Stock or other securities because of the filing of the
Registration Statement by the Company or the offering
contemplated hereby; and
(10) No transfer taxes are required to be paid in
connection with the sale and delivery of the Common Shares
by the Company to the
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<PAGE> 25
Underwriters hereunder.
In rendering such opinion, such counsel may rely, as to matters of
local law, on opinions of local counsel and, as to matters of fact, on
certificates of officers of the Company and of governmental officials,
in which case their opinion is to state that they are so doing and that
the Underwriters are justified in relying on such opinions or
certificates and copies of said opinions or certificates are to be
attached to the opinion. Such counsel shall also include a statement to
the effect that nothing has come to such counsel's attention that would
lead such counsel to believe that either at the effective date of the
Registration Statement or at the applicable Closing Date the
Registration Statement or the Prospectus, or any such amendment or
supplement, contains any untrue statement of a material fact or omits
to state a 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.
(ii) An opinion of Keating, Muething & Klekamp, counsel for the
Selling Shareholder, addressed to the Underwriters and dated the First
Closing Date, or the Second Closing Date, as the case may be, to the
effect that:
(1) This Agreement and the Shareholder Agreement have
been duly authorized, executed and delivered by or on
behalf of the Selling Shareholder; the Agent has been duly
and validly authorized to act as the custodian of the
Common Shares to be sold by such Selling Shareholder; and
the performance of this Agreement and the Shareholder
Agreement and the consummation of the transactions herein
contemplated by the Selling Shareholder will not result in
a breach of, or constitute a default under, any indenture,
mortgage, deed of trust, trust (constructive or other),
loan agreement, lease, franchise, license or other
agreement or instrument to which the Selling Shareholder is
a party or by which the Selling Shareholder or any of his
property may be bound, or violate any statute, judgment,
decree, order, rule or regulation known to such counsel of
any court or governmental body having jurisdiction over the
Selling Shareholder or any of his property; and no
approval, authorization, order or consent of any court,
regulatory body, administrative agency or other
governmental body is required for the execution and
delivery of this
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<PAGE> 26
Agreement or the Shareholder Agreement or the consummation
by the Selling Shareholder of the transactions contemplated
by this Agreement, except such as have been obtained and
are in full force and effect under the Act and such as may
be required under the rules of the NASD and applicable Blue
Sky laws;
(2) The Selling Shareholder has full right, power and
authority to enter into this Agreement and the Shareholder
Agreement and to sell, transfer and deliver the Common
Shares to be sold on such Closing Date by such Selling
Shareholder hereunder and good and marketable title to such
Common Shares so sold, free and clear of all perfected
liens, encumbrances, equities, claims, restrictions,
security interests, voting trusts or other defects of title
whatsoever, has been transferred to the Underwriters (whom
counsel may assume to be bona fide purchasers) who have
purchased such Common Shares hereunder;
(3) This Agreement and the Shareholder Agreement are
valid and binding agreements of the Selling Shareholder in
accordance with their terms except as enforceability may be
limited by general equitable principles, bankruptcy,
insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally and except with
respect to those provisions relating to indemnities or
contributions for liabilities under the Act, as to which no
opinion need be expressed; and
(4) No transfer taxes are required to be paid in
connection with the sale and delivery of the Common Shares
owned by the Selling Shareholder to the Underwriters
hereunder.
In rendering such opinion, such counsel may rely, as to matters of
fact, on certificates of the Selling Shareholder, in which case their
opinion is to state that they are so doing and that the Underwriters
are justified in relying on such certificates and copies of said
certificates are to be attached to the opinion. Such counsel shall also
include a statement to the effect that nothing has come to such
counsel's attention that would lead such counsel to believe that either
at the effective date of the Registration Statement or at the
applicable Closing Date the Registration Statement or the Prospectus,
or any such amendment or
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<PAGE> 27
supplement, contains any untrue statement of a material fact or omits
to state a 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.
(iii) Such opinion or opinions of Taft, Stettinius & Hollister,
counsel for the Underwriters, dated the First Closing Date or the
Second Closing Date, as the case may be, with respect to the
incorporation of the Company, the sufficiency of all corporate
proceedings and other legal matters relating to this Agreement, the
validity of the Common Shares, the Registration Statement and the
Prospectus and other related matters as you may reasonably require, and
the Company and the Selling Shareholder shall have furnished to such
counsel such documents and shall have exhibited to them such papers and
records as they may reasonably request for the purpose of enabling them
to pass upon such matters. In connection with such opinions, such
counsel may rely on representations or certificates of officers of the
Company and governmental officials.
(iv) A certificate of the Company executed by the President and
the chief financial or accounting officer of the Company, dated the
First Closing Date or the Second Closing Date, as the case may be, to
the effect that:
(1) The representations and warranties of the Company set
forth in Section 2 of this Agreement are true and correct as of
the date of this Agreement and as of the First Closing Date or
the Second Closing Date, as the case may be, and the Company
has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied on or prior
to such Closing Date;
(2) The Commission has not issued any order preventing or
suspending the use of the Prospectus or any Preliminary
Prospectus filed as a part of the Registration Statement or any
amendment thereto; no stop order suspending the effectiveness
of the Registration Statement has been issued; and to the best
of the knowledge of the respective signers, no proceedings for
that purpose have been instituted or are pending or
contemplated under the Act;
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<PAGE> 28
(3) Each of the respective signers of the certificate has
carefully examined the Registration Statement and the
Prospectus; in his opinion and to the best of his knowledge,
the Registration Statement and the Prospectus and any
amendments or supplements thereto contain all statements
required to be stated therein regarding the Company and its
subsidiaries; and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading;
(4) Since the initial date on which the Registration
Statement was filed, no agreement, written or oral, transaction
or event has occurred which should have been set forth in an
amendment to the Registration Statement or in a supplement to
or amendment of any prospectus which has not been disclosed in
such a supplement or amendment;
(5) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, and
except as disclosed in or contemplated by the Prospectus, there
has not been any material adverse change or a development
involving a material adverse change in the condition (financial
or otherwise), business, properties, results of operations,
management or prospects of the Company and its subsidiaries;
and no legal or governmental action, suit or proceeding is
pending or threatened against the Company or any of its
subsidiaries which is material to the Company and its
subsidiaries, whether or not arising from transactions in the
ordinary course of business, or which may adversely affect the
transactions contemplated by this Agreement; since such dates
and except as so disclosed, neither the Company nor any of its
subsidiaries has entered into any verbal or written agreement
or other transaction which is not in the ordinary course of
business or which could result in a material reduction in the
future earnings of the Company or incurred any material
liability or obligation, direct, contingent or indirect, made
any change in its capital stock, made any material change in
its short-term debt or funded debt or repurchased or otherwise
acquired any of the Company's capital
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<PAGE> 29
stock; and the Company has not declared or paid any dividend,
or made any other distribution, upon its outstanding capital
stock payable to shareholders of record on a date prior to the
First Closing Date or Second Closing Date; and
(6) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus and
except as disclosed in or contemplated by the Prospectus, the
Company and its subsidiaries have not sustained a material loss
or damage by strike, fire, flood, windstorm, accident or other
calamity (whether or not insured).
(v) On the First Closing Date or the Second Closing Date, as
the case may be, a certificate, dated such Closing Date and addressed
to you, signed by the Selling Shareholder to the effect that the
representations and warranties of such Selling Shareholder in this
Agreement are true and correct, as if made at and as of the First
Closing Date or the Second Closing Date, as the case may be, and such
Selling Shareholder has complied with all the agreements and satisfied
all the conditions on his part to be performed or satisfied prior to
the First Closing Date or the Second Closing Date, as the case may be.
(vi) On the date before this Agreement is executed and also on
the First Closing Date and the Second Closing Date a letter addressed
to you and to the Selling Shareholder from Price Waterhouse LLP,
independent accountants, the first one to be dated the day before the
date of this Agreement, the second one to be dated the First Closing
Date and the third one (in the event of a Second Closing) to be dated
the Second Closing Date, in form and substance satisfactory to you.
(vii) On or before the First Closing Date, letters from the
Selling Shareholder and each director and officer of the Company, in
form and substance satisfactory to you, confirming that for a period of
ninety (90) days after the first date that any of the Common Shares are
released by you for sale to the public, such person will not directly
or indirectly sell or offer to sell or otherwise dispose of any shares
of Common Stock or any right to acquire such shares without the prior
written consent of each of the Representatives, which consent may be
withheld at the sole discretion of each of the Representatives.
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<PAGE> 30
All such opinions, certificates, letters and documents shall be in compliance
with the provisions hereof only if they are satisfactory to you and to Taft,
Stettinius & Hollister. The Company shall furnish you with such manually signed
or conformed copies of such opinions, certificates, letters and documents as you
request. Any certificate signed by any officer of the Company and delivered to
you or to your counsel shall be deemed to be a representation and warranty by
the Company to you as to the statements made therein.
If any condition to your obligations hereunder to be satisfied prior to or at
the First Closing Date is not so satisfied, this Agreement at your election will
terminate upon notification by you to the Company and the Selling Shareholder
without liability on the part of any Underwriter, the Company or the Selling
Shareholder except for the expenses to be paid or reimbursed by the Company and
by the Selling Shareholder pursuant to Sections 7 and 9 hereof and except to the
extent provided in Section 11 hereof.
SECTION 9. Reimbursement of Underwriters' Expenses. Notwithstanding any
other provisions hereof, if this Agreement shall be terminated by you pursuant
to Section 8, or if the sale to you of the Common Shares at the First Closing is
not consummated because of any refusal, inability or failure on the part of the
Company or the Selling Shareholder to perform any agreement herein or to comply
with any provision hereof, the Company agrees to reimburse you upon demand for
all out-of-pocket expenses that shall have been reasonably incurred by you in
connection with the proposed purchase and the sale of the Common Shares,
including but not limited to fees and disbursements of counsel, printing
expenses, travel expenses, postage, facsimile and telephone charges relating
directly to the offering contemplated by the Prospectus. Any such termination
shall be without liability of any party to any other party except that the
provisions of this Section, Section 7 and Section 11 shall at all times be
effective and shall apply.
SECTION 10. Effectiveness of Registration Statement. You, the Company
and the Selling Shareholder will use your, its and his best efforts to cause the
Registration Statement to become effective, to prevent the issuance of any stop
order suspending the effectiveness of the Registration Statement and, if such
stop order be issued, to obtain as soon as possible the lifting thereof.
SECTION 11. Indemnification.
(a) The Company and the Selling Shareholder, individually but
not jointly, agree to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of
the Act against any losses, claims, damages, liabilities or expenses,
joint or several, to
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which such Underwriter or such controlling person may become subject,
under the Act, the Exchange Act, or other federal or state statutory
law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the
written consent of the Company), insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or
any amendment or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state in any of them a material
fact required to be stated therein or necessary to make the statements
in any of them not misleading, or arise out of or are based in whole or
in part on any inaccuracy in the representations and warranties of the
Company or the Selling Shareholder contained herein or any failure of
the Company or the Selling Shareholder to perform their respective
obligations hereunder or under law; and will reimburse each Underwriter
and each such controlling person for any legal and other expenses as
such expenses are reasonably incurred by such Underwriter or such
controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that neither the
Company nor the Selling Shareholder will be liable in any such case to
the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment
or supplement thereto in reliance upon and in conformity with the
information furnished to the Company pursuant to Section 4 hereof; and
provided further, in no event shall the aggregate liability of the
Selling Shareholder for indemnification, contribution, reimbursement of
expenses and breach of a representation or warranty exceed the net
proceeds received by the Selling Shareholder in this offering. The
Company and the Selling Shareholder may agree, as between themselves
and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which
they each shall be responsible. In addition to its other obligations
under this Section 11(a), each of the Company and the Selling
Shareholder agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding arising
out of or based upon any statement or omission, or any alleged
statement or omission, or any inaccuracy in the representations and
warranties of the Company or the Selling Shareholder herein or
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<PAGE> 32
failure to perform its obligations hereunder, all as described in this
Section 11(a), it will reimburse each Underwriter on a quarterly basis
for all reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation,
inquiry or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Company's
or the Selling Shareholder's obligation to reimburse each Underwriter
for such expenses and the possibility that such payments might later be
held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have
been improper, each Underwriter shall promptly return it to the
reimbursing party together with interest, compounded daily, determined
on the basis of the prime rate (or other commercial lending rate for
borrowers of the highest credit standing) announced from time to time
by Bank of America NT&SA, San Francisco, California (the "Prime Rate").
Any such interim reimbursement payments which are not made to an
Underwriter within 30 days of a request for reimbursement, shall bear
interest at the Prime Rate from the date of such request. This
indemnity agreement will be in addition to any liability which the
Company or the Selling Shareholder may otherwise have.
(b) Each Underwriter will severally indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement, the Selling Shareholder and each person, if
any, who controls the Company within the meaning of the Act, against
any losses, claims, damages, liabilities or expenses to which the
Company, or any such director, officer, Selling Shareholder or
controlling person may become subject, under the Act, the Exchange Act,
or other federal or state statutory law or regulation, or at common law
or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter),
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof as contemplated below) arise out of or are
based upon any untrue or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or arise out of or are based in
whole or in part on any inaccuracy in the representations and
warranties of the Underwriters contained herein or any failure of the
Underwriters to perform their respective obligations hereunder or
under law, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any
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<PAGE> 33
amendment or supplement thereto, in reliance upon and in conformity
with the information furnished to the Company pursuant to Section 4
hereof; and will reimburse the Company, or any such director, officer,
Selling Shareholder or controlling person for any legal and other
expense reasonably incurred by the Company, or any such director,
officer, Selling Shareholder or controlling person in connection with
investigating, defending, settling, compromising or paying any such
loss, claim, damage, liability, expense or action. In addition to its
other obligations under this Section 11(b), each Underwriter severally
agrees that, as an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or
omission, described in this Section 11(b) which relates to information
furnished to the Company pursuant to Section 4 hereof, it will
reimburse the Company (and, to the extent applicable, each officer,
director, controlling person or Selling Shareholder) on a quarterly
basis for all reasonable legal or other expenses incurred in connection
with investigating or defending any such claim, action, investigation,
inquiry or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company (and, to the extent
applicable, each officer, director, controlling person or Selling
Shareholder) for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement payment
is so held to have been improper, the Company (and, to the extent
applicable, each officer, director, controlling person or Selling
Shareholder) shall promptly return it to the Underwriters together with
interest, compounded daily, determined on the basis of the Prime Rate.
Any such interim reimbursement payments which are not made to the
Company within 30 days of a request for reimbursement, shall bear
interest at the Prime Rate from the date of such request. This
indemnity agreement will be in addition to any liability which such
Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section or to the extent
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<PAGE> 34
it is not prejudiced as a proximate result of such failure. In case any
such action is brought against any indemnified party and such
indemnified party seeks or intends to seek indemnity from an
indemnifying party, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with all
other indemnifying parties similarly notified, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified
party shall have reasonably concluded that there may be a conflict
between the positions of the indemnifying party and the indemnified
party in conducting the defense of any such action or that there may be
legal defenses available to it and/or other indemnified parties which
are different from or additional to those available to the indemnifying
party, the indemnified party or parties shall have the right to select
separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified
party or parties. Upon receipt of notice from the indemnifying party to
such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under
this Section for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless
(i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the
proviso to the next preceding sentence (it being understood, however,
that the indemnifying party shall not be liable for the expenses of
more than one separate counsel, approved by the Representatives in the
case of paragraph (a), representing the indemnified parties who are
parties to such action) or (ii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice
of commencement of the action, in each of which cases the fees and
expenses of counsel shall be at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section 11 is
required by its terms but is for any reason held to be unavailable to
or otherwise insufficient to hold harmless an indemnified party under
paragraphs (a), (b) or (c) in respect of any losses, claims, damages,
liabilities or expenses referred to herein, then each applicable
indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of any losses, claims, damages,
liabilities or expenses referred to herein (i) in such
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proportion as is appropriate to reflect the relative benefits received
by the Company, the Selling Shareholder and the Underwriters from the
offering of the Common Shares or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to
in clause (i) above but also the relative fault of the Company, the
Selling Shareholder and the Underwriters in connection with the
statements or omissions or inaccuracies in the representations and
warranties herein which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The respective relative benefits received by the
Company, the Selling Shareholder and the Underwriters shall be deemed
to be in the same proportion, in the case of the Company and the
Selling Shareholder as the total price paid to the Company and to the
Selling Shareholder, respectively, for the Common Shares sold by them
to the Underwriters (net of underwriting commissions but before
deducting expenses) bears to the total price to the public set forth on
the cover of the Prospectus, and in the case of the Underwriters as the
underwriting commissions received by them bears to the total price to
the public set forth on the cover of the Prospectus. The relative fault
of the Company, the Selling Shareholder and the Underwriters shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact or the inaccurate or the alleged
inaccurate representation and/or warranty relates to information
supplied by the Company, the Selling Shareholder or the Underwriters
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in subparagraph (c) of
this Section 11, any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending
any action or claim. The provisions set forth in subparagraph (c) of
this Section 11 with respect to notice of commencement of any action
shall apply if a claim for contribution is to be made under this
subparagraph (d); provided, however, that no additional notice shall be
required with respect to any action for which notice has been given
under subparagraph (c) for purposes of indemnification. The Company,
the Selling Shareholder and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 11 were
determined solely by pro rata allocation (even if the Underwriters were
treated as one
-35-
<PAGE> 36
entity for such purpose) or by any other method of allocation which
does not take account of the equitable considerations referred to in
the immediately preceding paragraph. Notwithstanding the provisions of
this Section 11, no Underwriter shall be required to contribute any
amount in excess of the amount of the total underwriting commissions
received by such Underwriter in connection with the Common Shares
underwritten by it and distributed to the public. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 11 are individual in
proportion to their respective underwriting commitments and not joint.
(e) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in
Sections 11(a) and 11(b) hereof, including the amounts of any requested
reimbursement payments and the method of determining such amounts,
shall be settled by arbitration conducted under the provisions of the
Constitution and Rules of the Board of Governors of the New York Stock
Exchange, Inc. or pursuant to the Code of Arbitration Procedure of the
NASD. Any such arbitration must be commenced by service of a written
demand for arbitration or written notice of intention to arbitrate,
therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration
tribunal in such demand or notice, then the party responding to said
demand or notice is authorized to do so. Such an arbitration would be
limited to the operation of the interim reimbursement provisions
contained in Sections 11(a) and 11(b) hereof and would not resolve the
ultimate propriety or enforceability of the obligation to reimburse
expenses which is created by the provisions of such Sections 11(a) and
11(b) hereof.
SECTION 12. Default of Underwriters. It shall be a condition to
this Agreement and the obligation of the Company and the Selling Shareholder to
sell and deliver the Common Shares hereunder, and of each Underwriter to
purchase the Common Shares in the manner as described herein, that each of the
Underwriters shall purchase and pay for all the Common Shares agreed to be
purchased by such Underwriter hereunder upon tender to such Underwriter of all
such shares in accordance with the terms hereof. If any Underwriter defaults in
its obligations to purchase Common Shares hereunder on either the First or
Second Closing Date and arrangements satisfactory to the non-defaulting
Underwriter and the Company for the purchase of such Common Shares by other
persons are
-36-
<PAGE> 37
not made within 48 hours after such default, this Agreement will terminate
without liability on the part of the non-defaulting Underwriter or the Company
or the Selling Shareholder except for the expenses to be paid by the Company and
the Selling Shareholder pursuant to Section 7 hereof and except to the extent
provided in Section 11 hereof.
In the event that Common Shares to which a default relates are to be purchased
by the non-defaulting Underwriter or by another party or parties, the
non-defaulting Underwriter or the Company shall have the right to postpone the
First or Second Closing Date, as the case may be, for not more than five
business days in order that the necessary changes in the Registration Statement,
Prospectus and any other documents, as well as any other arrangements, may be
effected. As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. Nothing herein will relieve a
defaulting Underwriter from liability for its default.
SECTION 13. Effective Date. This Agreement shall become effective
immediately as to Sections 7, 9, 11, 14 and 16 and, as to all other provisions,
(i) if at the time of execution of this Agreement the Registration Statement has
not become effective, at 2:00 P.M., California time, on the first full business
day following the effectiveness of the Registration Statement, or (ii) if at the
time of execution of this Agreement the Registration Statement has been declared
effective, at 2:00 P.M., California time, on the first full business day
following the date of execution of this Agreement; but this Agreement shall
nevertheless become effective at such earlier time after the Registration
Statement becomes effective as you may determine on and by notice to the Company
or by release of any of the Common Shares for sale to the public. For the
purposes of this Section 13, the Common Shares shall be deemed to have been so
released upon the release for publication of any newspaper advertisement
relating to the Common Shares or upon the release by you of telegrams offering
the Common Shares for sale to securities dealers.
SECTION 14. Termination. Without limiting the right to terminate this
Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice
to you and the Selling Shareholder or by you by notice to the Company
and the Selling Shareholder at any time prior to the time this
Agreement shall become effective as to all its provisions, and any such
termination shall be without liability on the part of the Company or
the Selling Shareholder to any Underwriter (except for the expenses to
be paid or reimbursed by the Company and the Selling Shareholder
-37-
<PAGE> 38
pursuant to Sections 7 and 9 hereof and except to the extent provided
in Section 11 hereof) or of any Underwriter to the Company or the
Selling Shareholder (except to the extent provided in Section 11
hereof).
(b) This Agreement may also be terminated by you prior to the
First Closing Date by notice to the Company (i) if additional material
governmental restrictions, not in force and effect on the date hereof,
shall have been imposed upon trading in securities generally or minimum
or maximum prices shall have been generally established on the New York
Stock Exchange or on the American Stock Exchange or in the over the
counter market by the NASD, or trading in securities generally shall
have been suspended on either such Exchange or in the over the counter
market by the NASD, or a general banking moratorium shall have been
established by federal, New York or California authorities, (ii) if an
outbreak of major hostilities or other national or international
calamity or any substantial change in political, financial or economic
conditions shall have occurred or shall have accelerated or escalated
to such an extent, as, in the judgment of the Representatives, to
affect adversely the marketability of the Common Shares, (iii) if any
adverse event shall have occurred or shall exist which makes untrue or
incorrect in any material respect any statement or information
contained in the Registration Statement or Prospectus or which is not
reflected in the Registration Statement or Prospectus but should be
reflected therein in order to make the statements or information
contained therein not misleading in any material respect, or (iv) if
there shall be any action, suit or proceeding pending or threatened, or
there shall have been any development or prospective development
involving particularly the business or properties or securities of the
Company or any of its subsidiaries or the transactions contemplated by
this Agreement, which, in the reasonable judgment of the
Representatives, may materially and adversely affect the Company's
business or earnings and makes it impracticable or inadvisable to offer
or sell the Common Shares. Any termination pursuant to this subsection
(b) shall without liability on the part of any Underwriter to the
Company or the Selling Shareholder or on the part of the Company or the
Selling Shareholder to any Underwriter (except for expenses to be paid
or reimbursed by the Company and the Selling Shareholder pursuant to
Sections 7 and 9 hereof and except to the extent provided in Section 11
hereof).
(c) This Agreement shall also terminate at 5:00 P.M.,
California time, on the tenth full business day after the Registration
Statement shall have become effective if the
-38-
<PAGE> 39
initial public offering price of the Common Shares shall not then as
yet have been determined as provided in Section 5 hereof. Any
termination pursuant to this subsection (c) shall without liability on
the part of any Underwriter to the Company or the Selling Shareholder
or on the part of the Company or the Selling Shareholder to any
Underwriter (except for expenses to be paid or reimbursed by the
Company and the Selling Shareholder pursuant to Sections 7 and 9 hereof
and except to the extent provided in Section 11 hereof).
SECTION 15. Failure of the Selling Shareholder to Sell and Deliver. If
the Selling Shareholder shall fail to sell and deliver to you the Common Shares
to be sold and delivered by such Selling Shareholder at the First Closing Date
under the terms of this Agreement, then you may at your option, by written
notice from you to the Company and the Selling Shareholder, either (i) terminate
this Agreement without any liability on the part of any Underwriter or, except
as provided in Sections 7, 9 and 11 hereof, the Company or the Selling
Shareholder, or (ii) purchase the shares which the Company has agreed to sell
and deliver in accordance with the terms hereof. In the event of a failure by
the Selling Shareholder to sell and deliver as referred to in this Section,
either you or the Company shall have the right to postpone the Closing Date for
a period not exceeding seven business days in order that the necessary changes
in the Registration Statement, Prospectus and any other documents, as well as
any other arrangements, may be effected.
SECTION 16. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of the Selling Shareholder and of
the Underwriters set forth in or made pursuant to this Agreement will remain in
full force and effect, regardless of any investigation made by or on behalf of
any Underwriter or the Company or any of its or their partners, officers or
directors or any controlling person, or the Selling Shareholder, as the case may
be, and will survive delivery of and payment for the Common Shares sold
hereunder and any termination of this Agreement.
SECTION 17. Notices. All communications hereunder shall be in writing
and shall be mailed, delivered or sent by facsimile and confirmed to (i)
Montgomery Securities at 600 Montgomery Street, San Francisco, California 94111,
Attention: George M. Vetter, III, and Roney & Co. at One Griswold, Detroit,
Michigan 48226, Attention: John C. Donnelly, with a copy to Timothy E. Hoberg,
Esq., Taft, Stettinius & Hollister, 425 Walnut Street, Cincinnati, Ohio 45202;
(ii) the Company at One Microwave Plaza, Cincinnati, Ohio 45249-9502, Attention:
Jacques A. Robinson, with a copy to
-39-
<PAGE> 40
Neil Ganulin, Esq., Frost & Jacobs, 201 East Fifth Street, Cincinnati, Ohio
45202; and (iii) the Selling Shareholder at 9550 Cunningham Road, Cincinnati,
Ohio 45243, with a copy to Gary P. Kreider, Esq., Keating, Muething & Klekamp,
One East Fourth Street, Cincinnati, Ohio 45202. The Company, the Selling
Shareholder or you may change the address for receipt of communications
hereunder by giving notice to the others.
SECTION 18. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 12 hereof, and to the benefit of the officers and directors
and controlling persons referred to in Section 11, and in each case their
respective successors, personal representatives and assigns, and no other person
will have any right or obligation hereunder. No such assignment shall relieve
any party of its obligations hereunder. The term "successors" shall not include
any purchaser of the Common Shares as such from any of the Underwriters merely
by reason of such purchase.
SECTION 19. Partial Unenforceability. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 20. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the laws pertaining to
conflicts of laws) of the State of California.
SECTION 21. General. This Agreement constitutes the entire agreement of
the parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. This Agreement may be executed in several
counterparts, each one of which shall be an original, and all of which shall
constitute one and the same document.
In this Agreement, the masculine, feminine and neuter genders and the singular
and the plural include one another. The section headings in this Agreement are
for the convenience of the parties only and will not affect the construction or
interpretation of this Agreement. This Agreement may be amended or modified, and
the observance of any term of this Agreement may be waived, only by a writing
signed by the Company, the Selling Shareholder and you.
-40-
<PAGE> 41
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed copies hereof, whereupon it will
become a binding agreement among the Company, the Selling Shareholder and you,
all in accordance with its terms.
Very truly yours,
CINCINNATI MICROWAVE, INC.
By:__________________________
President
SELLING SHAREHOLDER
_____________________________
James L. Jaeger
The foregoing Underwriting Agreement
is hereby confirmed and accepted by
us as of the date first above written.
MONTGOMERY SECURITIES
By:______________________________
Partner
RONEY & CO.
By:______________________________
-41-
<PAGE> 42
SCHEDULE A
<TABLE>
<CAPTION>
Number of Firm
Common Shares
Name of Underwriter to be Purchased
- ------------------- ---------------
<S> <C>
Montgomery Securities ................
Roney & Co.......... .................
---------
TOTAL ......................
4,000,000
=========
</TABLE>
-42-
<PAGE> 43
SCHEDULE B
__________, 1995
PRICE DETERMINATION AGREEMENT
Referring to Section 5 of the Underwriting Agreement dated
__________, 1995, among the Company, the Selling Shareholder and the
Underwriters as therein defined with respect to the purchase and sale of the
Common Shares, we hereby confirm our agreement that the initial public offering
price of the Common Shares shall be $_____ per share; that the underwriting
discount shall be $_____ per share; and that the purchase price to be paid by
the Underwriters for the Common Shares to be purchased from the Company and the
Selling Shareholder shall be $_____ per share.
This Agreement may be executed in various counterparts which
together shall constitute one and the same Agreement.
MONTGOMERY SECURITIES
RONEY & CO.
By Montgomery Securities
By ___________________________
Acting on behalf of the Underwriters
named in the Underwriting Agreement
CINCINNATI MICROWAVE, INC.
By ___________________________
Acting on behalf of the Company
SELLING SHAREHOLDER
______________________________
James L. Jaeger
-43-
<PAGE> 1
Exhibit 4(i)
Articles of Incorporation
-OF-
CINCINNATI MICROWAVE, INC.
--------------------------
(Name of Corporation)
The undersigned, a majority of whom are citizens of the Unites States,
desiring to form a corporation, for profit, under Sections 1701.01 et seq. of
the Revised Code of Ohio, do hereby certify:
FIRST. Then name of said corporation shall be CINCINNATI MICROWAVE, INC.
--------------------------
SECOND. The place in Ohio where its principal office is to be located is
Cincinnati Hamilton County.
------------------------------------------------
(City, Village or Township)
THIRD. The purposes for which it is formed are.
to engage in a manufacturing business having to do with electronic
equipment and supplies; to manufacture, distribute, sell and otherwise deal in
products and electronic components and commodities; and to do all other
things necessary and incident to carry on the foregoing general purposes.
<PAGE> 2
FOURTH. The number of shares which the corporation is authorized to have
outstanding is FIVE HUNDRED (500), all of which 500 shares will be without par
value.
FIFTH. The amount of stated capital with which the corporation shall begin
business is ONE THOUSAND and 00/100------------Dollars ($1,000.00----).
-----------------------------------------------------------
IN WITNESS WHEREOF, We have hereunto subscribed our names, this 15th day of
-----------
October, 1976.
- --------------
CINCINNATI MICROWAVE, INC.
-----------------------------------------
(Name of Corporation)
/s/ CHARLES W. SLICER
-----------------------------------------
Charles W. Slicer
-----------------------------------------
-----------------------------------------
(INCORPORATORS' NAMES SHOULD BE TYPED
OR PRINTED BENEATH SIGNATURES)
N.B. Articles will be returned unless accompanied by form designating statutory
agent. See Section 1701.07, Revised Code of Ohio.
<PAGE> 3
ORIGINAL APPOINTMENT OF AGENT
The undersigned, being at least a majority of the
incorporators of _________________________
(Name of Corporation)
CINCINNATI MICROWAVE. INC.
hereby appoint Michael D. Valentine of Cincinnati, Hamilton County, Ohio
---------------------------------------------------------
(Name of Agent)
a natural person resident in the county in which the corporation has its
principal office _______________________________________
(Name of Corporation)
and __________________________________________________________________________
upon whom any process, notice or demand required or permitted by statute to be
served upon the corporation may be served. His
complete address is 2460 Fairview Avenue, Cincinnati,
---------------------------------------- ---------------
(Street or Avenue) (City or Village)
Hamilton County, Ohio, 45219.
- --------------------------------
(Zip Code)
CINCINNATI MICROWAVE, INC.
--------------------------------------
(Name of Corporation)
/s/ CHARLES W. SLICER
--------------------------------------
Charles W. Slicer
--------------------------------------
--------------------------------------
--------------------------------------
(INCORPORATORS NAMES SHOULD BE TYPED
OR PRINTED BENEATH SIGNATURES)
Hamilton County, Ohio
--------------------------------------
October 15, 1976
--------------------------------------
CINCINNATI MICROWAVE, INC.
- --------------------------------------
(Name of Corporation)
Gentlemen: I hereby accept appointment as agent of your corporation upon
whom process, tax notices or demands may be served.
/s/ MICHAEL D. VALENTINE
-------------------------------------
(Signature of Agent or Name of
Corporation)
By -------------------------------------
(Signature of Officer Signing
and Title)
Remarks: All articles of incorporation must be accompanied by an original
appointment of agent. There is no filing fee for this appointment.
<PAGE> 4
CERTIFICATE OF AMENDMENT
TO ARTICLES OF
CINCINNATI MICROWAVE, INC.
James L. Jaeger, President, and Robert W. Buechner, Secretary, of Cincinnati
Microwave, Inc., an Ohio corporation, with its principal office located at
Cincinnati, Ohio, do hereby certify that in writing signed on July 6, 1983,
under the provisions of Section 1701.54 of the Revised Code by all of the
shareholders who would be entitled to a notice of a meeting held for such
purpose the following resolutions were adopted to amend the articles:
RESOLVED: That the following sections of the Articles of Incorporation
be and the same are hereby amended to supercede and take the place of the
existing sections of the Articles of Incorporation.
THIRD: The purposes for which it is formed are: to engage in a
manufacturing business having to do with electronic equipment and
supplies; to manufacture, distribute, sell and otherwise deal in
products and electronic components and commodities; and to engage in
any lawful act or activity for which corporations may be formed under
Sections 1701.01 to 1701.98, inclusive, of the Ohio Revised Code.
FOURTH: The number of shares of shares which the corporation is
authorized to have outstanding is twenty million (20,000,000), all of
which will be without par value.
RESOLVED: That the following new sections of the Articles of
Incorporation be and they are hereby added to the Articles of
Incorporation.
SIXTH: The corporation, by action of its board of directors,
may purchase, hold in its treasury, and resell from its treasury its
own shares at any time and from time to time subject, however, to the
limitations provided by Section 1701.35(B) of the Ohio Revised Code.
SEVENTH: The holders of common shares are not entitled to
preemptive or other rights to subscribe for or purchase additional
shares or other securities of the corporation.
IN WITNESS WHEREOF, said James L. Jaeger, President, and Robert W. Buechner,
Secretary, of Cincinnati Microwave, Inc., acting for and on behalf of said
corporation have hereunto subscribed their names this 7th day of July, 1983.
BY: /s/ JAMES L. JAEGER BY: /s/ ROBERT W. BUECHNER
---------------------------- ----------------------------------
President Secretary
<PAGE> 5
CERTIFICATE OF AMENDMENT
TO ARTICLES OF
CINCINNATI MICROWAVE, INC.
James L. Jaeger, President, and Robert W. Buechner, Secretary, of
Cincinnati Microwave, Inc., an Ohio coporation, with its principal office
located at Deerfield Twp., Ohio, do hereby certify that in writing signed on
September 26, 1983, under the provisions of Section 1701.54 of the Revised Code
by all of the shareholders who would be entitled to a notice of a meeting held
for such purpose the following resolution was adopted to amend the articles:
RESOLVED: That the following section of the Articles of
Incorporation be and the same is hereby amended by deleting
the current Article Fourth and inserting in place thereof
the following:
FOURTH: The total number of shares which the corporation is
authorized to issue is Twenty Million One Hundred Thousand
(20,100,000), of which Twenty Million (20,000,000) are
common shares, without par value, and One Hundred Thousand
(100,000) are to be of a class designated "Preferred Shares"
which shall have the rights, qualifications, limitations,
designations and preferences as described herein.
The Board of Directors of the corporation shall have the
authority to amend these Articles by adopting appropriate
resolutions and filing the proper documents with the
Secretary of State of Ohio to provide for the issuance of
Preferred Shares in one or more series and thereafter to
issue such Preferred Shares, provided that the aggregate
number of shares issued and not cancelled of any and all
such series shall not exceed the total number of Preferred
Shares hereinabove authorized. The Board, in its
authorizing resolution of resolutions, (1) shall establish
for the shares of each series or Preferred Shares such (a)
voting rights, if any, (b) par value, if any, (c) redemption
provisions, (d) dividend rights, and (e) rights and
preferences upon dissolution or liquidation of the
corporation or upon any distribution of the assets of the
corporation as the Board deems appropriate and desirable,
and (2) may also establish for such shares such (f) rights
to a sinking fund, (g) terms whereunder such shares may be
converted into or exchanged for other securities of the
corporation, or (h) such other relative, participating,
optional or special rights, qualifications, benefits,
<PAGE> 6
limitations or restrictions as the Board deems appropriate
or desirable. Shares of any series or Preferred Shares
which have been redeemed (whether through the operations of
a sinking fund or otherwise) or which, if convertible or
exchangeable, have been converted into or exchanged for
other securities of the corporation shall have the status of
authorized and unissued Preferred Shares to be created by
resolution or resolutions of the Board of Directors or as
part of any other series of Preferred Shares, all subject to
the conditions or restrictions on issuance set forth in the
resolution of resolutions adopted by the Board of Directors
providing for the creation of any series of Preferred
Shares. The number of authorized Preferred Shares may be
increased or decreased by the affirmative vote of holders of
a majority of the outstanding shares of the corporation,
both Preferred and common.
IN WITNESS WHEREOF, said James L. Jaeger, President, and Robert W.
Buechner, Secretary, of Cincinnati Microwave, Inc., acting for and on behalf of
said corporation have hereunto subscribed their names this 26th day of
September, 1983.
BY: /s/ James L. Jaeger BY: /s/ Robert W. Buechner
-------------------------- ----------------------------
President Secretary
<PAGE> 7
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
CINCINNATI MICROWAVE, INC.
Jacques A. Robinson, President, and James F. Whalen, Secretary, of
Cincinnati Microwave, Inc. (the "Corporation"), an Ohio corporation with its
principal office located at Cincinnati, Hamilton County, Ohio, do hereby
certify that the annual meeting of shareholders of the Corporation was duly
called and held on Tuesday, July 23, 1991, at which meeting a quorum of the
shareholders was present in person or by proxy, and by the affirmative vote of
the holders of shares entitling them to exercise two-thirds of the voting power
of the corporation, the following resolution was adopted:
RESOLVED, that the following is to be added
to the Corporation's Articles of Incorporation as
Article Eighth:
EIGHTH: Sections 1701.01(Y) through 1701.01(CC)
and 1701.831 of the Ohio Revised Code shall not
apply to any control share acquisition (as
defined in the Ohio Revised Code) of shares of
the corporation.
IN WITNESS WHEREOF, the said officers acting for and on behalf of the
Corporation have hereunto signed their names as of the 29th day of August,
1991.
CINCINNATI MICROWAVE, INC.
By /s/ Jacques A. Robinson
-------------------------------
Jacques A. Robinson, President
By /s/ James F. Whalen
-------------------------------
James F. Whalen, Secretary
<PAGE> 1
EXHIBIT 4(ii)
REGULATIONS
OF
CINCINNATI MICROWAVE, INC.
AS AMENDED THROUGH JULY 23, 1991
ARTICLE 1.
OFFICE
1.1 The principal office of the Company shall be in Deerfield
Township, Warren County, Ohio.
ARTICLE 2.
SEAL
2.1 The Company shall have a circular seal consisting of two
concentric circles and a logo of the Company and its state of incorporation
shall appear in the inner circle and the name of the Company and the words
"Corporate Seal" shall appear between the concentric circles.
ARTICLE 3.
SHARES
3.1 CERTIFICATES. Certificates evidencing the ownership of shares
of the Company shall be issued to those entitled to them by transfer or
otherwise. The certificates for shares shall be of such tenor and design as
the Board of Directors may from time to time adopt. Each certificate for
shares shall bear a distinguishing number, the signature of the President or
the Vice President, and of the Secretary or an Assistant Secretary, and all
those recitals which are required by law. When such a certificate is
countersigned by an incorporated transfer agent or registrar, the signature of
any of said officers of the corporation may be facsimile, engraved, stamped or
printed. Although any officer of the corporation whose manual or facsimile
signature is affixed to such a certificate shall have ceased to be such officer
before the certificate is issued, such certificate nevertheless shall be
effective in all respects when delivered.
3.2 TRANSFER OF SHARES. The shares of the Company may be
transferred on the proper books of the Company by the registered holders
thereof, by their attorneys legally constituted, or by their legal
representatives. To authorize any transfer such persons shall surrender the
certificate or certificates evidencing the shares to be transferred, such
certificate or certificates to be either endorsed by the owner or accompanied
by a separate written assignment or power of attorney to sell, assign or
transfer such shares.
<PAGE> 2
3.3 LOST CERTIFICATES. The Board of Directors shall have the
authority to regulate procedures concerning certificates alleged to have been
lost, stolen or destroyed and the issuance of new or duplicate certificates to
replace the same.
ARTICLE 4.
SHAREHOLDERS
4.1 ANNUAL MEETING. The annual meeting of the shareholders shall
be held on such date as shall be fixed each year by the Board of Directors.
4.2 SPECIAL MEETING. Special meetings may be called upon the
written request of the Chairman of the Board, the President (or, in the case of
the President's absence, death or disability, the Vice President authorized to
exercise the authority of the President), the Board of Directors by action at a
meeting or by a majority of the Directors acting without a meeting, or by
shareholders representing at least one- fourth (1/4) of all shares entitled to
vote. Calls for such meetings shall specify the time, place and purposes
thereof, and such meetings shall be limited to the purposes so specified.
4.3 NOTICE OF MEETING. Upon the call of a meeting of shareholders
by any person entitled to make such call, the Secretary of the Company shall
cause a written or printed notice of such meeting, stating the time, place and
purposes thereof, to be given to each shareholder of record entitled to vote at
such meeting. Such notice shall be given to each such shareholder by mail or
personal delivery at his, her or its address, as such address appears on the
records of the Company, at least seven (7) days and not more than sixty (60)
days prior to the date of such meeting. Shareholders of record, as that term
is used in this paragraph, means those persons shown on the books of the
Company as shareholders at the close of business on the record date fixed by
the Directors pursuant to Article 5 hereof, or, if not so fixed or if such date
be a legal holiday, the first business day at the time when mailed or
personally delivered. Should the Secretary of the Company fail to give notice
pursuant to this Section, upon request of a person or persons duly authorized
to call a meeting, such notice may be given by the person or persons making
such call.
4.4 PLACE OF MEETING. Meetings of the shareholders shall be held
at the principal office of the Company or at such other place or places as may
be determined by the Board of Directors.
4.5 QUORUM. At all shareholders' meetings a majority of the
shares entitled to vote represented in person or by proxy shall constitute a
quorum for such meeting; provided, however, that no action required by the
General Corporation Law of Ohio to be taken by a specified proportion of the
voting power of the corporation, or of any class of shares, may be taken by a
lesser portion; and, provided further, that the holders of a majority of the
voting shares represented thereat, whether or not a quorum is present, may
adjourn said meeting from time to time.
2
<PAGE> 3
4.6 ORDER OF BUSINESS. At all shareholders meetings, unless
altered by the affirmative vote a majority of the shareholders present at any
such meeting, the order of business shall be as follows:
(a) Reading of minutes of previous meeting;
(b) Reports of Officers and Committees;
(c) Unfinished business;
(d) Election of Directors, including fixing number and
classes of Directors,(when the meeting is the regular
annual meeting or a special meeting called for the
election of Directors); and
(e) New or miscellaneous business.
4.7 PROXIES. Any shareholder entitled to vote at the meeting of
shareholders may be represented and vote thereat by proxy appointed by an
instrument in writing subscribed by such shareholder, or by his duly authorized
attorney-in-fact, and submitted to the Secretary at or before such meeting.
Unless a longer time shall be provided in the writing appointing a proxy, no
proxy shall be valid after eleven (11) months from the date of its execution;
in no event shall any proxy be valid for a period exceeding three (3) years.
All proxies shall be revocable at will, but revocation shall be effective only
upon notice given in writing to the Secretary of the Company (1) by the
shareholder appointing such proxy, (2) by the Executor or Administrator of the
Estate of such appointing shareholder, or (3) by any fiduciary having control
of the shares in respect to which the proxy was appointed.
4.8 INFORMAL ACTION. Unless otherwise provided by law, any action
might be authorized or taken by the shareholders in meeting may be authorized
or taken without a meeting if a writing setting forth the authorization given
or the action taken and which is signed by all shareholders who will be
entitled to notice of a meeting called for such purpose is filed with the
Secretary of the Company.
ARTICLE 5.
RECORD DATE
5.1 RECORD DATE. The Board of Directors shall fix a date, which
shall not be a past date and which shall not precede by more than sixty (60)
days the date of any meeting of shareholders or any dividend or distribution
payment date or any date for the allotment of rights or other matters provided
by law, as a record date for the determination of the shareholders entitled to
notice of such meeting or to vote thereat. or to receive such dividends,
distribution or rights as the case may be.
ARTICLE 6.
DIRECTORS
6.1 NUMBER, QUALIFICATIONS AND ELECTION. The management of the
affairs and business of the Company shall be vested in a Board of Directors
consisting of such number of persons, not less than three (3) nor more than
nine (9), as may be determined from
3
<PAGE> 4
time to time by the shareholders at any annual meeting or any special meeting
called for the election of Directors. The Directors elected at each annual
meeting of shareholders shall hold office until the next annual meeting and
thereafter until their respective successors have been duly elected and
qualified.
6.2 MEETINGS. The Board shall hold its meetings at the principal
office of the Company, or at such other place as may be determined upon by the
Board, at such times as may be decided upon by the Board, and on call of the
President or a majority of the Board, on notice in writing to each Director of
the time and place of such meeting.
6.3 VACANCIES. All vacancies in the Board of Directors, whether
caused by resignation, by death or otherwise, may be filled by a majority of
the remaining Directors attending a meeting of the Board. A director thus
elected to fill any vacancy shall hold office for the unexpired term of his
predecessor and until his successor is elected and qualified.
6.4 QUORUM. A majority of the Board shall constitute a quorum at
all meetings and it shall require the affirmative vote of a majority of the
whole Board to adopt, amend or repeal any measure.
6.5 INFORMAL ACTION. Unless otherwise provided by law, any action
which might be taken by the Directors in meeting may be taken without a meeting
if a consent to such action in writing, signed by all Directors entitled to
vote at a meeting called to take such action, is filled with the Secretary of
the Company.
6.6 EXECUTIVE AND OTHER COMMITTEE. The Board of Directors may
create an executive committee or other committees of no fewer than three member
directors. Such committees shall have an may exercise such powers of the
Board of Directors in the management of the corporation as may be conferred or
authorized by the resolutions appointing them. Such committees shall act only
during the intervals between meetings of the Board of Directors and subject to
the direction of the Board of Directors. Acts of the committee within the
authority delegated to it shall be effective for all purposes as the act or
authorization of the directors. However, no committee shall have the power to
fill vacancies among the directors or in any committee. The Board of Directors
shall have the power at any time to fill vacancies in, to change the membership
of, or to discharge any such committee. A majority of the members of any
committee may determine its action and fix the time and place of its meetings.
Committee members may participate at meetings by means of communications
equipment if all participants can hear each other, and such participation shall
constitute presence at the meeting.
6.7 The Board shall fix the compensation of the Chairman of the
Board, if any, and the President. The compensation of all other officers and
head of departments shall be fixed by the Board or by the President or the
proper executive officer.
6.8 Any meeting of the Board at which all of the Directors are
present shall be a valid meeting, regardless of the giving or omission to give
any prior notice thereof and any lawful business may be transacted at all such
meetings.
4
<PAGE> 5
ARTICLE 7.
OFFICERS
7.1 PRINCIPAL OFFICERS. The principal officers of the Company
shall be a President, one or more Vice Presidents (who shall have such titles
and such duties as are determined by the Board), a Secretary, a Treasurer, and
if desired, a Chairman of the Board. The offices may be held by the same
person, but no officer shall execute, acknowledge, or verify any instrument in
more than one capacity if such instrument is required by law or by the Articles
of Incorporation or the Regulations to be executed, acknowledged, or verified
by two or more officers.
7.2 SUBORDINATE OFFICERS. The Board of Directors may appoint such
Assistant Secretaries, Assistant Treasurers, Controller and other officers as
the Board of Directors may determine, to hold office for such period and with
such authority and to perform such duties as the Board of Directors may from
time to time determine.
7.3 ELECTION, TERM AND ELIGIBILITY. The officers of the Company
shall be elected annually by the Board of Directors at its annual meeting or at
a special meeting held in its place. New or additional officers may be elected
at any meeting of the Board of Directors. Each officer shall hold office until
his successor is chosen or until his death, resignation or removal. Only the
Chairman of the Board need be a member of the Board of Directors. No officer
need be a shareholder of the corporation.
7.4 REMOVAL. Any officer may be removed, with or without cause,
by the Board of Directors without prejudice to the contract rights of such
officer. The election or appointment of an officer for a given term, or a
given provision in the Articles of Incorporation or Regulations with respect to
a term of office, shall not be deemed to create contract rights.
7.5 VACANCIES. If any office shall become vacant by reason of
death, resignation, removal or otherwise, the Board of Directors shall elect a
successor to fill such office.
ARTICLE 8.
DUTIES OF OFFICERS
8.1 THE PRESIDENT. Unless the Board of directors determines
otherwise, the President shall be the chief executive officer of the Company.
He shall have executive authority to see that all orders and resolutions of the
Board of Directors are carried into effect and, subject to the control vested
in the Board of Directors by law, by the Articles of Incorporation or by these
Regulations, shall administer and be responsible for the management of the
business and affairs of the corporation. He shall perform all duties incident
to the office of the President and such other duties as from time to time may
be assigned to him by the Board of Directors.
8.2 THE CHAIRMAN OF THE BOARD. The Chairman of the Board, if any,
shall preside at all meetings of the Board of Directors. He shall have such
other powers and duties as the Board of Directors shall assign to him from time
to time.
5
<PAGE> 6
8.3 THE VICE PRESIDENTS. The Vice Presidents shall perform such
functions as indicated by their title and shall report directly to the
President and perform such duties as may be assigned by the President and by
the Board of Directors.
8.4 THE SECRETARY. The Secretary shall keep a record of all
proceedings of the shareholders and Board of Directors; he shall have custody
of the stock books of the Company or designate an agent for same; he shall
issue and attest all certificates for shares; he shall have charge of the
transfer of shares or designate an agent for same and, generally, perform such
duties as may be required of him by the Board.
8.5 THE TREASURER. The Treasurer shall have charge of the funds
of the Company. He shall keep proper records showing all receipts,
expenditures and disbursements of the Company with vouchers in support thereof.
He shall also be responsible for the selection of depositories for the funds of
the Company and shall perform such other duties as may be assigned to him by
the Board of Directors.
ARTICLE 9.
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES, AND AGENTS
9.1 RIGHT TO INDEMNIFICATION. Each person who was or is a party
or is threatened to be made a party to or is involved in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative ("Proceeding"), by reason of the fact that he
or she, or a person of whom he or she is the legal representative, is or was
director or officer, employee, or agent of the corporation or, as a director or
officer of the corporation, is or was serving at the request of the corporation
as a director, officer, trustee, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such Proceeding is
alleged action in an official capacity as a director, officer, trustee,
employee or agent or in any other capacity, shall be indemnified and held
harmless by the corporation to the fullest extent authorized by law, including
but not limited to the Ohio General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the corporation to provide broader
indemnification rights than such law permitted the corporation to provide prior
to such amendment), against all expenses, liability and loss (including
attorneys' fees, and in respect of claims not made by or in the right of the
corporation, judgments, fines, ERISA, excise taxes or penalties and amounts
paid or to be paid in settlement) actually and reasonably incurred by such
person in connection with any such Proceeding; provided, however, that the
corporation shall indemnify any such person seeking indemnity in connection
with an action, suit or proceeding (or part thereof) initiated by such person
only if such action, suit or proceeding (or part thereof) initiated by such
person was authorized by the Board of Directors. Such right shall include the
right to be paid by the corporation expenses, including attorneys' fees,
incurred in defending any such Proceeding in advance of its final disposition;
provided, however, that the payment of such expenses in advance of the final
disposition of such Proceeding shall be made only upon delivery to the
corporation of an undertaking, by or on behalf of such director, officer,
employee, or agent, in which such director, officer, employee, or agent agrees
(i) to repay all amounts so advanced if it
6
<PAGE> 7
should be ultimately determined by clear and convincing evidence in a court of
competent jurisdiction that such person's action or failure to act involved an
act or omission undertaken with deliberate intent to cause injury to the
corporation or undertaken with reckless disregard for the best interests of the
corporation, and (ii) to cooperate reasonably with the corporation concerning
the Proceeding.
9.2 RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section 9.1
hereof is not paid in full by the corporation within thirty days after a
written claim therefor has been received by the corporation, the claimant may
any time thereafter bring suit against the corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant shall
be entitled to be paid also the expense of prosecuting such suit. It shall be
a defense to any such action (other than an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking has been tendered to the
corporation) that the claimant has not met the standards of conduct which make
it permissible under the applicable law for the corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall
be on the corporation.
9.3 CONTRACTUAL RIGHTS; APPLICABILITY. The right to be
indemnified or to the reimbursement or advancement of expenses pursuant hereto
(i) is a contract right based upon good and valuable consideration, pursuant to
which the person entitled thereto may bring suit as if the provisions hereof
were set forth in a separate written contract between the corporation and the
director, officer, employee or agent, (ii) is intended to be retroactive and
shall be available with respect to events occurring prior to the adoption
hereof, and (iii) shall continue to exist after the rescission or restrictive
modification hereof with respect to events occurring prior thereto.
9.4 NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by Sections 9.1 and 9.2 hereof shall not be exclusive and shall be in addition
to any other right which such person may have or may hereafter acquire under
any statute, provision of the Articles or Regulations, agreement, vote of
shareholders or disinterested directors or otherwise.
9.5 INSURANCE. The corporation may maintain insurance, at its
expense, to protect itself and any such director, officer, employee or agent of
the corporation or another corporation, partnership, joint venture, trust or
other enterprise against such expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under the Ohio General Corporation Law.
ARTICLE 10.
10.1 These regulations may be changed, amended or repealed in
accordance with the laws of the State of Ohio.
7.
<PAGE> 1
FROST & JACOBS EXHIBIT 5
2500 PNC CENTER 201 EAST FIFTH STREET POST OFFICE BOX 5715
CINCINNATI, OHIO 45201-5715 (513) 651-6800
August 10, 1995
Cincinnati Microwave, Inc.
One Microwave Plaza
Cincinnati, Ohio 45249
Re: Cincinnati Microwave, Inc.
Form S-3 Registration Statement
Gentlemen:
We are counsel for Cincinnati Microwave, Inc., an Ohio corporation (the
"Company"), which is named as the registrant in the Registration Statement on
Form S-3 which is being filed on or about August 11, 1995 with the Securities
and Exchange Commission for the purpose of registering under the Securities Act
of 1933, as amended, 4,600,000 common shares, without par value (the "Common
Shares"), of the Company.
With respect to the Common Shares being registered pursuant to such
Registration Statement as filed and as it may be amended, it is our opinion
that the Common Shares (when issued and paid for pursuant to the terms of the
Underwriting Agreement to be entered into among the Company, the Selling
Shareholder and the Underwriters) will be validly issued, fully paid and
nonassessable.
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the Registration Statement.
Very truly yours,
/s/ Frost & Jacobs
0228117.01
OFFICES IN: CINCINNATI, COLUMBUS AND MIDDLETOWN, OHIO LEXINGTON, KENTUCKY
NAPLES, FLORIDA
<PAGE> 1
Exhibit 10(i)
[THE SCOTCREST GROUP
INCORPORATED LETTERHEAD]
May 16, 1995
Cincinnati Microwave, Inc.
One Microwave Plaza
Cincinnati, Ohio 45249
Attention: Gilbert Wachsman
Chairman, Compensation Committee
Re: Extention of Engagement of Services
-----------------------------------
This letter will confirm that Cincinnati Microwave, Inc. (the "Company"
or "CNMW") will continue to engage The Scotcrest Group, Inc., ("Scotcrest") to
provide Executive Services as previously defined and agreed to in the letter of
Engagement of Services dated March 25, 1991 ("Original Agreement"). All of the
terms and conditions of the Original Agreement shall continue except as
provided below.
In order to induce Scotcrest to extend its Original Agreement to
provide Executive Services:
(1) CNMW shall increase the daily fee for the services of Jacques Robinson
to $1,800 per day, effective May 15, 1995.
(2) CNMW shall grant Scotcrest an option to purchase 150,000 shares of
common stock of the Company at $12.25 per share. This option shall vest at the
rate of 37,500 shares per year (on May 15 of 1996, 1997, 1998 and 1999) and the
option shall expire on May 15, 2005.
(3) CNMW shall pay Scotcrest a cash incentive bonus for 1995 results of the
Company as follows: (a) $100,000 for achievement of a reported net income
amount for 1995 determined by the Compensation Committee (the "goal") plus (b)
an amount equal to 4% of reported net income in excess of the goal. There will
be no incentive bonus paid for any results that fail to produce the goal in
1995.
101 First Street, Suite 434, Los Altos, CA 94022 Tel: (415) 949-4067. Fax:
(415) 949-0434
<PAGE> 2
Cincinnati Microwave, Inc.
May 16, 1995
Page Two
If the foregoing is acceptable, please indicate by countersigning this
letter where indicated.
Very truly yours,
THE SCOTCREST GROUP, INC.
By: /s/ Jacques Robinson
----------------------------
Jacques A. Robinson
President & CEO
The foregoing is hereby agreed:
CINCINNATI MICROWAVE, INC.
By: /s/ Gilbert Wachsman
----------------------------
Gilbert Wachsman
Chairman, Compensation Committee of
the Board of Directors
cc: Neil Ganulin, Frost & Jacobs
Charles Fullgraf
Joseph O'Donnell
Erika Williams
<PAGE> 1
kind and whether or not such Obligations are specifically
contemplated as of the date hereof. The absence of any
reference to this Agreement in any documents, instruments or
agreements evidencing or relating to any Obligation secured
hereby shall not limit or be construed to limit the scope or
applicability of this Agreement.
The Bank acknowledges that, without the prior consent
of the lessors, which consent has not been obtained as of the
date of this Agreement, the Company is prohibited from
assigning or pledging its interests in certain equipment, or
its interests as lessee, under the terms of certain equipment
leases for the property identified in Exhibit B attached hereto.
4.2 Representations and Covenants Regarding the
Collateral. The Company represents, warrants and covenants as
follows: The Company (a) except for the security interests
granted hereby, any liens set forth in Exhibit B, and liens
permitted by this Agreement, is, or as to Collateral arising or
to be acquired after the date hereof, shall be, the sole and
exclusive owner of the Collateral, and the Collateral is and
shall remain free from any and all liens, security interests,
encumbrances, claims and interests, and no security agreement,
financing statement, equivalent security or lien instrument or
continuation statement covering any of the Collateral is on
file or of record in any public office; (b) shall not create,
permit or suffer to exist, and shall take such action as is
necessary to remove, any claim to or interest in or lien or
encumbrance upon the Collateral except the security interest
granted hereby and any liens or encumbrances set forth in
Exhibit B, and shall defend the right, title and interest of
the Bank in and to the Collateral against all claims and
demands of all persons and entities at any time claiming the
same or any interest therein; (c) shall maintain its principal
place of business and chief executive office at the address set
forth in paragraph 9.1 of this Agreement, and the records
concerning the Collateral shall be kept at that address unless
the Bank shall give its prior written consent otherwise; (d)
unless the Bank shall give its prior written consent otherwise,
shall keep the Collateral at the locations set forth in Exhibit
C attached hereto and maintain no other place of business or
place where Collateral is located, except as shown in Exhibit C
attached hereto; (e) shall deliver to the Bank at least thirty
(30) days prior to the occurrence of any of the following
events, written notice of such impending events: (i) a change
in the principal place of business or chief executive office;
(ii) the opening or closing of any place of business; or (iii)
a change in name, identity or corporate structure.
4.3 Lockbox and Collection of Accounts. The Company shall
cause all of its accounts to be collected through a lockbox
arrangement with the Bank and shall execute lockbox agreements
in form and substance satisfactory to the Bank. Upon the
occurrence of an Event of Default, the Bank may notify Account
Debtors on any Collateral that the Collateral has been assigned
to the Bank and shall be paid to the Bank through the lockbox
or otherwise. Upon request of the Bank at any time after the
occurrence of an Event of Default, the Company agrees to notify
such Account Debtors and indicate on all billings that the
accounts are payable to the Bank.
4.4 Cash Collection Account. The collections through the
lockbox arrangement and all collections by means of credit card
sales shall be deposited into a cash collection account
maintained with the Bank (the "Cash Collection Account"), over
which the Bank alone shall have the power of withdrawal. If
the Company makes collections on any of the Collateral, it
shall hold in trust for the Bank the proceeds received from
collections, and turn over all checks, drafts, cash and other
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<PAGE> 2
remittances and proceeds to the Bank each business day in the
exact form in which they are received, together with a
collection report in a form acceptable to the Bank. Said
proceeds shall be deposited in the Cash Collection Account. In
the absence of an Event of Default or Pending Default, the Bank
shall apply the whole or any part of funds that have been
deposited into the Cash Collection Account against the
principal and/or interest of the Revolving Loan and the
balance, if any, of such funds shall be paid over and applied
by the Bank to the Company's commercial account. Upon the
occurrence of an Event of Default, the Bank in its discretion
may apply the whole or any part of the collected funds on
deposit in the Cash Collection Account against the principal
and/or interest of the Loan or any other indebtedness or
Obligations, any portion of said funds on deposit in the Cash
Collection Account which the Bank elects not to apply to the
Obligations may be paid over and deposited by Bank to the
Company's commercial account.
4.5 Application of Proceeds from Collection of Accounts;
Setoff; Government Accounts; Perfection; Lien Notation. All
amounts received by the Bank representing payment of Accounts
or proceeds from the sale of Inventory or of the Collateral may
be applied by the Bank to the payment of the Obligations in
such order of preference as the Bank may determine; provided,
however, that in the absence of an Event of Default or a
Pending Default, the Bank shall not apply such amounts to the
payment of the Term Loan or any portion thereof to the extent
that such Term Loan, or any portion thereof, is not due and
payable. The Company also authorizes the Bank at any time
after the occurrence of an Event of Default, without notice, to
appropriate and apply any balances, credits, deposits, accounts
or money of the Company in the Bank's possession, custody or
control to the payment of any of the Obligations whether or not
the Obligations are due or matured. Except with respect to
Accounts producing a maximum aggregate indebtedness not to
exceed $50,000.00 from AAFES, if any of the Accounts arise out
of contracts with or orders from the United States or any
department, agency or instrumentality thereof, the Company
shall immediately (i) notify the Bank thereof in writing and
(ii) execute any instrument and take any steps which the Bank
deems necessary pursuant to the Federal Assignment of Claims
Act of 1940, as amended (41 USC Section 15) in order that all
money due and to become due under such contract or order shall
be assigned to the Bank. The Company agrees to execute,
deliver, file and record all such notices, affidavits,
assignments, financing statements and other instruments as
shall in the good faith judgment of the Bank be necessary or
desirable to evidence, validate and perfect the security
interest of the Bank in the Accounts. If certificates of title
are issued or outstanding with respect to any Inventory or
Equipment, the Company will cause the interest of the Bank to
be properly noted thereon at the Company's expense.
4.6 Collateral Insurance. The Company shall have and
maintain insurance at all times with respect to all Inventory
and Equipment insuring against risks of fire (including
so-called extended coverage), explosion, theft, sprinkler
leakage and such other casualties as the Bank may designate,
containing such terms, in such form, for such amounts, for such
periods and written by such companies as may be satisfactory to
the Bank, and each such policy shall contain a clause or
endorsement satisfactory to the Bank that names the Bank as
additional insured and loss payee, as its interests may appear,
and that provides that no act, default or breach of warranty or
condition of the insured or any other person shall affect the
right of the Bank to recover under such policy or policies of
insurance or to pay any premium in whole or in part relating
thereto. All policies of insurance shall provide for thirty
-7-
<PAGE> 3
(30) days' written minimum notice of cancellation or alteration
to the Bank. The Company shall deliver to the Bank certified
copies of all policies of insurance and evidence of the payment
of all premiums therefor. The Company hereby irrevocably
appoints the Bank (and any of the Bank's officers, employees or
agents designated by the Bank) as attorney in obtaining and
cancelling such insurance and in making, settling and adjusting
all claims under such policies of insurance, endorsing any
check, draft, instrument or other item of payment for the
proceeds of such policies of insurance and for making all
determinations and decisions with respect to such policies of
insurance; provided, however, that the Bank shall not exercise
the power of attorney granted by this section until and unless
(a) an Event of Default shall have occurred or (b) an event of
loss shall have occurred, and the Bank in good faith deems that
the Company is not diligently pursuing its claims. In the
event of failure to provide insurance as herein provided, the
Bank may, at its option, provide such insurance, and the
Company shall pay to the Bank, upon demand, the cost thereof.
Should said sum not be paid to the Bank upon demand, interest
shall accrue thereon from the date of demand until paid in full
at the highest rate set forth in any document or instrument
evidencing any of the Obligations.
4.7 Books and Records. The Company shall at all times
keep accurate and complete records of the Collateral, including
without limitation a perpetual inventory and complete and
accurate stock records, and at all reasonable times and from
time to time, shall allow the Bank, by or through any of its
officers, agents, attorneys or accountants, to examine, inspect
and make extracts from such books and records and to arrange
for verification of the Collateral directly with Account
Debtors or by other methods and to examine and inspect the
Collateral wherever located. In addition, upon request of the
Bank, the Company shall provide the Bank with copies of
agreements with, purchase orders from, and invoices to, the
Account Debtors, and copies of all shipping documents, delivery
receipts, and such other documentation and information relating
to the Collateral as the Bank may require.
4.8 Collateral Administration and Warranties Regarding the
Inventory and the Accounts. (a) The Company shall promptly
perform, on request of the Bank, such acts as the Bank may in
good faith determine to be necessary or advisable to create,
perfect, maintain, preserve, protect and continue the
perfection of any lien and security interest provided for in
this Agreement or otherwise to carry out the intent of this
Agreement, including, without limitation, (i) obtaining waivers
or other similar documents reasonably necessary to permit the
enforcement of the remedies of the Bank hereunder, (ii)
delivering to the Bank warehouse receipts covering any portion
of the Inventory located in warehouses and for which warehouse
receipts are issued, (iii) after the occurrence of an Event of
Default, transferring Inventory to warehouses designated by the
Bank or leasing warehouses containing the Inventory to the Bank
or its designee, (iv) delivering to the Bank copies, and
originals upon the Bank's request, of all letters of credit on
which the Company is named beneficiary, and (vi) if any
Inventory is at any time in the possession or control of a
warehouseman, bailee or any agent, notifying such person of the
Bank's lien and security interest in the Collateral and, upon
the Bank's request, instructing such persons to hold all
Collateral for the Bank's account subject to the Bank's
instruction; (b) the Company warrants that each of the Eligible
Accounts is based on an actual bona fide, and genuine (i) sale
and delivery of goods or (ii) rendering or performance of
services in the ordinary course of business, the Account
Debtors have accepted such goods or services and
unconditionally owe and are obligated to pay the full amounts
-8-
<PAGE> 4
reflected in the invoices according to the terms thereof
without any defense, offset or counterclaim, (c) all of the
shipping and delivery receipts and other documents to be given
to the Bank with respect to the Accounts will be genuine, and
if there are any disputes with any of the Accounts, the Company
will notify the Bank promptly and resolve or settle such
dispute at no expense or detriment to the Bank; (d) without the
prior written consent of the Bank, the Company shall not (i)
extend, amend or otherwise modify the terms of any Account,
(ii) amend, modify or waive any term or condition of any
contractual obligation related thereto or (iii) redate any
invoice or sale or make sales on extended dating beyond that
customary in the Company's industry; provided, however, that
the Company may extend, amend or otherwise modify the terms of
any Account in the ordinary course of business, or amend,
modify or waive any term or condition or any contractual
obligation related thereto, if such extension, amendment,
modification or waiver does not cause an Account to become or
otherwise remain (but for such action) an Eligible Account.
4.9 Preservation and Disposition of Collateral. The
Company shall (a) obtain, prior to the placement of any
Collateral in or upon any leased or mortgaged real property, a
waiver from the lessor and/or the mortgagee, as the case may
be, with respect to the rights (whether present or future) of
the lessor or mortgagee with respect to that Collateral; (b)
advise the Bank promptly, in writing and in reasonable detail,
(i) of any material encumbrance or claim asserted against any
of the Collateral; (ii) of any material change in the
composition of the Collateral; and (iii) of the occurrence of
any other event that would have a material adverse effect upon
the aggregate value of the Collateral or upon the security
interest of the Bank; (c) not sell or otherwise dispose of the
Collateral, except for the sale of the Inventory in the
ordinary course of business, the sale during any fiscal year of
Equipment having an aggregate value not exceeding $50,000.00,
and the sale during any fiscal year of obsolete Inventory or
Equipment, the proceeds of all of which sales shall be paid to
the Bank for application first against the principal and/or
interest of the Revolving Loan and then to any other
Obligations of the Company to the Bank; (d) keep the Collateral
in good condition and shall not misuse, abuse, secrete, waste
or destroy any of the same; (e) not use the Collateral in
violation of any statute, ordinance, regulation, rule, decree
or order; (f) not permit to become liens or encumbrances any
taxes, assessments, charges or levies upon the Collateral or in
respect to the income or profits therefrom; and (g) at its
option, the Bank may discharge taxes, liens, security interests
or other encumbrances at any time levied or placed on the
Collateral and may pay for the maintenance and preservation of
the Collateral. The Company agrees to reimburse the Bank upon
demand for any payment made or any expense incurred (including
reasonable attorneys' fees) by the Bank pursuant to the
foregoing authorization. Should said sum not be paid to the
Bank upon demand, interest shall accrue thereon, from the date
of demand until paid in full, at the highest rate set forth in
any document or instrument evidencing any of the Obligations.
4.10 Extensions and Compromises. With respect to any
Collateral, the Company assents to all extensions or
postponements of the time of payment thereof or any other
indulgence in connection therewith, to each substitution,
exchange or release of Collateral, to the addition or release
of any party primarily or secondarily liable, to the acceptance
of partial payments thereon and to the settlement, compromise
or adjustment thereof, all in such manner and at such time or
times as the Bank may deem advisable. The Bank shall have no
duty as to the collection or protection of Collateral or any
income therefrom, nor as to the preservation of rights against
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<PAGE> 5
prior parties, nor as to the preservation of any right
pertaining thereto, beyond the safe custody of Collateral in
the possession of the Bank.
4.11 Financing Statements. At the request of the Bank, the
Company shall join with the Bank in executing, delivering and
filing one or more financing statements in a form satisfactory
to the Bank and shall pay the cost of filing the same in all
public offices wherever filing is deemed by the Bank to be
necessary or desirable. A carbon, photographic or other
reproduction of this Agreement or of a financing statement
shall be sufficient as a financing statement.
4.12 Bank's Appointment as Attorney-in-Fact. The Company
hereby irrevocably constitutes and appoints the Bank and any
officer or agent thereof, with full power of substitution, as
the Company's true and lawful attorney-in-fact with full
irrevocable power and authority in its place and stead and in
its name or in the Bank's own name, from time to time in the
Bank's discretion, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to
execute any and all documents and instruments that may be
necessary or desirable to accomplish the purposes of this
Agreement and, without limiting the generality of the
foregoing, hereby grants to the Bank the power and right, on
behalf of the Company, without notice to or assent: (a) to
execute, file and record all such financing statements,
certificates of title and other certificates of registration
and operation and similar documents and instruments as the Bank
may deem necessary or desirable to protect, perfect and
validate the Bank's security interest in the Collateral; (b) to
receive, collect, take, indorse, sign, and deliver in the
Company's or the Bank's name, any and all checks, notes,
drafts, or other documents or instruments relating to the
Collateral; and (c) upon the occurrence of an Event of Default,
(i) to notify postal authorities to change the address for
delivery of the Company's mail to an address designated by the
Bank, (ii) to open such mail delivered to the designated
address, (iii) to sign and indorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications and notices
in connection with accounts and other documents relating to the
Collateral; (iv) to commence and prosecute any suits, actions
or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and
to enforce any other right in respect of any Collateral; (v) to
defend any suit, action or proceeding brought with respect to
any Collateral; (vi) to negotiate, settle, compromise or adjust
any account, suit, action or proceeding described above and, in
connection therewith, to give such discharges or releases as
the Bank may deem appropriate; and (vii) generally, to sell,
transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and
completely as though the Bank were the absolute owner thereof
for all purposes, and to do, at the Bank's option, at any time
or from time to time, all acts and things which the Bank deems
necessary to protect, preserve or realize upon the Collateral
and the Bank's security interest therein, in order to effect
the intent of this Agreement.
The Company hereby ratifies all that said attorneys
shall lawfully do or cause to be done by virtue hereof. This
power of attorney is a power coupled with an interest and shall
be irrevocable. The powers conferred upon the Bank hereunder
are solely to protect its interests in the Collateral and shall
not impose any duty upon the Bank to exercise any such powers.
The Bank shall be accountable only for amounts that the Bank
actually receives as a result of the exercise of such powers
and neither the Bank nor any of its officers, directors,
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<PAGE> 6
employees or agents shall be responsible to the Company for any
act or failure to act, except for the Bank's own gross
negligence or willful misconduct.
4.13 No Consequential Damages. No claim may be made by the
Company, any officers, directors, or agents against the Bank or
its affiliates, directors, officers, employees, attorneys or
agents for any special, direct, indirect, or consequential
damages in respect of any breach or wrongful conduct (whether
the claim therefor is based on contract, tort or duty imposed
by law) in connection with, arising out of or in any way
related to the transactions contemplated and relationship
established by this Agreement, or any act, omission or event
occurring in connection therewith, and the Company hereby
waives, releases and agrees not to sue upon any such claim for
any such damages, whether or not accrued and whether or not
known or suspected to exist in its favor.
4.14 Remedies on Default. Upon the occurrence of an Event
of Default, the Bank shall have the rights and remedies of a
secured party under this Agreement, under any other instrument
or agreement securing, evidencing or relating to the
Obligations and under the law of the State of Ohio or any other
applicable state law. Without limiting the generality of the
foregoing, the Bank shall have the right to take possession of
the Collateral and all books and records relating to the
Collateral and for that purpose the Bank may enter upon any
premises on which the Collateral or books and records relating
to the Collateral or any part thereof may be situated and
remove the same therefrom. Except for the notices specified
below of time and place of public sale or disposition or time
after which a private sale or disposition is to occur, the
Company expressly agrees that the Bank, without demand of
performance or other demand, advertisement or notice of any
kind to or upon the Company or any other person or entity (all
and each of which demands, advertisements and/or notices are
hereby expressly waived), may, after the occurrence of an Event
of Default, forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and/or may forthwith
sell, lease, assign, give option or options to purchase or sell
or otherwise dispose of and deliver the Collateral (or contract
to do so), or any part thereof, in one or more parcels at
public or private sale or sales, at any of the Bank's offices
or elsewhere at such prices as the Bank may deem best, for cash
or on credit or for future delivery without assumption of any
credit risk. The Bank shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any
part of the Collateral so sold, free of any right or equity of
redemption. The Company further agrees, (a) at the Bank's
request, to assemble the Collateral and to make it available to
the Bank at such places as the Bank may reasonably select and
(b) to allow the Bank to use or occupy the Company's premises,
without charge, for the purpose of effecting the Bank's
remedies in respect of the Collateral. The Bank shall apply
the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred in
connection therewith or incidental to the care or safekeeping
of any or all of the Collateral or in any way relating to the
rights of the Bank hereunder, including reasonable attorneys'
fees and legal expenses, to the payment in whole or in part of
the Obligations, in such order as the Bank may elect, and only
after so paying over such net proceeds and after the payment by
the Bank of any other amount required by any provision of law,
need the Bank account for the surplus, if any. To the extent
permitted by applicable law, the Company waives all claims,
damages and demands against the Bank arising out of the
repossession, retention, sale or disposition of the Collateral
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<PAGE> 7
and agrees that the Bank need not give more than seven days'
notice pursuant to the terms of this Agreement of the time and
place of any public sale or of the time after which a private
sale may take place and that such notice is reasonable
notification of such matters. The Company shall remain liable
for any deficiency if the proceeds of any sale or disposition
of the Collateral are insufficient to pay all amounts to which
the Bank is entitled and shall also be liable for the costs of
collecting any of the Obligations or otherwise enforcing the
terms thereof or of this Agreement, including reasonable
attorneys' fees.
4.15 Mortgage. As additional security for the Loan, the
Company shall also grant to the Bank a first and exclusive
open-end mortgage upon all of the real estate owned by the
Company and located in Warren County, Ohio (the "Real
Property") which open-end mortgage shall contain terms and
conditions satisfactory to the Bank.
4.16 Intellectual Property. The Company shall execute such
other documents and take such further actions as the Bank in
its sole and absolute good faith discretion may deem necessary
or desirable to create, perfect, maintain, preserve, protect
and continue in favor of the Bank a first and exclusive
security interest in all of the Company's Intellectual Property.
5. Warranties and Representations. The Company warrants
and represents to the Bank:
5.1 Corporate Organization and Authority. The Company (a)
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio; (b) has all
requisite corporate power and authority and all necessary
licenses and permits to own and operate its properties and to
carry on its business as now conducted and as presently
proposed to be conducted; and (c) is not doing business or
conducting any activity in any jurisdiction in which it has not
duly qualified and become authorized to do business, except
where the failure to do so does not have a material adverse
affect upon the business, properties, prospects, profits or
condition (financial or otherwise) of the Company.
5.2 Borrowing is Legal Authorized. (a) The Board of
Directors of the Company has duly authorized the execution and
delivery of this Agreement and of the notes and documents
contemplated herein; this Agreement, the notes and other
documents executed in connection with this Agreement will
constitute valid and binding obligations enforceable in
accordance with their respective terms; (b) the execution of
this Agreement and related notes and documents and the
compliance with all the provisions of this Agreement (i) are
within the corporate powers of the Company; and (ii) except as
disclosed in Section 4.1 above, are legal and will not conflict
with, result in any breach in any of the provisions of,
constitute a default under, or result in the creation of any
lien or encumbrance upon any property of the Company under the
provisions of, any agreement, charter instrument, bylaw, or
other instrument to which the Company is a party or by which it
may be bound; (c) there are no limitations in any indenture,
contract, agreement, mortgage, deed of trust or other agreement
or instrument to which the Company is now a party or by which
the Company may be bound with respect to the payment of
principal or interest on any indebtedness, or the Company's
ability to incur indebtedness including the notes to be
executed in connection with this Agreement.
5.3 Taxes. Except for those tax returns referred to in
Exhibit E attached hereto, for which extensions of the time for
filing have been duly sought and obtained by the Company and
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<PAGE> 8
have not expired, all tax returns required to be filed by the
Company in any jurisdiction have in fact been filed, and all
taxes, assessments, fees and other governmental charges upon
the Company, or upon any of its properties, which are due and
payable have been paid. The Company does not know of any
proposed additional tax assessment against it. The accruals
for taxes on the books of the Company for its current fiscal
period are adequate.
5.4 Capital Structure. Set forth in Exhibit D attached
hereto is a list that accurately represents to the Bank the
following: (a) the classes of capital stock of the Company and
par value of each such class, all as authorized by the
Company's Articles of Incorporation and the number of shares of
each such class of stock issued and outstanding, and (b) the
number of shares of each class of capital stock for which James
L. Jaeger is the registered owner or holder (either legally or
beneficially). All shares of all classes of capital stock
issued are fully paid and nonassessable. Except for the
issuance of common stock of the Company pursuant to the Stock
Registration, and except for certain stock options as
disclosed by the Company in its Form 10-K filed with the
Securities and Exchange Commission for the fiscal year ended
December 26, 1993, the Company does not have outstanding any
other stock or other equity security, or any other instrument
convertible to an equity security of the Company, or any
commitment, understanding, agreement or arrangement to issue,
sell or have outstanding any of the foregoing.
5.5 Compliance with Law. The Company (a) is not in
violation of any laws, ordinances, governmental rules or
regulations to which it is subject, including without
limitation any laws, rulings or regulations relating to the
Employee Retirement Income Security Act of 1974 or Section 4975
of the Internal Revenue Code and (b) has not failed to obtain
any licenses, permits, franchises or other governmental or
environmental authorizations necessary to the ownership of its
properties or to the conduct of its business, which violation
or failure might materially and adversely affect the business,
prospects, profits, properties or condition (financial or
otherwise) of the Company.
5.6 Financial Statements; Full Disclosure. The financial
statements for the fiscal year ending December 26, 1993, and
the fiscal quarter ending March 27, 1994, which have been
supplied to the Bank, have been prepared in accordance with
generally accepted accounting principles consistently applied
and fairly represent the Company's financial condition as of
such date No material adverse change in the Company's
financial condition has occurred since March 27, 1994. To the
best of the Company's knowledge, the financial statements
referred to in this paragraph do not, nor does this Agreement
or any written statement furnished by the Company to the Bank
in connection with obtaining the Loan, contain any untrue
statement of a material fact or omit a material fact necessary
to make the statements contained therein or herein not
misleading. The Company has disclosed to the Bank in writing
all financial information, pending litigation, administrative
proceedings, and arbitration proceedings, which materially
affect the properties, business, prospects, profits or
condition (financial or otherwise) of the Company or the
ability of the Company to perform this Agreement.
5.7 No Insolvency. On the date of this Agreement and
after giving effect to all indebtedness of the Company
(including the Loan), the Company (a) will be able to pay its
obligations as they become due and payable; (b) has assets, the
present fair saleable value of which exceeds the amount that
will be required to pay its probable liability on its
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<PAGE> 9
obligations as the same become absolute and matured; (c) has
sufficient property, the sum of which at a fair valuation
exceeds all of its indebtedness; (d) will have sufficient
capital to engage in the its business; and (e) its grant of the
Collateral for the Loan constitutes fair consideration and
reasonably equivalent value because of the receipt of the
proceeds of the Loan.
5.8 Government Consent. Neither the nature of the Company
or of its business or properties, nor any relationship between
the Company and any other entity or person, nor any
circumstance in connection with the execution of this
Agreement, is such as to require a consent, approval or
authorization of, or filing, registration or qualification
with, any governmental authority on the part of the Company as
a condition to the execution and delivery of this Agreement and
the notes and documents contemplated herein.
5.9 Title to Properties. The Company (a) has good title
to all the property in which it has a property interest, free
from any liens and encumbrances, except as set forth on Exhibit
B attached to this Agreement, and (b) has not agreed or
consented to cause or permit in the future (upon the happening
of a contingency or otherwise) any of its property whether now
owned or hereafter acquired to be subject to a lien or
encumbrance except as provided in this paragraph.
5.10 No Defaults. No event has occurred and no condition
exists which would constitute an Event of Default pursuant to
this Agreement. The Company is not in violation in any
material respect of any term of any agreement, charter
instrument, bylaw or other instrument to which it is a party or
by which it may be bound.
5.11 Environmental Protection. The Company (a) has no
actual knowledge of the permanent placement, burial or disposal
of any Hazardous Substances (as hereinafter defined) on any
real property owned, leased, or used by the Company (the
"Premises"), of any spills, releases, discharges, leaks, or
disposal of Hazardous Substances that have occurred or are
presently occurring on, under, or onto the Premises, or of any
spills, releases, discharges, leaks or disposal of Hazardous
Substances that have occurred or are occurring off the Premises
as a result of the improvement, operation, or use of the
Premises which would result in non-compliance with any of the
Environmental Laws (as hereinafter defined); (b) is and has
been in compliance with all applicable Environmental Laws in
all material respects; (c) knows of no pending or threatened
environmental civil, criminal or administrative proceedings
against the Company relating to Hazardous Substances; (d) knows
of no facts or circumstances that would give rise to any future
civil, criminal or administrative proceeding against the
Company relating to Hazardous Substances; and (e) will not
permit any of its employees, agents, contractors,
subcontractors, or any other person occupying or present on the
Premises to generate, manufacture, store, dispose or release
on, about or under the Premises any Hazardous Substances which
would result in the Premises not complying in all material
respects with the Environmental Laws.
As used herein, "Hazardous Substances" shall mean and
include all hazardous and toxic substances, wastes, materials,
compounds, pollutants and contaminants (including, without
limitation, asbestos, polychlorinated biphenyls, and petroleum
products) which are included under or regulated by the
Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Section 9601, et seq., the
Hazardous Materials Transportation Act, as amended (49 U.S.C.
Section 1801 et seq.), the Toxic Substances Control Act, 15 U.S.C.
- 14 -
<PAGE> 10
Section 2601, et seq., the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq., the Water Quality Act of 1987, 33 U.S.C.
Section 1251, et seq., the Clean Water Act, as amended (33 U.S.C.
Section 1321 et seq.), and the Clean Air Act, 42 U.S.C. Section 7401, et
seq., and any other federal, state or local statute, ordinance,
law, code, rule, regulation or order regulating or imposing
liability (including strict liability) or standards of conduct
regarding Hazardous Substances (hereinafter the "Environmental
Laws"), but does not include such substances as are permanently
incorporated into a structure or any part thereof in such a way
as to preclude their subsequent release into the environment,
or the permanent or temporary storage or disposal of household
hazardous substances by tenants, and which are thereby exempt
from or do not give rise to any violation of the forementioned
Environmental Laws.
5.12 Warranties and Representations. On the date of each
advance pursuant to the Loan, the warranties and
representations set forth in Section 5 hereof shall be true and
correct on and as of such date with the same effect as though
such warranties and representations had been made on and as of
such date, except to the extent that such warranties and
representations expressly relate to an earlier date.
6. Company Business Covenants. The Company covenants
that on and after the date of this Agreement until terminated
pursuant to the terms of this Agreement, or so long as any of
the indebtedness provided for herein remains unpaid:
6.1 Payment of Taxes and Claims. The Company will pay
before they become delinquent (a) all taxes, assessments and
governmental charges or levies imposed upon it or its property;
and (b) all claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords, bailees and other like
persons, any of the foregoing which, if unpaid, might result in
the creation of a lien or encumbrance upon its property;
provided, however, that the Company may withhold payment of
such taxes, assessments, governmental charges, levies, claims
and demands so long as the Company is contesting the same in
good faith, is diligently prosecuting the same by appropriate
proceedings and has established adequate book reserves with
respect thereto; provided, however, that none of the foregoing
has resulted in the creation of a lien or encumbrance against
the Collateral.
6.2 Maintenance of Properties and Corporate Existence.
The Company shall (a) maintain its property in good condition,
ordinary wear and tear excepted, and make all renewals,
replacements, additions, betterments and improvements thereto
which it deems necessary; (b) maintain, with financially sound
and reputable insurers, insurance with respect to its
properties and business against such casualties and
contingencies, of such types (including but not limited to fire
and casualty, public liability, products liability, larceny,
embezzlement or other criminal misappropriation insurance) in
such amounts as is customary in the case of entities of
established reputations engaged in the same or a similar
business and similarly situated; (c) keep true books of records
and accounts in which full and correct entries will be made of
all its business transactions, and reflect in its financial
statements adequate accruals and appropriations to reserves;
(d) do or cause to be done all things necessary (i) to preserve
and keep in full force and effect its existence, rights and
franchises, and (ii) to maintain its status as a corporation
duly organized and existing and in good standing under the laws
of the state of its incorporation; and (e) not be in violation
of any laws, ordinances, or governmental rules and regulations
or fail to obtain any licenses, permits, franchises or other
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<PAGE> 11
governmental authorizations necessary to the ownership of its
properties or to the conduct of its business, which violation
or failure to obtain might materially and adversely affect the
business, prospects, profits, properties or condition
(financial or otherwise) of the Company.
6.3 Sale of Assets; Merger; Subsidiaries; Tradenames. The
Company shall not (a) except in the ordinary course of business
and except as set forth in Section 4.9 herein, sell, lease,
transfer or otherwise dispose of, any of its assets; provided,
however, that the Company may sell, lease, transfer or
otherwise dispose of assets having a fair market value not to
exceed $100,000.00 in the aggregate during any fiscal year, (b)
without the prior written consent of the Bank consolidate with,
merge into, or make investments in any other entity, except for
those investments permitted by Section 6.24 hereof, or permit
any other entity to consolidate with or merge into it, (c)
acquire all or substantially all of the assets or business of
any other company, person or entity, or (d) create or acquire
any subsidiaries without the prior written consent of the
Bank. Except for the subsidiaries listed in Exhibit F attached
hereto, which subsidiaries are and shall remain inactive,
wholly-owned subsidiaries of the Company, the Company has no
subsidiaries and presently conducts business only in the
name(s) of the Company and those names referred to in one or
more security agreements executed and delivered to the Company
by the Bank in connection with this Agreement. The Company
will promptly notify the Bank of its intent to conduct business
in any other name and shall execute such security agreements,
financing statements, amendments thereto or other instruments
and agreements as the Bank in good faith deems necessary in
order to create, maintain, preserve, protect and continue its
first and exclusive perfected security interest in the
Collateral.
6.4 Negative Pledge. The Company will not cause or permit
or agree or consent to cause or permit in the future (upon the
happening of a contingency or otherwise), any of its real or
personal property, whether now owned or hereafter acquired, to
become subject to a lien or encumbrance, except: (i) liens in
connection with deposits required by workers' compensation,
unemployment insurance, social security and other like laws;
(ii) taxes, assessments, reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions,
restrictions, leases and other similar title exceptions or
encumbrances affecting real property, provided they do not in
the aggregate materially detract from the value of said
property or materially interfere with its use in the ordinary
conduct of business; (iii) inchoate liens arising under ERISA
to secure the contingent liability of the Company; (iv) liens
as set forth in Exhibit B attached to this Agreement; and (v)
liens in connection with borrowings permitted by Section 6.5
below. In addition, the Company will not grant or agree to
provide in the future (upon the happening of a contingency or
otherwise), a "negative pledge" or other covenant or agreement
similar to this Section 6.4 in favor of any other lender,
creditor or third party.
6.5 Other Borrowings and Contingent Liabilities. Except
for (i) the Loan, (ii) the capitalized lease agreements
reflected on Exhibit B to this Agreement, and (iii) purchase
money financing transactions secured by the item or items being
purchased, in an amount not to exceed the purchase price of
such item or items, that, in the aggregate, do not exceed the
sum of $100,000.00 in any one fiscal year, the Company will not
(a) create or incur extensions of credit or indebtedness,
including without limitation, any indebtedness or liability for
borrowed money or advances, letters of credit, or capitalized
lease agreements or (b) guarantee, indorse or otherwise become
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<PAGE> 12
surety for or upon the obligations of others, except by
indorsement of negotiable instruments for deposit or collection
in the ordinary course of business.
6.6 Sale of Accounts; No Consignment. The Company shall
not sell, assign, or encumber, except to the Bank, any of its
Accounts or notes receivable. Except with respect to sales or
transfers of obsolete Inventory or Equipment, the Company shall
not permit any of its Inventory or Equipment to be sold or
transferred on consignment or acquire or possess any of its
inventory on consignment.
6.7 Minimum Security . The Company shall maintain, as
minimum security for (x) the Revolving Loan and Letters of
Credit, Eligible Inventory and Eligible Accounts having an
aggregate value such that the Borrowing Base will equal or
exceed the aggregate unpaid principal balance of the Revolving
Loan plus the aggregate stated value of the outstanding Letters
of Credit, and if the Company fails to do so, the Company shall
immediately pay to the Bank the difference between (a) the sum
of (i) the aggregate unpaid principal balance of the Revolving
Loan, plus (ii) the aggregate stated value of the outstanding
Letters of Credit, and (b) the Borrowing Base; and (y) the Term
Loan, Equipment in which the Bank has a first and exclusive
perfected security interest and Real Property upon which the
Bank has a first and exclusive perfected mortgage, such that
the 80% of the orderly liquidation value (or other similar
method of computing value as reflected in appraisals or other
methods satisfactory to the Bank) of the Equipment, plus 70% of
the fair market value of the Real Property (as reflected in
appraisals or other evaluations acceptable to the Bank in its
sole and absolute discretion)(collectively, the Term Loan
Collateral Value"), equals or exceeds the principal balance of
the Term Loan, and if the Company fails to do so, then the
Company shall immediately pay to the Bank the difference
between the principal balance of the Term Loan and the Term
Loan Collateral Value.
6.8 Ownership and Management. The Company shall not
permit any material change in its ownership. Without limiting
the generality of the foregoing, the Company shall not permit
James L. Jaeger to reduce his percentage ownership of any class
of capital stock of the Company having voting rights to a
percentage that is less than 41%. The Company shall not permit
any material adverse change in the offices of President/Chief
Executive Officer and Executive Vice President/Chief Operating
Officer.
6.9 Acquisition of Capital Stock. The Company shall not
redeem or acquire any of its own capital stock in excess of the
sum of $l,500,000.00 in the aggregate during any fiscal year,
except through the use of the net proceeds from the
simultaneous sale of an equivalent amount of its capital stock;
provided, however, that no such redemptions or acquisitions
shall be made if, after giving effect thereto, there exists a
Pending Default or Event of Default under this Agreement.
6.10 Receipt of Proceeds from issuance of Common Stock.
The Company shall provide to the Bank, on or before December
31, 1994, evidence satisfactory to the Bank in its sole and
absolute discretion of the Company's receipt of at least
$3,000,000.00 in net proceeds from its issuance of common stock
pursuant to the Stock Registration.
6.11 Trade Accounts Payable. The Company shall not permit
more than 15% of its trade accounts payable to be past due for
more than 60 days.
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<PAGE> 13
6.12 Cash Dividends and Other Distributions. The Company
shall not declare or pay any cash dividends in any fiscal
year. The Company shall make no other distributions of any
kind to shareholders, except for salaries and bonuses to
employees in the ordinary course of business.
6.13 Transactions With Affiliates. The Company shall not
directly or indirectly enter into or permit to exist any
transactions (including, without limitation, the purchase,
sale, lease or exchange of any property or the rendering of any
service) with any of its affiliates, shareholders or any
affiliates of either of the foregoing, on terms that are less
favorable to the Company than those which might be obtained at
the time from persons or entities who are not affiliated with
the Company or its shareholders. "Affiliate" shall mean any
individual, partnership, Corporation, or other entity which,
directly or indirectly, is in control of, is controlled by, or
is under common control with the Company. For the purposes of
this definition, control of such entity shall mean the power,
direct or indirect, to vote five percent or more of the
securities, units or other measures having ordinary voting
power for the election of directors, management committees, or
similar committees of such entity, or the power to direct or
cause the direction of the management and policies of such
entity, whether by contract or otherwise.
6.14 Tangible Net Worth. The Company shall maintain at all
times a Tangible Net Worth of (a) not less than $12,265,000.00
beginning with the date of this Agreement and continuing
through and including September 25, 1994, (b) not less than
$14,265,000.00 beginning September 26, 1994, and continuing
through and including December 25, 1994, (c) not less than
$15,515,000.00 beginning December 26, 1994, and continuing
through and including September 24, 1995, (d) not less than
$16,515,000.00 beginning September 25, 1995 and continuing
through and including December 24, 1995; and (e) not less than
$17,515,000.00 beginning December 25, 1995 and continuing
thereafter. "Tangible Net Worth" shall mean the shareholder's
equity of the Company, minus the sum of all of the following:
(i) the excess of cost over the value of net assets of
purchased businesses, rights, and other similar intangibles,
(ii) organizational expenses, (iii) intangible assets (to the
extent not reflected in the foregoing), (iv) goodwill, (v)
deferred charges or deferred financing costs, (vi) loans or
advances to and/or accounts or notes receivable from
Affiliates, and (vii) non-compete agreements.
6.15 Book Net Worth. The Company shall maintain at all
times a book net worth of (a) not less than $15,750,000.00
beginning with the date of this Agreement and continuing
through and including September 25, 1994, (b) not less than
$17,750,000.00 for the period beginning September 26, 1994, and
ending December 25, 1994, (c) not less than $19,000,000.00
beginning December 26, 1994, and continuing through and
including September 24, 1995, (d) not less than $20,000,000.00
beginning September 25, 1995 and continuing through and
including December 24, 1995, and (e) not less than
$21,000,000.00 beginning December 25, 1995 and continuing
thereafter.
6.16 Working Capital. The Company shall maintain at all
times a working capital of not less than $4,000,000.00. For
purposes of this Agreement, "working capital" shall mean the
excess of current assets over current liabilities. For the
purposes of this section, the indebtedness of the Company under
the Loan shall be classified as a long-term liability.
6.17 Ratio of Total Liabilities to Tangible Net Worth. The
Company shall maintain at all times a ratio of (a) Total
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<PAGE> 14
Liabilities to (b) Tangible Net Worth of (i) not greater than
1.85 to 1.00 beginning with the date of this Agreement and
continuing through and including December 25, 1994, and (ii)
not greater than 1.75 to 1.00 beginning December 26, 1994, and
continuing at all times thereafter. "Total Liabilities" shall
mean with respect to the Company (i) all indebtedness for
borrowed money or for the defer red purchase price of property
or services, (ii) any other indebtedness which is evidenced by
a note, bond, debenture or similar instrument, (iii) all
obligations with respect to any letter of credit issued for the
account of the Company, (iv) all obligations in respect of
acceptances issued or created for the account of the Company,
(v) lease obligations which, in accordance with GAAP, should be
capitalized, (vi) all liabilities (including lease obligations)
secured by any lien or encumbrance on any property owned by the
Company even though the Company has not assumed or otherwise
become liable for the payment thereof, (vii) all obligations of
the Company with respect to interest rate protection agreements
(valued at the termination value thereof computed in accordance
with a method approved by the International Swap Dealer's
Association), and (viii) all other obligations of the Company
which, in accordance with GAAP, would be classified upon a
balance sheet as liabilities (except capital stock and retained
earnings).
6.18 No Losses. Except for losses from operations during
the first and second fiscal quarters of 1994 not to exceed
$1,400,000.00 in the aggregate, and losses from operations
during the first and second fiscal quarters of 1995 not to
exceed $1,000,000.00 in the aggregate, the Company shall incur
no losses from operations (excluding the effect of
extraordinary gains from sales, exchanges or other dispositions
of property not in the ordinary course of business in any
fiscal quarter. The net income of the Company for the third
fiscal quarter of 1995 shall exceed any aggregate losses from
operations incurred by the Company during the first two fiscal
quarters of 1995.
6.19 Cash Flow Coverage Ratio. The Company shall achieve
as of the end of each fiscal year a ratio of (a) Cash Flow to
(b) Fixed Charges of not less than 1.20 to 1.00. "Cash Flow"
for any fiscal period, shall mean the sum of (i) Net Income for
such period, plus (ii) depreciation and amortization expenses
which were deducted in determining Net Income for such period.
Net Income" for any period shall mean the net income (or loss)
of the Company for such period, which in accordance with GAAP
would be included as net income on the statements of income of
the Company for such period. "Fixed Charges" shall mean, as of
the end of each fiscal year, the sum of each of the following:
all principal payments and all capital lease payments required
to be made by the Company during such fiscal year in respect of
all long-term debt, both as reflected in the long-term debt
schedule to the Company's balance sheet contained in the
Company's financial statements for the immediately preceding
fiscal year.
6.20 Capital Expenditures. The Company will not make any
expenditure for fixed or capital assets, including by way of
the incurrence of capitalized lease obligations, expenditures
for maintenance and repairs which should be capitalized in
accordance with generally accepted accounting principles or
otherwise in excess of (i) $10,000,000.00 during the fiscal
year beginning December 27, 1993 and ending December 26, 1994,
(ii) $15,000,000.00 during the fiscal year beginning December
26, 1994, and ending December 24, 1995, and (iii) $15,000,000
during each fiscal year thereafter.
6.21 Loans and Advances. The Company will not make any
loans or advances to any person, corporation or entity if such
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<PAGE> 15
loans or advances will exceed an aggregate total outstanding at
any one time of $100,000.00.
6.22 Operating Lease Rentals. The Company will not without
the prior written approval of the Bank enter into operating
leases providing in the aggregate for annual rentals which
exceed $1,000,000.00.
6.23. Environmental Compliance and Indemnification. The
Company hereby indemnifies the Bank and holds the Bank harmless
from and against any loss, damage, cost, expense or liability
(including strict liability) directly or indirectly arising
from or attributable to the generation, storage, release,
threatened release, discharge, disposal or presence (whether
prior to or during the term of the Loan) of Hazardous
Substances on, under or about the premises (whether by the
Company or any employees, agents, contractor or subcontractors
of the Company or any predecessor in title or any third persons
occupying or present on the premises), or the breach of any of
the representations and warranties regarding the premises,
including, without limitation: (a) those damages or expenses
arising under the Environmental Laws; (b) the costs of any
repair, cleanup or detoxification of the premises, including
the soil and ground water thereof, and the preparation and
implementation of any closure, remedial or other required
plans; (c) damage to any natural resources; and (d) all
reasonable costs and expenses incurred by the Bank in
connection with clauses (a), (b) and (c) including, but not
limited to reasonable attorneys' fees.
The indemnification provided for herein shall not
apply to any losses, liabilities, damages, injuries, expenses
or costs which: (i) arise from the gross negligence or willful
misconduct of the Bank, or (ii) relate to Hazardous Substances
placed or disposed of on the premises after the Bank acquires
title to the premises through foreclosure or otherwise.
6.24. Maintenance of Accounts. Except for (i) certain
deposit accounts maintained with Dean Witter and Gradison
/McDonald & Co., the balance of which deposit accounts shall
not at any time exceed $1,250,000.00 in the aggregate, (ii)
certain deposit accounts maintained solely in connection with
its credit card processing activities, and (iii) certain
payroll, medical, and tax accounts, which deposit accounts
shall be transferred to the Bank within 60 days of the date of
this Agreement, and (iv) a certain deposit account maintained
pursuant to a lockbox agreement with Fifth Third Bank, which
deposit account shall be closed within 60 days of the date of
this Agreement, the Company shall maintain all of its operating
and deposit accounts at the Bank.
7. Financial Information and Reporting. The Company
shall deliver the following to the Bank (a) within 30 days
after the end of each month, financial statements, including a
balance sheet and statements of income and surplus, certified
by the president or chief financial officer of the Company
(either individually a "Financial Officer") as fairly
representing the Company's financial condition as of the end of
such period; (b) within 45 days after the end of each quarter,
statements signed by a Financial Officer certifying the
compliance of the Company with the terms of this Agreement and
certifying the calculation of all financial covenants; (c) a
current loan and collateral report, borrowing certificate, or
other writings satisfactory to the Bank for the calculation of,
or setting forth the calculation of, the Borrowing Base with
each advance request pursuant to the Revolving Loan and with
each request for issuance of a Letter of Credit if the
Borrowing Base does not reflect sufficient availability for
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<PAGE> 16
such advance, but, in any event, no less frequently than once
every two weeks; (d) within 30 days after the end of each
month, an accounts reconciliation report, an inventory
reconciliation report and an inventory listing signed by a
Financial Officer, in detail satisfactory to the Bank; (e)
within 30 days after the end of each month, a report signed by
a Financial Officer setting forth the number and dollar total
of accounts receivable remaining due and payable less than 31
days from the date of the original invoice therefor, the number
and dollar total remaining due and payable less than 61 days
from the date of the original invoice therefor, the number and
dollar total remaining due and payable less than 91 days from
the date of the original invoice therefor, and the number and
dollar total remaining due and payable more than 90 days from
the date of the original invoice therefor; (f) within 30 days
after the end of each month, a report signed by a Financial
Officer setting forth the number and dollar total of accounts
payable remaining due and payable less than 31 days from the
date of the original invoice therefor, the number and dollar
remaining due and payable less than 61 days from the date of
the original invoice therefor, the number and dollar total
remaining due and payable less than 91 days from the date of
the original invoice therefor, and the number and dollar total
remaining due and payable more than 90 days from the date of
the original invoice therefor; (g) within 90 days after the end
of each fiscal year, audited financial statements prepared in
accordance with generally accepted accounting principles
consistently applied and certified by independent public
accountants satisfactory to the Bank, containing a balance
sheet, statements of income and changes in shareholders equity
and statements of cash flows and, promptly upon receipt of such
letters by the Company, any management letters written by such
accountants; (h) within 120 days after the end of each fiscal
year, a statement signed by the Company's independent public
accountants certifying that nothing has come to their attention
that has caused them to believe that the Company is not in
compliance with the provisions of Sections 6.14 through 6.22 of
this Agreement, insofar as such Sections pertain to accounting
matters; (i) prior to the end of each fiscal year, updated
financial projections with respect to the Company's projected
financial condition for the next fiscal year; (j) within three
days of the filing or release, as the case may be, copies of
any Securities and Exchange Commission or State Securities Law
disclosures, filings, documents or any press releases; and (k)
at the request of the Bank, such other information as the Bank
may from time to time reasonably require.
8. Default.
8.1 Events of Default. An "Event of Default" shall exist
if any of the following occurs and is continuing: (a) the
Company fails to make any payment of principal, interest, and
any other sum due and payable under any note or reimbursement
agreement executed in connection with this Agreement on or
before the date such payment is due; (b) the Company fails to
perform or observe any covenant contained in Sections 3.1,
3.4, 4.3, 4.4, 4.6, 6.1, 6.3 through and including 6.9, 6.12,
6.18, 6.20, and 6.22 of this Agreement; (c) the Company fails
to perform or observe any covenant contained in Sections 3.2,
3.3, 6.2, 6.10, 6.11, and 6.13 through and including 6.17 and
6.23 of this Agreement, and such failure continues for more
than 10 days after such failure shall first become known to any
officer of the Company; provided, however, that if the Bank, in
good faith, determines that such failure is incapable of being,
or is unlikely to be, remedied, such failure shall immediately
constitute an Event of Default; (d) the Company fails to comply
with any other provision of this Agreement, and such failure
continues for more than 15 days after such failure shall first
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<PAGE> 17
become known to any officer of the Company; (e) any warranty,
representation or other statement by or on behalf of the
Company contained in this Agreement or in any instrument
furnished in compliance with or in reference to this Agreement
is false or misleading in any material respect as of the time
made, or the Company fails to perform or observe any covenant
contained in any mortgage, security agreement or other
agreement in favor of the Bank; (f) the Company becomes
insolvent or makes an assignment for the benefit of creditors,
or consents to the appointment of a trustee, receiver or
liquidator; (g) bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings are instituted by or
against the Company; (h) a final judgment or judgments for the
payment of money aggregating in excess of $100,000.00,
including without limitation the amounts outstanding under
those judgments referenced in, or judgments that may be
rendered in connection with, litigation disclosed in Exhibit G
to this Agreement, is or are outstanding against the Company
and any such judgment or judgments have not been discharged in
full or stayed; (i) the occurrence of any event which allows
the acceleration of the maturity of any indebtedness (other
than the Loan) of the Company to the Bank, any of the Bank's
affiliates, or any other person, corporation or entity under
any indenture, agreement or undertaking; provided that, except
with respect to any indebtedness to the Bank or any of the
Bank's affiliates, the amount of any such indebtedness exceeds
$100,000.00 in the aggregate; (j) the default by, dissolution
of, or death of any guarantor, insurer or other surety for the
Company with respect to any obligation or liability to the
Bank; (k) the property furnished as security materially
declines in value, and the Company does not immediately, upon
demand, furnish additional security satisfactory to the Bank;
or (l) the Bank for any reason in good faith deems itself
insecure with respect to the repayment of the indebtedness
provided for herein.
8.2 Default Remedies. If an Event of Default exists, the
Bank may immediately exercise any right, power or remedy
permitted to the Bank by law or any provision of this
Agreement, and shall have, in particular, without limiting the
generality of the foregoing, the right to declare the entire
principal and all interest accrued on all notes then
outstanding pursuant to this Agreement to be forthwith due and
payable, without any presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by
the Company; provided, however, that upon the occurrence of an
Event of Default pursuant to Section 8.1(f) or (g), the entire
principal and all interest accrued on all notes or
reimbursement agreements then outstanding pursuant to this
Agreement shall automatically become due and payable.
9. Miscellaneous.
9.1 Notices. (a) All communications under this Agreement
or under the notes executed pursuant hereto shall be in writing
and shall be mailed by overnight courier, by certified mail,
postage prepaid, or by facsimile (1) if to the Bank, at the
following address, or at such other address as may have been
furnished in writing to the Company by the Bank:
The Huntington National Bank
105 West Fourth Street, Suite 400
Cincinnati, Ohio 45202
Attn: Steven M. Kuhn
Telecopier No.: (513) 762-1873
(2) if to the Company, at the following address, or at such
other address as may have been furnished in writing to the Bank
by the Company:
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<PAGE> 18
Cincinnati Microwave, Inc.
One Microwave Plaza
Cincinnati, Ohio 45202
Attn: Troy D. Gross
Telecopier No.: (513) 247-4109
(b) any notice so addressed and mailed by overnight courier or
by registered or certified mail shall be deemed to be given one
day after the date of mailing and any notice sent by telecopier
shall be deemed to be given when confirmed.
9.2 Access to Accountants. The Company hereby irrevocably
authorizes its certified public accountants to provide to the
Bank any and all information that the Bank requests from time
to time with regard to the Company, and to discuss with the
Bank from time to time any and all matters relating to the
Company. In furtherance of the foregoing, the Company hereby
waives any privilege or claim of confidentiality to the extent
such might otherwise prevent the Company's accountants from
providing such information to the Bank or discussing such
matters with the Bank. The Bank agrees to provide the Company
with oral or written notice before requesting any information
from the Company's certified public accountants; provided,
however, that, after the occurrence of an Event of Default, the
Bank need only provide oral or written notice to the Company
within a reasonable time after obtaining information in
connection with any such request, of each request made by the
Bank for information from the Company's certified public
accountants.
9.3 Reproduction of Documents. This Agreement and all
documents relating hereto, including, without limitation, (a)
consents, waivers and modifications which may hereafter be
executed, (b) documents received by the Bank at the closing or
otherwise, and (c) financial statements, certificates and other
information previously or hereafter furnished to the Bank, may
be reproduced by the Bank by any photographic, photostatic,
microfilm, micro-card, miniature photographic or other similar
process and the Bank may destroy any original document so
reproduced. The Company agrees and stipulates that any such
reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not such
reproduction was made by the Bank in the regular course of
business) and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible
in evidence.
9.4 Survival, Successors and Assigns. All warranties,
representations, and covenants made by the Company herein or on
any certificate or other instrument delivered by it or on its
behalf under this Agreement shall be considered to have been
relied upon by the Bank and shall survive the closing of the
Loan regardless of any investigation made by the Bank on its
behalf. All statements in any such certificate or other
instrument shall constitute warranties and representations by
the Company. This Agreement shall inure to the benefit of and
be binding upon the heirs, successors and assigns of each of
the parties.
9.5 Amendment and Waiver, Duplicate Originals. All
references to this Agreement shall also include all amendments,
extensions, renewals, modifications, and substitutions thereto
and thereof made in writing and executed by both the Company
and the Bank. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with
(and only with) the written consent of the Company and the
Bank; provided however that nothing herein shall change the
Bank's sole discretion (as set forth elsewhere in this
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<PAGE> 19
Agreement) to make advances, determinations, decisions or to
take or refrain from taking other actions. No delay or failure
or other course of conduct by the Bank in the exercise of any
power or right shall operate as a waiver thereof; nor shall any
single or partial exercise of the same preclude any other or
further exercise thereof, or the exercise of any other power or
right. Two or more duplicate originals of this Agreement may
be signed by the parties, each of which shall be an original
but all of which together shall constitute one and the same
instrument.
9.6 Uniform Commercial Code and Generally Accepted
Accounting Principles. Unless the context otherwise requires,
or terms are defined in this Agreement, all terms used herein
which are defined in the Uniform Commercial Code as enacted in
Ohio shall have the meaning stated therein, and all accounting
terms shall be determined in accordance with generally accepted
accounting principles, consistently applied ("GAAP"). The
Company uses a 52/53 week fiscal year, and the Company will not
change its fiscal year without the prior written consent of the
Bank.
9.7 Enforceability and Governing Law. Any provision of
this Agreement which is prohibited or unenforceable in any
jurisdiction, as to such jurisdiction, shall be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. No delay or omission on the part of the Bank in
exercising any right shall operate as a waiver of such right or
any other right. All of the Bank's rights and remedies,
whether evidenced hereby or by any other agreement or
instrument, shall be cumulative and may be exercised singularly
or concurrently. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
The Company agrees that any legal suit, action or proceeding
arising out of or relating to this Agreement may be instituted
in a state or federal court of appropriate subject matter
jurisdiction in the State of Ohio; waives any objection which
it may have now or hereafter to the venue of any suit, action
or proceeding; and irrevocably submits to the jurisdiction of
any such court in any such suit, action or proceeding.
9.8 Waiver of Right to Trial by Jury. EACH PARTY TO THIS
AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER
THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (2) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED
HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.
9.9 Advertising. The Company agrees that the Bank may
advertise or otherwise disclose for marketing purposes the
extent and nature of the credit extended or to be extended and
other services provided to the Company by the Bank in
connection with or relating in any way to the Loan.
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<PAGE> 20
9.10 Conditions Precedent to Subsequent Money Advances.
The obligation of Bank to make any disbursement or advance,
subsequent to the initial disbursement or initial advance, of
any portion of the Loan is subject to all the conditions and
requirements of this Agreement and delivery of the following
required documents, or other action, all of which are
conditions precedent:
(a) Compliance. Company shall have complied and
shall then be in compliance with all the terms, covenants and
conditions of the Agreement which are binding upon it.
(b) Continuation of Representations and Warranties:
The representations and warranties herein contained shall be
true, with the same effect as though such representations and
warranties had been made at the time of the making of such
advance, except to the extent that such representations and
warranties expressly relate to an earlier date, and any request
for an Advance shall be deemed a representation and warranty of
same.
(c) Confirmation of Conditions Precedent: Company
shall then be in compliance with and able to confirm all the
foregoing conditions precedent with the same effect as though
such conditions precedent were requirements to the making of
any advance contemplated herein.
10. Index of Definitions.
"Account Debtor" is defined in Section 2.1.
"Accounts" is defined in Section 4.1.
"Affiliate" is defined in Section 6.13.
"Agreement" is defined in the preamble.
"Bank" is defined in the preamble.
"Borrowing Base" is defined in Section 1.2.
"Cash Collection Account" is defined in Section 4.4.
"Cash Flow" is defined in Section 6.19.
"Collateral" is defined in Section 4.1.
"Company" is defined in the preamble.
"Contra" is defined in Section 2.1.
"Deposits" is defined in Section 4.1.
"Eligible Accounts" is defined in Section 2.1.
"Eligible Inventory" is defined in Section 2.2.
"Environmental Laws" is defined in Section 5.11.
"Equipment" is defined in Section 4.1.
"Event of Default" is defined in Section 8.1.
"Fixed Charges" is defined in Section 6.19.
"Financial Officer" is defined in Section 7.
"GAAP" is defined in Section 9.6.
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<PAGE> 21
"Hazardous Substances" is defined in Section 5.11.
"Intellectual Property" is defined in Section 4.1.
"Inventory" is defined in Section 4.1.
"Letters of Credit" is defined in Section 1.1.
"Loan" is defined in Section 1.1.
"Net Income" is defined in Section 6.19.
"Obligations" is defined in Section 4.1.
"Pending Default" is defined in Section 1.4.
"Premises" is defined in Section 5.11.
"Proceeds" is defined in Section 4.1.
"Real Property" is defined in Section 4.15.
"Revolving Loan" is defined in Section 1.1.
"Stock Registration" is defined in Section 1.3.
"Tangible Net Worth" is defined in Section 6.14.
"Term Loan" is defined in Section 1.1.
"Term Loan Advance Conditions" is defined in Section
1.3.
"Term Loan Collateral Value" is defined in Section 6.7.
"Total Liabilities" is defined in Section 6.17.
"Working Capital" is defined in Section 6.16.
Each of the parties has signed this Agreement as of
the date set forth in the preamble above.
THE HUNTINGTON NATIONAL BANK
By /s/ Steven M. Kuhn
----------------------
Its Vice President
CINCINNATI MICROWAVE, INC.
By /s/ Troy D. Gross
------------------------
Troy D. Gross
Its Treasurer
PRI/7827
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<PAGE> 22
Exhibit A-1.
THE HUNTINGTON NATIONAL BANK
Revolving Note
City Office Division Branch /XX/ Secured
Account No. Note No. / / Unsecured
Account Name CINCINNATI MICROWAVE, INC.
/XX/ Corporation / / Partnership / / Individual/Proprietorship
/ / Other
$6,000,000.00 Cincinnati, Ohio May 27, 1994
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
The Huntington National Bank (hereinafter called the "Bank," which term shall
include any holder hereof) at such place as the Bank may designate or, in the
absence of such designation, at any of the Bank's offices, the sum of Six
Million Dollars ($6,000,000.00) or so much thereof as shall have been advanced
by the Bank at any time and not thereafter repaid (hereinafter referred to as
"Principal Sum") together with interest as hereinafter provided and payable at
the time and in the manner hereinafter provided. The proceeds of the loan
evidenced hereby may be advanced, repaid and readvanced in partial amounts
during the term of this revolving note (this "Note") and prior to maturity.
Each such advance shall be made to the undersigned upon receipt by the Bank of
the undersigned's application therefor and disbursement instructions, which
shall be in such form as the Bank shall from time to time prescribe. The Bank
shall be entitled to rely on any oral or telephonic communication requesting
an advance and/or providing disbursement instructions hereunder, which shall
be received by it in good faith from anyone reasonably believed by the Bank to
be the undersigned's authorized agent. The undersigned agrees that all
advances made by the Bank will be evidenced by entries made by the Bank into
its electronic data processing system and/or internal memoranda maintained by
the Bank. The undersigned further agrees that the sum or sums shown on the
most recent printout from the Bank's electronic data processing system and/or
on such memoranda shall be rebuttably presumptive evidence of the amount of
the Principal Sum and of the amount of any accrued interest.
This Note is executed and the advances contemplated hereunder are to
be made pursuant to a Loan and Security Agreement by and between the
undersigned and the Bank dated May 27, 1994, and all amendments,
modifications, and supplements thereto from time to time (hereinafter called
the "Loan and Security Agreement"), and all the covenants, representations,
agreements, terms, and conditions contained therein, including but not limited
to additional conditions of default, are incorporated herein as if fully
rewritten.
INTEREST
Interest will accrue on the unpaid balance of the Principal Sum until
paid at a variable rate of interest per annum, which shall change in the
manner set forth below, equal to three-fourths of one percentage point in
excess of the Prime Commercial Rate.
Upon the occurrence of an "Event of Default" pursuant to the Loan and
Security Agreement, interest will accrue on the unpaid balance of the
Principal Sum and unpaid interest, if any, at a variable rate of interest per
annum, which shall change in the manner set forth below, equal to three and
three-fourth percentage points in excess of the Prime Commercial Rate.
<PAGE> 23
All interest shall be calculated on the basis of a 360 day year for
the actual number of days the Principal Sum or any part thereof remains
unpaid.
As used herein, "Prime Commercial Rate" shall mean the rate
established by the Bank from time to time based on its consideration of
economic, money market, business and competitive factors. The Prime
Commercial Rate is not necessarily the Bank's most favored rate. Subject to
any maximum or minimum interest rate limitation specified herein or by
applicable law, any variable rate of interest on the obligation evidenced
hereby shall change automatically without notice to the undersigned
immediately with each change in the Prime Commercial Rate.
MANNER OF PAYMENT
The Principal Sum shall be due and payable on June 30, 1996, and at
maturity, whether by, acceleration or otherwise. Accrued interest shall be
due and payable monthly beginning on July 1, 1994, and continuing on the 1st
day of each month thereafter, and at maturity, whether by acceleration or
otherwise.
LATE CHARGE
Any installment or other payment not made within 10 days of the date
such payment or installment is due shall be subject to a late charge equal to
5% of the amount of the installment or payment.
SECURITY
This Note is secured by the security interests, assignments, and
mortgages granted and/or referenced in the Loan and Security Agreement.
DEFAULT
Upon the occurrence of any of the following events:
(a) the undersigned fails to make any payment of
interest or of the Principal Sum on or before the date such
payment is due;
(b) an "Event of Default" under the Loan and Security
Agreement shall have occurred and be continuing;
then the Bank may, at its option, without notice or demand, accelerate the
maturity of the obligations evidenced hereby, which obligations shall become
immediately due and payable. In the event the Bank shall institute any action
for the enforcement or collection of the obligations evidenced hereby, the
undersigned agrees to pay all costs and expenses of such action, including
reasonable attorneys' fees, to the extent permitted by law.
GENERAL PROVISIONS
The undersigned, and any indorser, surety, or guarantor, hereby
severally waive presentment, notice of dishonor, protest, notice of protest,
and diligence in bringing suit against any party hereto, and consent that,
without discharging any of them, the time of payment may be extended an
unlimited number of times before or after maturity without notice. The Bank
shall not be required to pursue any party hereto, including any guarantor, or
to exercise any rights against any collateral herefor before exercising any
other such rights.
The obligations evidenced hereby may from time to time be evidenced
by another note or notes given in substitution, renewal or extension hereof.
Any security interest or mortgage which secures the obligations evidenced
hereby shall remain in full force and effect notwithstanding any such
substitution, renewal, or extension.
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<PAGE> 24
The captions used herein are for references only and shall not be
deemed a part of this Note. If any of the terms or provisions of this Note
shall be deemed unenforceable, the enforceability of the remaining terms and
provisions shall not be affected. This Note shall be governed by and
construed in accordance with the law of the State of Ohio.
WAIVER OF RIGHT TO TRIAL BY JURY
THE UNDERSIGNED HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS NOTE OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE UNDERSIGNED OR THE BANK WITH RESPECT TO THIS NOTE OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE; AND THE UNDERSIGNED HEREBY AGREES AND CONSENTS
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY
COURT TRIAL WITHOUT A JURY, AND THAT THE UNDERSIGNED OR THE BANK MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE UNDERSIGNED TO THE WAIVER OF THE RIGHT OF THE
UNDERSIGNED TO TRIAL BY JURY.
WARRANT OF ATTORNEY
The undersigned authorizes any attorney at law to appear in any Court
of Record in the State of Ohio or in any state or territory of the United
States after the above indebtedness becomes due, whether by acceleration or
otherwise, to waive the issuing and service of process, and to confess
judgment against the undersigned in favor of the Bank for the amount then
appearing due together with costs of suit, and thereupon to waive all errors
and all rights of appeal and stays of execution.
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER
FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
CINCINNATI MICROWAVE, INC.
By:
Its:
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<PAGE> 25
Exhibit A-2.
THE HUNTINGTON NATIONAL BANK
COMMERCIAL LOAN NOTE
Business Purpose
City Office Division Branch /X/ Secured
Account No. Note No. / / Unsecured
Account Name CINCINNATI MICROWAVE, INC.
/X/ corporation / / partnership / / individual/proprietorship
/ / other
$4,000,000.00 Cincinnati, Ohio May 27, 1994
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
The Huntington National Bank (hereinafter called the "Bank," which term shall
include any holder hereof), at such place as the Bank may designate or, in the
absence of such designation, at any of the Bank's offices, the sum of up to
Four Million Dollars ($4,000,000.00) or so much thereof as shall have been
advanced by the Bank at any time and not thereinafter repaid (hereinafter
called the "Principal Sum"), together with interest as hereinafter provided.
Subject to the terms and conditions hereof and of the Loan and Security
Agreement (as hereafter defined), the proceeds of the loan evidenced hereby
may be advanced in partial amounts during the term of this note (this "Note")
prior to December 31, 1994. Each such advance shall be made to the
undersigned upon receipt by the Bank of the undersigned's application therefor
and disbursement instructions, which shall be in such form as the Bank shall
from time to time prescribe. The Bank shall be entitled to rely on any
written communication requesting an advance and/or providing disbursement
instructions hereunder, which shall be received by it in good faith from
anyone reasonably believed by the Bank to be the undersigned's authorized
agent. The undersigned agrees that all advances made by the Bank will be
evidenced by entries made by the Bank into its electronic data processing
system and/or internal memoranda maintained by the Bank. The undersigned
further agrees that the sum or sums shown on the most recent printout from the
Bank's electronic data processing system, the grid attached hereto, or on such
memoranda shall be rebuttably presumptive evidence of the amount of the
Principal Sum and of the amount of any accrued interest. The undersigned
promises to pay the Principal Sum and the interest thereon at the time and in
the manner hereinafter provided in this Note.
Notwithstanding any other provision contained herein, the right of
the undersigned to obtain any advances hereunder in excess of the principal
sum of $2,000,000.00 is subject to the satisfaction of the terms and
conditions set forth in Section 1.3 of the Loan and Security Agreement.
This Note is executed and the advances contemplated hereunder are to
be made pursuant to a Loan and Security Agreement by and between the
undersigned and the Bank dated May 27, 1994, and all amendments and
modifications thereto from time to time (hereinafter called the "Loan and
Security Agreement") and all the covenants, representations, agreements, terms
and conditions contained therein, including but not limited to additional
conditions of default, are incorporated herein as if fully rewritten.
<PAGE> 26
INTEREST
Interest will accrue on the unpaid balance of the Principal Sum until
paid at a variable rate of interest per annum, which shall change in the
manner set forth below equal to one percentage point in excess of the Prime
Commercial Rate.
Upon the occurrence of an "Event of Default" pursuant to the Loan and
Security Agreement, interest will accrue on the unpaid balance of the
Principal Sum and unpaid interest, if any, until paid at a variable rate of
interest per annum, which shall change in the manner set forth below, equal to
four percentage points in excess of the Prime Commercial Rate.
All interest shall be calculated on the basis of a 360 day year for
the actual number of days the Principal Sum or any part thereof remains
unpaid.
As used herein, "Prime Commercial Rate" shall mean the rate
established by the Bank from time to time based on its consideration of
economic, money market, business and competitive factors, and it is not
necessarily the Bank's most favored rate. Subject to any maximum or minimum
interest rate limitation specified herein or by applicable law, any variable
rate of interest on the obligation evidenced hereby shall change automatically
without notice to the undersigned immediately with each change in the Prime
Commercial Rate.
MANNER OF PAYMENT
The Principal Sum shall be payable on December 31, 1994, and accrued
interest shall be due and payable monthly beginning on July 1, 1994, and
continuing on the 1st day of each month thereafter, and at maturity, whether
by acceleration or otherwise.
LATE CHARGE
Any installment or other payment not made within 10 days of the date
such payment or installment is due shall be subject to a late charge equal to
5% of the amount of the installment or payment.
SECURITY
This Note is secured by the security interests granted by or referred
to in the Loan and Security Agreement and by the assignments and the mortgages
or other security documents dated of even date herewith or given
contemporaneously herewith.
DEFAULT
Upon the occurrence of any of the following events:
(a) the undersigned fails to make any payment of interest or of the
Principal Sum on or before the date such payment is due;
(b) an "Event of Default" under the Loan and Security Agreement
shall have occurred and be continuing;
then the Bank may, at its option, without notice or demand, accelerate the
maturity of the obligations evidenced hereby, which obligations shall become
immediately due and payable. In the event the Bank shall institute any action
for the enforcement or collection of the obligations evidenced hereby, the
undersigned agrees to pay all costs and expenses of such action, including
reasonable attorneys' fees, to the extent permitted by law.
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<PAGE> 27
GENERAL PROVISIONS
The undersigned, and any indorser, surety, or guarantor, hereby
severally waive presentment, notice of dishonor, protest, notice of protest,
and diligence in bringing suit against any party hereto, and consent that,
without discharging any of them, the time of payment may be extended an
unlimited number of times before or after maturity without notice. The Bank
shall not be required to pursue any party hereto, including any guarantor, or
to exercise any rights against any collateral herefor before exercising any
other such rights.
The obligations evidenced hereby may from time to time be evidenced
by another Note or Notes given in substitution, renewal or extension hereof.
Any security interest or mortgage which secures the obligations evidenced
hereby shall remain in full force and effect notwithstanding any such
substitution, renewal, or extension.
The captions used herein are for reference only and shall not be
deemed a part of this Note. If any of the terms or provisions of this Note
shall be deemed unenforceable, the enforceability of the remaining terms and
provisions shall not be affected. This Note shall be governed by and
construed in accordance with the law of the State of Ohio.
WAIVER OF RIGHT TO TRIAL BY JURY
THE UNDERSIGNED HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS NOTE OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE UNDERSIGNED OR THE BANK WITH RESPECT TO THIS NOTE OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE; AND THE UNDERSIGNED HEREBY AGREES AND CONSENTS
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY
COURT TRIAL WITHOUT A JURY, AND THAT THE UNDERSIGNED OR THE BANK MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE UNDERSIGNED TO THE WAIVER OF THE RIGHT OF THE
UNDERSIGNED TO TRIAL BY JURY.
WARRANT OF ATTORNEY
The undersigned authorizes any attorney at law to appear in any Court
of Record in the State of Ohio or in any other state or territory of the
United States after the above indebtedness becomes due, whether by
acceleration or otherwise, to waive the issuing and service of process, and to
confess judgment against the undersigned in favor of the Bank for the amount
then appearing due together with costs of suit, and thereupon to waive all
errors and all rights of appeal and stays of execution.
WARNING-BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER
FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
Borrower:
CINCINNATI MICROWAVE, INC.
By:
Its:
LOANS/663
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<PAGE> 28
Exhibit A-3
STANDBY LETTER OF CREDIT REIMBURSEMENT AGREEMENT
To The Huntington National Bank: May 27, 1994
In consideration of your issuing, or your application for the
issuance by your correspondent at our request, of one or more Standby Letters
of Credit (herein called the "Credit," whether one or more) substantially in
accordance with the application attached hereto, or such applications as may
hereafter be executed and made a part hereof, the undersigned, jointly and
severally, if more than one, agree as follows:
1. This Standby Letter of Credit Reimbursement Agreement (the
"Agreement") is executed and the Credit contemplated hereunder are made
pursuant to a Loan and Security Agreement by and between the parties hereto
dated May 27, 1994, and all amendments and modifications thereto from time to
time (hereinafter called the "Loan Agreement") and all the covenants,
representations, agreements, terms and conditions contained therein are
incorporated by reference herein. All Applications shall be made on forms
substantially identical to Exhibit A attached hereto. Upon execution by any
of the undersigned, each Application shall become a part of, and subject to,
the terms and conditions of the Loan Agreement and this Agreement.
2. As to drafts drawn under or purporting to be drawn under the
Credit which are payable in United States Currency, we agree (a) in the case
of each sight draft, to reimburse you at your issuing office on demand, in
United States legal tender, the amount paid on such draft; or, (b) if so
demanded by you, to pay to you at said office in advance, in such legal
tender, the amount required to pay such draft.
3. As to drafts drawn under or purporting to be drawn under the
Credit which are payable in currency other than United States currency, we
agree in the case of each sight draft to reimburse you at your issuing office,
on demand, the equivalent of the amount paid, in United States legal tender,
at the rate of exchange then current for cable transfers to the place of
payment, in the currency in which such draft is drawn. A demand made on one
of us shall fix the exchange rate as to all of us. If for any reason
whatsoever, there shall be, at the time of your demand of reimbursement or
payment, no rate of exchange current for effective cable transfers to the
place of payment and in the currency in which any such draft is drawn, we
agree to pay you, on demand, in United States legal tender, an amount which,
in your sole judgment, shall be sufficient to meet our obligations hereunder,
which amount may be applied by you at any time as a payment on account of such
obligations; or, at your option, held as security therefor; it being
understood, however, that we shall remain liable for any deficiency which may
result if such amount in the United States legal tender shall prove to be
insufficient to effect full payment or reimbursement to you at the time when a
rate of exchange for such transfers shall again be current.
4. We also agree to pay to you, on demand, your commission of one
percent of the stated value of each Credit and all charges and expenses
(including all charges for legal services) paid or incurred by you in
connection with the Credit, plus correspondent's charges, if any, and interest
where chargeable. We agree to pay you beginning one day after demand for
reimbursement upon any amounts paid on any draft hereunder interest at a
variable rate of interest per annum, which shall change in the manner set
forth below equal to three and three-fourths percentage points in excess of
the Prime Commercial Rate of The Huntington National Bank. As used herein,
Prime Commercial Rate shall mean the rate established by the Bank from time to
time based on its consideration of economic, money market, business and
competitive factors, and is not necessarily the Bank's most favored rate.
Subject to any maximum or minimum interest rate limitation specified herein or
by applicable law, the variable rate of interest on the obligation evidenced
hereby shall change automatically without notice to the undersigned
immediately with each change in the Prime Commercial Rate.
5. We agree that, in the event of any extension of the maturity or
time for presentation of drafts, documents, or any other modification of the
<PAGE> 29
terms of the Credit, at the request of any of us, with or without notification
to the others, or in the event of any increase in the amount of the Credit at
our request this Agreement shall be binding upon us with regard to the Credit
so increased or otherwise modified, to drafts, documents, and to any action
taken by you or any of your correspondents in accordance with such extension,
increase, or other modification.
6. We hereby expressly authorize you and any of your correspondents
to pay any drafts drawn under or purporting to be drawn under the Credit,
notwithstanding any discrepancies or irregularities between the drafts and
documents presented, and those required by the terms of the Credit; provided
that as to discrepancies and irregularities not otherwise covered by the
provisions of this Agreement, you or your correspondent so accepting or paying
must be furnished with an indemnity satisfactory to you, which, running in our
favor as well as yours, covers the discrepancies or irregularities, but is
limited to the actual damage directly attributable to such discrepancies or
irregularities.
7. We assume all risks of the acts or omissions of the users of the
Credit. We agree that, should the beneficiary under a Credit upon receipt of
advice, by cable or otherwise, of the issuance of the Credit, but prior to its
actual receipt, negotiate drafts by virtue of such advice, such negotiation
shall be considered a proper one and shall be included under the terms and
subject to all conditions hereof, and we assume all the risks of the misuses
of the Credit, whatsoever. Neither you nor your correspondents shall be
responsible for the form, validity, sufficiency, genuineness, or legal effect
of documents, even if such documents should in fact prove to be in any or all
respect invalid, insufficient, fraudulent, or forged; for the validity or
sufficiency of any instrument assigning/transferring or purporting to
assign/transfer the Credit or the rights or benefits thereunder or proceeds
thereof in whole or in part, which may prove to be invalid or ineffective for
any reason; for failure of any draft to bear any reference or adequate
reference to the Credit, or failure of documents to accompany any draft at
negotiation, or failure of documents to accompany any draft at payment if sent
by duplicate mail, or failure of any person to note the amount of any draft on
the reverse of the Credit, or to surrender to take up the Credit or to send
forward documents apart from drafts, as required by the terms of the Credit,
each of which provisions, if contained in the Credit itself, it is agreed, may
be waived by you; or for errors, omissions, interruptions, or delays in
transmission or delivery of any messages by mail, cable, telegraph, wireless,
or otherwise, whether or not they be in cipher; nor shall you be responsible
for any error, neglect, or default of any of your correspondents for errors in
translation, or for errors in interpretation of technical terms, or for any
consequences arising from causes beyond your control; and none of the above
shall affect, impair, or prevent the vesting of any of your rights or powers
hereunder. You shall have the right to transmit the terms of the Credit
without translating them. We shall protect you and any other drawee in paying
any draft dated on or before the expiration of any time limit expressed in the
Credit, regardless of when drawn and when or whether negotiated. If the
Credit provides that payment is to be made by your correspondent, neither you
nor such correspondent shall be responsible for the failure of any of the
documents specified in the Credit to come into your hands, or for any delay in
connection therewith; and our obligation to reimburse you for payments made or
obligations incurred shall not be affected by such failure or delay in the
receipt by you of any of such documents. In furtherance and extension and not
in limitation of the specific provisions herein before set forth, we agree
that any action taken by you or any correspondent of yours, under or in
connection with the Credit or the relative drafts and documents, if taken in
good faith, shall be binding on us, and shall not put you or your
correspondent under any resulting liability to us, and we make the same
agreement as to any inaction or omission, unless in breach of good faith.
You shall not in any way be liable for any failure by you or anyone
else to pay any draft under the Credit resulting from any censorship, law,
control or restriction rightfully or wrongfully exercised by any de facto or
de jure domestic or foreign government or agency, or from any other cause
beyond your control or the control of your correspondents, agents, or
sub-agents, or for any loss or damage to us or anyone else resulting from any
such failure to pay, all such risks being expressly assumed by us, and we
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<PAGE> 30
agree to indemnify and hold you harmless from any claim, loss, liability, or
expense arising by reason of any such failure to pay. We are responsible to
you for all obligations imposed upon you with respect to the Credit or the
relative drafts and documents.
8. Each of us agrees that the balance of every account of us or any
of us with you and each claim of us or any of us against you existing from
time to time, shall be subject to a lien and subject to be set off against any
and all such liabilities of us or any of us; and you may at any time or from
time to time at your option after the occurrence of an "Event of Default"
under the Loan Agreement and without notice appropriate and apply toward the
payment of any of such liabilities of us or any of us the balance of each such
account of us or any of us with you and each such claim of us or any of us
against you, and we and each of us, will continue liable for any deficiency.
Each of us agrees that all property of every description, now or hereafter in
your possession or custody, or in transit to you for any purpose, including
safekeeping, collection, or pledge, for the account of us or any of us, or as
to which we or any of us may have any interest, right, or power, whether or
not such property is in whole or in part released to us or any of us on trust
or bailee receipt, are hereby made security and subject to a lien and security
interest in your favor for any and all such liabilities of us or any of us.
You may at any time and from time to time after the occurrence of an "Event of
Default" under the Loan Agreement, without notice, transfer into your own name
or that of your nominee, any property so held as collateral. Each of us
agrees that upon the occurrence of an "Event of Default" under the Loan
Agreement, then (a) any and all such liabilities of us or any of us shall, at
your option, become and be immediately due and payable, without notice,
presentation, demand of payment or protest, all such being hereby expressly
waived, and (b) you shall have all the rights and remedies set forth in the
Loan Agreement and in any instrument, agreement or document executed by us in
connection with the Loan Agreement as well as any other rights and remedies to
which you may otherwise be entitled at law or in equity. Demands on or any
notices to us or any of us respectively shall be made in the manner set forth
in Section 9.1 of the Loan Agreement. Each of us agrees that with or without
notification to any of us, you may exchange, release, surrender, realize upon,
release on trust receipt to any of us, or otherwise deal with any property by
whomsoever pledged, mortgaged, or subjected to a security interest to secure
directly or indirectly any of the obligations hereunder or for which any of
the undersigned may be liable.
We will bear and pay all expenses of every kind (including all
charges for legal services) of the enforcement of any of your rights herein
mentioned, of any claim or demand by you against us or any of us, and of any
actual or attempted sale, exchange, enforcement, collection maintenance,
retention, insurance, compromise, settlement, release, delivery on trust
receipt, or delivery of any such security, and of the receipt of proceeds
thereof, and will repay to you any such expenses incurred by you.
9. None of your options, powers or rights (including those
hereunder) shall be waived unless you or your authorized agent shall have
signed such waiver in writing. No such waiver, unless expressly as stated
herein, shall be effective as to any transaction which occurs subsequent to
the date of such waiver, nor as to any continuance of a breach after such
waiver. No segregation or specific allocation by you of specified collateral
against any liability shall waive or affect any lien of any sort against other
securities or property or any of your options, powers or rights (including
those hereunder).
10. The word "property" as used in this Agreement includes goods,
merchandise, securities, funds, choses in action, and any and all other forms
of property, whether real, personal, or mixed, and any right or interest
therein. Property in your possession shall include property in possession of
anyone for you in any manner whatsoever. Your options, powers and rights
specified in this Agreement are in addition to those otherwise created. You
are hereby expressly given the right and power in furtherance of any right,
power or privilege which you may have hereunder or in connection with the
Credit to execute any endorsements, assignments, or other instruments of
conveyance or transfer in our name, place and stead, covering any property
standing in our name or belonging to us of every kind and description which
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<PAGE> 31
you may hold or which may come into your possession under the Credit or by
reason of this Agreement.
11. If the Credit states that except so far as otherwise expressly
stated, it is subject to the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce (Publication No.
500) (herein called the "Uniform Customs"), the Credit shall be so subject in
all respects; and (a) that, if the Credit does not state that except so far as
otherwise expressly stated it is subject to the Uniform Customs, you and any
of your correspondents may, without limiting the type of document acceptable
according to any other provisions of this Agreement, accept documents of any
character which comply with the Uniform Customs, or which comply with the laws
or regulations in force and customs and usages of the place of negotiation,
and (b) that you and any of your correspondents may receive, negotiate, and
pay as complying with the terms of the Credit, any drafts or other documents,
otherwise in order, which may be signed by, or issued to, the administrator or
executor of, or the trustee in bankruptcy of, or the receiver for any of the
property of the party in whose name the Credit provides that any drafts or
other documents should be drawn or issued.
12. You are hereby expressly authorized and directed to honor any
request for payment which is made under and in compliance with the terms of
said Credit without regard to, and without any duty on your part to inquire
into, the existence of any disputes or controversies between any of the
undersigned, the beneficiary of the Credit, or any other person, firm or
corporation, or the respective rights, duties, or liabilities of any of them
or whether any facts or occurrences represented in any of the documents
presented under the Credit are true or correct. Furthermore, we fully
understand and agree that your sole obligation to us shall be limited to
honoring requests for payment made under and in compliance with the terms of
the Credit and this Agreement and your obligation remains so limited even if
you may have assisted us in the preparation of the wording of the Credit or
any documents required to be presented thereunder or that you may otherwise be
aware of the underlying transaction giving rise to the Credit and this
Agreement.
13. If the undersigned is a banking institution, the undersigned
hereby appoints you as its agent to the extent of issuing the Credit in
accordance with and subject to the terms and provisions of this Agreement.
14. If the Credit shall be issued by your correspondent in
accordance with this Agreement, each of the warranties, liabilities and other
terms of this Agreement or of the Credit shall run in your favor as well as
that of your correspondent so issuing the Credit.
15. Each of the undersigned authorizes any attorney at law to appear
in any Court of Record in the State of Ohio or in any state or territory of
the United States after the above indebtedness becomes due, whether by
acceleration or otherwise, to waive the issuing and service of process, and to
confess judgment against any one or more of the undersigned in favor of the
Bank for the amount then appearing due together with costs of suit, and
thereupon to waive all errors and all rights of appeal and stays of
execution. No such judgment or judgments against less than all of the
undersigned shall be a bar to a subsequent judgment or judgments against any
one or more of the undersigned against whom judgment has not been obtained
hereon, this being a joint and several warrant of attorney to confess judgment.
16. WE HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO YOUR OR OUR DEALINGS WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND WE HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT WE
OR YOU MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
-4-
<PAGE> 32
COURT AS WRITTEN EVIDENCE OF OUR CONSENT TO THE WAIVER OF OUR RIGHT TO TRIAL
BY JURY.
17. This Agreement shall be binding upon us, our heirs, executors,
administrators, successors, and assigns, and shall inure to the benefit of,
and to be enforceable by, you, your successors, transferees and assigns. If
this Agreement should be terminated or revoked by operation of law as to us,
or any of us, we will indemnify and save you harmless from any loss which may
be suffered or incurred by you in acting hereunder, prior to the receipt by
you or your transferees or assigns of notice in writing of such termination or
revocation. If this Agreement is signed by two or more parties, it shall be
the joint and several agreement of such parties and whenever used herein, the
singular number shall include the plural, and the plural the singular. This
Agreement shall be governed by and construed in accordance with the law of the
State of Ohio.
WARNING
BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF
YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
Very truly yours,
CINCINNATI MICROWAVE, INC.
By:
Its:
-5-
<PAGE> 33
EXHIBIT B
SCHEDULE OF PERMITTED ENCUMBRANCES
Maximum Amount
Secured Party Description of Items of Obligation
Hewlett-Packard Logic Analyzers, Digitizing
Company Oscilliscope, Preprocessor
1/F, 83640A Sweepers, Opt 001
Step Attenuators, 2 Channel
RF Multipath Fading
Simulator, 9kHz-2.9GHz RF
Spectrum Analyzer and HP-IB
Interface for HP printer;
Specific equipment more fully
described in financing stmt.
nos. AK76875* filed on 2-9-94
with the Ohio Secretary of
State and 94-21117* filed on 2-1-94
with the Hamilton County Recorder;
Specific equipment more
fully described in financing stmt.
nos. AK88300* filed on 3-31-94
with the Ohio Secretary of
State and 94-58913* filed on
3-31-94 with the Hamilton
County, Recorder;
Specific equipment more
fully described in financing stmt.
nos. AK55298* filed on 10-27-93
with the Ohio Secretary of
State and 93-194026* filed on 10-27-93
with the Hamilton County Recorder;
Specific equipment more
fully described in financing stmt.
nos. AK55299* filed on 10-27-93
with the Ohio Secretary of
State and 93-194029* filed on 10-27-93
with the Hamilton County Recorder;
Specific equipment more
fully described in financing stmt.
nos. AK26078* filed on 6-14-93
with the Ohio Secretary of
State and 93-100501* filed on
6-14-93 with the Hamilton County
Recorder;
Specific equipment more
fully described in financing stmt.
nos. AK26199* filed on 6-15-93
with the Ohio Secretary of
State and 93-101656* filed 6-15-93 with
the Hamilton County Recorder;
Specific equipment more
fully described in financing stmt.
no. AK46346* filed on 9-16-93
with the Ohio Secretary of
State
<PAGE> 34
<TABLE>
<S> <C> <C>
The CIT Group/ Certificate of Deposit
Equipment Nos. 003-0092675194 and
Financing, Inc. 003-0092675178;
Specific equipment
more fully described in
financing stmt. no. AH0099963*
filed on 2-24-93 with
the Ohio Secretary of
State, financing stmt. no.
43335* filed 5-3-93 with
the Warren County, Ohio Recorder,
financing statement no. 6068 filed
4-23-93 with the Warren County,
Ohio Recorder,
and financing stmt. no. 93-30291*
filed on 2-25-93 with the
Hamilton County Recorder
First National 1 Clausing/Kondia 3 Axis
Bank of SW Ohio CNC Milling Machine w/ 20M
CNC Dynapath controller,
s/n X-643
Star Bank, NA Savin 9550 Copier with bin
Information stapler/sorter and Savin 9335
Leasing Corporation Copier w/bin stapler/sorter
The CIT Group/ Specific equipment manufactured
Equipment by Fuji $3,100,000.00
Financing, Inc.**
Information Specific automated distribution
Leasing equipment $120,000.00
Corporation**
</TABLE>
Those items set forth in commitment no. 31-94-00199 issued by
First American Title Insurance Company that have been approved by
the Bank for inclusion in the final title policy to be issued to
insure the lien of the Open-End Mortgage, Assignment of Rents and
Security Agreement executed and delivered to the Bank by the
Company as of the date of the Agreement with respect to certain
real property owned by the Company and located in Warren County,
Ohio.
* As in effect as of the date of this Agreement
** Will be subject to lease agreement to be executed after the
date of this Agreement.
<PAGE> 35
EXHIBIT C
SCHEDULE OF BUSINESS LOCATIONS
One Microwave Plaza
Cincinnati, Ohio 45249
<PAGE> 36
Exhibit D
CINCINNATI MICROWAVE, INC.
CAPITAL STOCK
AS OF DECEMBER 26, 1993*
<TABLE>
<CAPTION>
AUTHORIZED ISSUED OUTSTANDING**
---------- ------ -----------
<S> <C> <C> <C>
COMMON SHARES WITHOUT PAR VALUE ($0.20 STATED VALUE) 20,000,000 17,053,120 10,849,212
JAMES L. JAEGER** 6,193,179
<FN>
* based upon SEC 10-K filing for 1993; only one class of stock
** as of February 27, 1994
</TABLE>
<PAGE> 37
EXTEND.XLS
CINCINNATI MICROWAVE, INC.
TAX EXTENSIONS FILED
FEDERAL
CINCINNATI MICROWAVE, INC.
SUBS: EARTH TERMINALS, INC.
FIVE WAY MARKETING, INC.
CMI TECHNOLOGIES, INC.
CINCINNATI MICROWAVE AUSTRALIA
CINCINNATI MICROWAVE COMMUNICATIONS, INC.
FILED: MARCH 14, 1994
ESTIMATED PAID: $0
STATE
CINCINNATI MICROWAVE, INC.
FILED: MARCH 28, 1994
ESTIMATED PAID: $20,000
CMI TECHNOLOGIES, INC.
FILED: MARCH 28, 1994
ESTIMATED PAID: $3,650
FIVE WAY MARKETING, INC.
FILED: MARCH 28, 1994
ESTIMATED PAID: $200
EARTH TERMINALS, INC.
FILED: MARCH 28, 1994
ESTIMATED PAID: $0
CINCINNATI MICROWAVE AUSTRALIA
FILED: MARCH 28, 1994
ESTIMATED PAID: $0
CINCINNATI MICROWAVE, INC.
FILED: JANUARY 28, 1994
ESTIMATED PAID; $20,000
CMI TECHNOLOGIES, INC.
FILED: JANUARY 28, 1994
ESTIMATED PAID: $3,650
FIVE WAY MARKETING, INC.
FILED: JANUARY 28, 1994
ESTIMATED PAID: $200
EARTH TERMINALS, INC.
FILED: JANUARY 28, 1994
ESTIMATED PAID: $50
CINCINNATI MICROWAVE AUSTRALIA
FILED: JANUARY 28, 1994
ESTIMATED PAID: $50
PERSONAL PROPERTY -- WARREN COUNTY
CINCINNATI MICROWAVE, INC.
FILED: APRIL 30, 1994
ESTIMATED PAID: $0
5/11/94 A.D.M.
<PAGE> 38
CINCINNATI MICROWAVE, INC.
STATUS OF SUBSIDIARIES
MAY 1994
SUBSIDIARY STATUS
EARTH TERMINALS, INC. INACTIVE
FIVE WAY MARKETING, INC. INACTIVE
CMI TECHNOLOGIES, INC. INACTIVE
CINCINNATI MICROWAVE AUSTRALIA INACTIVE
CINCINNATI MICROWAVE COMMUNICATIONS, INC. DISSOLVED
SHEET XLT 5/13/94 8:23 AM
<PAGE> 39
SECRETARY OF STATE
STATE OF NEVADA
CERTIFICATE OF REVOCATION
I, CHERYL A. LAU, the duly qualified and elected Secretary of State of the
State of Nevada, do hereby certify that the Charter of CINCINNATI MICROWAVE
COMMUNICATIONS, INC. incorporated under the laws of the State of Nevada, JUNE
11, 1985 is now revoked for failure to file Annual List of Officers, Directors
and Resident Agent for the filing period JUNE, 1992 to JUNE, 1993 and to pay
filing fee and penalty thereon, pursuant to the provisions of the Nevada
Revised Statutes 78.150, 78.165 and 78.170 (1993). The Charter of the above
corporation was revoked on
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed the Great Seal of State, at my office, in
Carson City, Nevada, this 1st day of December, 1993.
/s/ CHERYL A. LAU
Secretary of State
By /s/ LISSA ROJAS
Deputy
<PAGE> 40
EXHIBIT G
<TABLE>
CINCINNATI MICROWAVE, INC.
SCHEDULE OF PENDING LITIGATION AND JUDGMENTS
A. VENDOR LITIGATION
<CAPTION>
VENDOR AMOUNT COURT OR JUDGMENT
OUTSTANDING AS OF STATUS
MAY 18, 1994*
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Micro Alliance, Inc. $0.00 Judgment in Court of Common
Pleas, Warren County, Ohio. Case
No. 93CV50915
2. Penstock. Inc. $0.00 Full Satisfaction of Judgment filed in
Santa Clara County Municipal Court,
Case No. DC93269244 (March 28,
1994)
3. Safco Corporation $0.00 Agreed Order entered December 2,
(Safeco alleges that 1993, Circuit Court of Cook County,
cancellation charges are due; Illinois, Case No. 93L050127, with
CMI is disputing this claim but standstill provision
has been willing to resolve)
4. Office Outfitters $0.00 Judgment entered in Court of
Common Pleas, Warren County,
Case No. 93EX7729
5. Frank's Industries, Inc. $4,908.60 Voluntary Dismissal filed without
prejudice in Court of Common
Pleas, Hamilton County, Ohio, Case
No. A93-6050 (February 11, 1994)
6. Shokai Far East Limited $42,939.33 Judgment entered in Court of
Common Pleas, Warren County,
Case No. 93CV51262
7. CM Temporary Services, $25,194.11 Judgment entered in Court of
Inc. Common Pleas, Warren County,
Ohio, Case No. 93CV50981 (August
20,1993)
8. Jergen's Inc. $4,237.31 Judgment entered in Court of
Common Pleas, Hamilton County,
Case No. A9303207
</TABLE>
<PAGE> 41
<TABLE>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
9. Schroeder's $0.00 Summary Judgment entered in Court
of Common Pleas, Warren County,
Case No. 93CV50894 (February 11,
1994)
10. Right Source $0.00 Court of Common Pleas, Warren
County, Case No. 93CV50857
11. SRS Manufacturing $0.00 Agreed Judgment entered in Court of
Common Pleas, Warren county,
Case No. 93CV51226
12. Leesal Tech $8,358.27 Court of Common Pleas, Hamilton
County, Case No. A9303438
- ---------------------------------------------------------------------------------------------------
TOTAL OUTSTANDING $85,637.62
===================================================================================================
<FN>
* Per Cincinnati Microwave's
Records; Does Not Include
Any Interest Or Legal Fees
</TABLE>
<PAGE> 42
CINCINNATI MICROWAVE, INC.
SCHEDULE OF PENDING LITIGATION AND JUDGMENTS
B. OTHER LITIGATION OR INVESTIGATIONS
1. Bright Star, Inc. v. Guardian Technologies, Inc., Indiana Superior
Court, Marion, County, Case No. 49-C019207 CP2548 for breach of contract.
2. Debbie L. Miller v. Cincinnati Microwave and Wes Trimble Administrator
Bureau of Worker's Compensation, Court of Common Pleas, Warren County, Case
No. 94CV51715, appeal of denial of Worker's Compensation claim. Only issue is
entitlement to benefits; result will not affect Cincinnati Microwave's Worker's
Compensation premium rates.
3. Cincinnati Microwave, Inc. v. B.E.L.-Tronics Limited, United States
District Court, Southern District of Ohio, Western Division, Case No.
C-1-92-715, for patent infringement.
4. Felicia Guadian individually and as the representative of the estate of
Richard Guadian, Jr. v. Guardian Technologies, Inc., et al., Superior Court of
California, County of Monterey, Case No. 97849, for wrongful death of Richard
Guadian.
5. The U.S. Department of Labor, Wage and Hour Division, currently is
investigating the Cincinnati Microwave's payroll practices focusing on the
Department's overtime pay regulations. The investigation is expected to be
completed by mid-June, 1994.
6. From time to time, Cincinnati Microwave has disputes with consumers
regarding products purchased and such consumers may threaten to commence
litigation if such disputes are not resolved to their satisfaction.
<PAGE> 43
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT (this "Amendment") to the Loan and Security
Agreement is entered into as of the 28th day of December, 1994, by and between
Cincinnati Microwave, Inc. (hereinafter the "Company") and The Huntington
National Bank (hereinafter the "Bank").
RECITALS:
A. As of May 27, 1994, the Company and the Bank executed a certain Loan
and Security Agreement (hereinafter the "Loan Agreement") which sets forth the
terms of certain loans to the Company; and
B. As of May 27, 1994, the Company executed and delivered to the Bank,
inter alia, a revolving promissory note in the original principal sum of Six
Million Dollars ($6,000,000.00) (hereinafter the "Revolving Note"); and
C. As of May 27, 1994, the Company executed and delivered to the Bank,
inter alia, a commercial loan promissory note in the original principal sum of
Four Million Dollars ($4,000,000.00) (hereinafter the "Term Note"); and
D. In connection with the Loan Agreement, the Revolving Note and the
Term Note, the Company executed and delivered to the Bank certain other loan
documents, an open-end mortgage, assignment of rents and security agreement,
lockbox agreements, consents, assignments, security agreements, agreements,
instruments and financing statements in connection with the indebtedness
referred to in the Loan Agreement (all of the foregoing, together with the
Revolving Note, the Term Note and the Loan Agreement, are hereinafter
collectively referred to as the "Loan Documents"); and
E. The Company and the Bank desire to amend and modify certain terms in
the Loan Agreement, increase the principal sum of the Revolving Note and
decrease the principal sum of the Term Note.
NOW, THEREFORE, in consideration of the mutual covenants, agreements
and promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the Company and the Bank, for
themselves and their successors and assigns do hereby agree, recite, represent
and warrant as follows:
<PAGE> 44
1. Section 1.1, "The Loan," of the Loan Agreement is hereby
amended to recite in its entirety that:
1.1 The Loan. The Bank, subject to the terms and conditions hereof,
will make loans and advances to the Company up to the principal sum of
$10,000,000.00 (the "Loan"). The Loan shall be comprised of (a) loans
and advances on a revolving basis up to the principal sum of
$7,000,000.00 subject to the terms and conditions hereof (the
"Revolving Loan"), (b) a term loan providing for advances up to the
principal sum of $3,000,000.00, subject to the terms and conditions
hereof (the "Term Loan"), and (c) a standby letter of credit facility
for the issuance of standby letters of credit with an aggregate
maximum stated value not to exceed $1,000,000.00 (the "Letters of
Credit"). Notwithstanding the individual limits of the Revolving Loan
and the Letters of Credit set forth in the immediately preceding
sentence, the outstanding principal balance of the Revolving Loan,
plus the aggregate stated value of the outstanding Letters of Credit
shall not exceed $7,000,000.00.
2. Section 1.2, "Lending Formula," of the Loan Agreement is hereby
amended to recite in its entirety that:
1.2 Lending Formula. The principal balance of the Revolving Loan
plus the aggregate stated value of the outstanding Letters of Credit
shall not exceed an amount equal to the sum of (i) the lesser of 40%
of Eligible Inventory or $3,000,000.00; plus (ii) 80% of Eligible
Accounts (collectively the "Borrowing Base"). The Bank, in its sole
discretion, reserves the right upon notice to the Company to increase
or decrease the foregoing percentages or the maximum dollar amount
attributable to Eligible Inventory; provided, however, that the Bank
shall not increase or decrease the foregoing percentages by more than
ten percentage points or increase or decrease the maximum dollar amount
attributable to Eligible Inventory by more than ten percent in the
aggregate, unless an Event of Default or Pending Default shall have
occurred and be continuing or unless the Bank shall have determined in
good faith that a material change in the Company's business, prospects,
properties or condition (financial or otherwise) has occurred.
3. Concurrently with the execution of this Amendment, the Company
shall execute and deliver to the Bank First Note Modification Agreements in the
form of Exhibit A and Exhibit B attached to this Amendment.
4. Nothing contained is this Amendment shall be construed to in
any manner affect, modify, cure, or effect a waiver of the occurrence and/or
continuance of any "Event of Default" by the Company under the terms of the
Loan Agreement or the Loan Documents or other documents executed in connection
therewith. The Company agrees further that any other
-2-
<PAGE> 45
indulgence granted the Company by the Bank shall in no way indicate the Bank's
agreement to any further indulgence.
5. Each reference to the Loan Agreement, whether by use of the phrase
"Loan and Security Agreement," "Loan Agreement," "Agreement," the prefix
"herein" or any other term, and whether contained in the Loan Agreement itself,
in this Amendment or any document executed concurrently herewith or in any loan
documents executed hereafter, shall be construed as a reference to the Loan
Agreement as amended by this Amendment.
6. The Company hereby reaffirms each and every warranty and
representation made in the Loan Documents as if the same were made as of the
date this Amendment becomes effective, except to the extent that such
warranties and representations expressly relate to an earlier date.
7. Except as modified herein, the Loan Agreement, Loan Documents and
all other agreements as to payment, guarantee of payment or security executed
in connection therewith shall remain as written originally and in full force and
effect in all respects, and nothing herein shall affect, modify, limit or
impair any of the rights and powers which the Bank may have thereunder. Any
modification or waiver of any of the agreements, covenants, or terms of the
Loan Agreement or the Loan Documents shall not be construed as the Bank's
agreement or intention to agree to any further modifications or waivers.
8. The Company agrees to perform and observe all of the covenants,
agreements, stipulations, and conditions to be performed under the Loan
Agreement, Loan Documents, and all other related agreements, as amended hereby.
9. The Company hereby represents and warrants to the Bank that (a) the
Company has legal power and authority to execute and deliver the within
Amendment; (b) the officer executing the within Amendment on behalf of the
Company has been duly authorized to execute and deliver the same and bind the
Company with respect to the provisions provided for herein; (c) the execution
and delivery hereof by the Company and the performance and observance by the
Company of the provisions hereof do not violate or conflict with the articles
of incorporation, regulations or by-laws of the Company or any law applicable
to the Company or
-3-
<PAGE> 46
result in the breach of any provision of or constitute a default under any
agreement, instrument or document binding upon or enforceable against the
Company; and (d) this Amendment constitutes a valid and legally binding
obligation upon the Company in every respect.
10. THIS AMENDMENT shall become effective only upon its execution by
all parties hereto.
11. The capitalized terms herein shall have the same meanings as the
capitalized terms in the Loan Agreement as amended hereby.
IN WITNESS WHEREOF, the Company and the Bank have hereunto set their
hands at Cincinnati, Ohio on the date first set forth above.
COMPANY:
CINCINNATI MICROWAVE, INC.
By: /s/ JOHN W. NOLAND
----------------------------------
Its: Executive Vice President and
Chief Operating Officer
BANK:
THE HUNTINGTON NATIONAL BANK
By: /s/ STEVEN M. KUHN
----------------------------------
Its: Vice President
-4-
<PAGE> 47
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT (this "Amendment") to the Loan and Security
Agreement is entered into as of the 17th day of March, 1995, by and between
Cincinnati Microwave, Inc. (hereinafter the "Company") and The Huntington
National Bank (hereinafter the "Bank").
RECITALS:
A. As of May 27, 1994, the Company and the Bank executed a certain
Loan and Security Agreement, which was amended by a certain First Amendment to
Loan and Security Agreement dated as of December 28, 1994 (hereinafter
collectively the "Loan Agreement"), setting forth the terms of certain loans to
the Company; and
B. As of May 27, 1994, the Company executed and delivered to the Bank,
inter alia, a revolving promissory note in the original principal sum of Six
Million Dollars ($6,000,000.00), which was amended by a certain First Note
Modification Agreement (Revolving Note) and by a certain Second Note
Modification Agreement (Revolving Note), both dated as of December 28, 1994
(hereinafter the "Revolving Note"); and
C. As of May 27, 1994, the Company executed and delivered to the Bank,
inter alia, a commercial loan promissory note in the original principal sum of
Four Million Dollars ($4,000,000.00), which was amended by a certain First Note
Modification Agreement (Term Note) and by a certain Second Note Modification
Agreement (Term Note), both dated as of December 28, 1994 (hereinafter the
"Term Note"); and
D. In connection with the Loan Agreement, the Revolving Note and the
Term Note, the Company executed and delivered to the Bank certain other loan
documents, an open-end mortgage, assignment of rents and security agreement,
lockbox agreements, consents, assignments, security agreements, agreements,
instruments and financing statements in connection with the indebtedness
referred to in the Loan Agreement (all of the foregoing, together with the
Revolving Note, the Term Note and the Loan Agreement, are hereinafter
collectively referred to as the "Loan Documents"); and
E. The Company and the Bank desire to amend and modify certain terms
in the Loan Agreement.
<PAGE> 48
NOW, THEREFORE, in consideration of the mutual covenants, agreements
and promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the Company and the Bank, for
themselves and their successors and assigns do hereby agree, recite, represent
and warrant as follows:
1. Section 6.11, "Trade Accounts Payable," of the Loan Agreement
is hereby amended to recite in its entirety that:
6.11 Trade Accounts Payable. Beginning December
26, 1994, and continuing at all times thereafter,
the Company shall not permit more than 15% of its
trade accounts payable to be past due for more
than 60 days.
2. Section 6.14, "Tangible Net Worth," of the Loan Agreement is
hereby amended to recite in its entirety that:
6.14 Tangible Net Worth. The Company shall maintain
at all times a Tangible Net Worth of (a) not less
than $10,000,000.00 beginning December 26, 1994, and
continuing through and including December 30, 1995,
and (b) not less than $13,000,000.00 beginning
December 31, 1995, and continuing at all times thereafter.
"Tangible Net Worth" shall mean the shareholder's
equity of the Company, minus the sum of all of the
following: (i) the excess of cost over the value of
net assets of purchased businesses, rights, and other
similar intangibles, (ii) organizational expenses,
(iii) intangible assets (to the extent not reflected in
the foregoing), (iv) goodwill, (v) deferred charges or
deferred financing costs, (vi) loans or advances to
and/or accounts or notes receivable from Affiliates,
and (vii) non-compete agreements.
3. Section 6.15, "Book Net Worth," of the Loan Agreement is hereby
amended to recite in its entirety that:
6.15 Book Net Worth. The Company shall maintain at
all times a book net worth of (a) not less than
$13,000,000.00 beginning December 26, 1994, and
continuing through and including December 30, 1995,
and (b) not less than $16,500,000.00 beginning
December 31, 1995, and continuing at all times
thereafter.
4. Section 6.16, "Working Capital," of the Loan Agreement is
hereby amended to recite in its entirety that:
-2-
<PAGE> 49
6.16 Working Capital. The Company shall maintain
at all times a working capital of not less than
$500,000.00 beginning December 26, 1994, and
continuing at all times thereafter. For purposes
of this Agreement, "working capital" shall mean
the excess of current assets over current liabilities.
For the purposes of this section, the indebtedness
of the Company under the Loan shall be classified
as a long-term liability.
5. Section 6.17, "Ratio of Total Liabilities to Tangible Net
Worth," of the Loan Agreement is hereby amended to recite in its entirety that:
6.17 Ratio of Total Liabilities to Tangible Net
Worth. The Company shall maintain at all times
a ratio of (a) Total Liabilities to (b) Tangible
Net Worth of (i) not greater than 2.5 to 1.00
beginning December 26, 1994, and continuing at
all times thereafter. "Total Liabilities" shall
mean with respect to the Company (i) all indebtedness
for borrowed money or for the deferred purchase
price of property or services, (ii) any other
indebtedness which is evidenced by a note, bond,
debenture or similar instrument, (iii) all
obligations with respect to any letter of credit
issued for the account of the Company, (iv) all
obligations in respect of acceptances issued or
created for the account of the Company, (v) lease
obligations which, in accordance with GAAP, should
be capitalized, (vi) all liabilities (including
lease obligations) secured by any lien or
encumbrance on any property owned by the Company
even though the Company has not assumed or
otherwise become liable for the payment thereof,
(vii) all obligations of the Company with
respect to interest rate protection agreements
(valued at the termination value thereof computed
in accordance with a method approved by the
International Swap Dealer's Association), and
(viii) all other obligations of the Company
which, in accordance with GAAP, would be
classified upon a balance sheet as liabilities
(except capital stock and retained earnings).
6. Section 6.18, "No Losses," of the Loan Agreement is hereby
amended to recite in its entirety that:
6.18 No Losses. Except for losses from operations
which do not exceed in the aggregate the sum of
$3,000,000.00 during the first and second fiscal
quarters in 1995, and (b) $3,000,000.00 during
the first and second fiscal quarters in 1996, the
Company shall incur no losses in any fiscal quarter
in any fiscal year (excluding the effect of
extraordinary gains from sales, exchanges or
other dispositions of property not in the ordinary
course of business).
-3-
<PAGE> 50
7. Effective upon the execution of this Amendment, the Company
represents and warrants that no "Event of Default," as defined in the Loan
Agreement, has occurred and is continuing, nor will any occur immediately after
the execution and delivery of this Amendment by the performance or observance
of any provision hereof.
8. Each reference to the Loan Agreement, whether by use of the phrase
"Loan and Security Agreement," "Loan Agreement," "Agreement," the prefix
"herein" or any other term, and whether contained in the Loan Agreement itself,
in this Amendment or any document executed concurrently herewith or in any loan
documents executed hereafter, shall be construed as a reference to the Loan
Agreement as amended by this Amendment.
9. The Company hereby reaffirms each and every warranty and
representation made in the Loan Documents as if the same were made as of the
date this Amendment becomes effective, except to the extent that such
warranties and representations expressly relate to an earlier date.
10. Except as modified herein, the Loan Agreement, Loan Documents and
all other agreements as to payment, guarantee of payment or security executed
in connection therewith shall remain as written originally and in full force
and effect in all respects, and nothing herein shall affect, modify, limit or
impair any of the rights and powers which the Bank may have thereunder. Any
modification or waiver of any of the agreements, covenants, or terms of the
Loan Agreement or the Loan Documents shall not be construed as the Bank's
agreement or intention to agree to any further modifications or waivers.
11. The Company agrees to perform and observe all of the covenants,
agreements, stipulations, and conditions to be performed under the Loan
Agreement, Loan Documents, and all other related agreements, as amended hereby.
12. The Company hereby represents and warrants to the Bank that (a)
the Company has legal power and authority to execute and deliver the within
Amendment; (b) the officer executing the within Amendment on behalf of the
Company has been duly authorized to execute and deliver the same and bind the
Company with respect to the provisions provided for herein; (c) the execution
and delivery hereof by the Company and the performance and
-4-
<PAGE> 51
observance by the Company of the provisions hereof do not violate or conflict
with the articles of incorporation, regulations or by-laws of the Company or
any law applicable to the Company or result in the breach of any provision of
or constitute a default under any agreement, instrument or document binding upon
or enforceable against the Company; and (d) this Amendment constitutes a valid
and legally binding obligation upon the Company in every respect.
13. THIS AMENDMENT shall become effective only upon its execution by
all parties hereto.
14. The capitalized terms herein shall have the same meanings as the
capitalized terms in the Loan Agreement as amended hereby.
IN WITNESS WHEREOF, the Company and the Bank have hereunto set their
hands at Cincinnati, Ohio on the date first set forth above.
COMPANY:
CINCINNATI MICROWAVE, INC.
By: /s/ WALTER P. MASAVAGE
-----------------------------
Its: Vice President and Controller
BANK:
THE HUNTINGTON NATIONAL BANK
By: /s/ STEVEN M. KUHN
-----------------------------
Its: Vice President
-5-
<PAGE> 52
FIRST MORTGAGE MODIFICATION AGREEMENT
This First Mortgage Modification Agreement (this "Agreement") is made
as of the 28th day of December, 1994, by Cincinnati Microwave, Inc., an Ohio
corporation whose address is One Microwave Plaza, Cincinnati, Ohio 45249
(herein "Borrower") and The Huntington National Bank, a national banking
association whose address is 105 West Fourth Street, Suite 400, Cincinnati,
Ohio 45202 (herein "Lender").
WITNESSETH:
WHEREAS, the Borrower executed a certain Open-End Mortgage Assignment
of Rents and Security Agreement in favor of Lender, dated the 27th day of May,
1994, and recorded May 27, 1994, in Official Record Volume 1003, Page 706,
Recorder's Office, Warren County, Ohio (the "Mortgage"), to secure certain
indebtedness evidenced by Borrower's revolving note dated May 27, 1994, in the
original principal sum of Six Million Dollars ($6,000,000.00) (the "Revolving
Loan"), and by Borrower's commercial loan note dated May 27, 1994, in the
original principal sum of Four Million Dollars ($4,000,000.00) (the "Term
Loan"); and
WHEREAS, as of even date herewith, Lender and Borrower have entered
into a certain First Note Modification Agreement (Revolving Note) (the
"Revolving Note Modification Agreement") whereby certain terms of the Revolving
Loan were revised; and
WHEREAS, as of even date herewith, Lender and Borrower have entered
into a certain First Note Modification Agreement (Term Note) (the "Term Note
Modification Agreement") whereby certain terms of the Term Loan were revised;
and
WHEREAS, in connection with the Revolving Note Modification Agreement,
Lender and Borrower desire to amend the Mortgage to reflect certain revised
terms of the Revolving Loan.
WHEREAS, in connection with the Term Note Modification Agreement,
Lender and Borrower desire to amend the Mortgage to reflect certain revised
terms of the Term Loan.
NOW, THEREFORE, for and in consideration of the covenants set forth
herein, Lender and Borrower hereby agree as follows:
1. The second paragraph on the first page of the Mortgage is
hereby deleted in its entirety and the following paragraph is hereby inserted
in its place:
WHEREAS, Borrower is indebted and/or liable to Lender
up to the principal sum of Ten Million and 00/100
Dollars ($10,000,000.00), which indebtedness and/or
liability is evidenced by (i) a certain Loan and
Security Agreement between Borrower and Lender, dated
of even date herewith (the "Loan Agreement"), (ii)
Borrower's term promissory note in an amount up to
the principal amount of $3,000,000.00 (the "Term Note"),
providing for monthly installments of principal and
interest, (iii) Borrower's revolving promissory note
in an amount up to the principal amount of $7,000,000.00
(the "Revolving Note"), providing for monthly installments
of interest and for advances, repayments and readvances
in partial amounts prior to maturity, and (iv) a certain
Standby Letter of Credit Reimbursement Agreement between
Borrower and Lender, dated of even date herewith (the
"Reimbursement Agreement") (the Term Note, Revolving
Note and Reimbursement Agreement are collectively
referred to as the "Note");
2. All covenants, terms and conditions set forth in the Mortgage,
except those amended hereby, are and shall remain in full force and effect and
are hereby ratified, assumed and reaffirmed.
<PAGE> 53
IN WITNESS WHEREEOF, the parties hereto have executed this Agreement as
of the day and year first above written.
LENDER:
Signed and Acknowledged THE HUNTINGTON NATIONAL BANK
in the presence of:
/s/ LISA TWELVES By: /s/ STEVEN M. KUHN
- --------------------------------- ---------------------------------
(signed name) Its: Vice President
LISA TWELVES
- ---------------------------------
(printed name)
/s/ LAURA LAMBERT
- ---------------------------------
(signed name)
LAURA LAMBERT
- ---------------------------------
(printed name)
BORROWER:
Signed and Acknowledged CINCINNATI MICROWAVE, INC.
in the presence of:
/s/ WALTER P. MASAVAGE By: /s/ JOHN W. NOLAND
- --------------------------------- ---------------------------------
(signed name) Its: Executive Vice President and
Chief Operating Officer
WALTER P. MASAVAGE
- ---------------------------------
(printed name)
/s/ ELAINE M. BACON
- ---------------------------------
(signed name)
ELAINE M. BACON
- ---------------------------------
(printed name)
STATE OF OHIO,
COUNTY OF WARREN SS.
On this 29 day of December, 1994, before me, a Notary Public in and for
said County and State, personally appeared Steven M. Kuhn, who acknowledged
himself to be Vice President of The Huntington National Bank, the national
banking association which executed the foregoing instrument, and who
acknowledged that he, as such officer of said association, being duly
authorized by the Board of Directors of said association, did execute the
foregoing instrument for and on behalf of said association and that such signing
is the free act and deed of said association for the uses and purposes therein
mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
[NOTARY SEAL]
/s/ ROBIN EPPINGHOFF
GENE FUGATE ------------------------------------
Notary Public, State of Ohio Notary Public
My Commission Expires 3-7-98
ROBIN EPPINGHOFF
Notary Public, State of Ohio
My Commission Expires May 12, 1997
-2-
<PAGE> 54
STATE OF OHIO,
COUNTY OF WARREN, SS.
On this 29 day of December, 1994 before me, a Notary Public in and for
said County and State, personally appeared John W. Nolard, known to me to be
the person who as Executive Vice President and CEO of Cincinnati Microwave,
Inc., the corporation which executed the foregoing instrument, signed the same,
and acknowledged to me that he did so sign said instrument in the name and upon
behalf of said corporation as such officer, and by authority of the resolution
of its Board of Directors; and that the same is his free act and deed as such
officer, and the free and corporate act and deed of said corporation.
/s/ ROBIN EPPINGHOFF
------------------------------
Notary Public
ROBIN EPPINGHOFF
Notary Public, State of Ohio
My Commission Expires May 12, 1997
This Instrument Prepared By:
Timothy E. Grady, Attorney-at-Law
PORTER, WRIGHT, MORRIS & ARTHUR
41 South High Street
Columbus, Ohio 43215
<PAGE> 55
FIRST NOTE MODIFICATION AGREEMENT
(REVOLVING NOTE)
The First Note Modification Agreement (this "Agreement") is entered
into as of the 28th day of December, 1994, by and between The Huntington
National Bank (hereinafter the "Bank") and Cincinnati Microwave, Inc.
(hereinafter the "Company").
WITNESSETH:
A. As of May 27, 1994, the Bank and the Company entered into and
executed a certain Loan and Security Agreement (hereinafter the "Loan
Agreement"); and
B. As of May 27, 1994, the Company executed and delivered to the
Bank, inter alia, a certain revolving promissory note in the original principal
amount of Six Million Dollars ($6,000,000.00) (hereinafter the "Note"); and
C. To secure the repayment of the Note, the Company granted to the
Bank (a) a security interest in the collateral described in the Loan Agreement,
and (b) a mortgage upon certain real property owned by the Company and located
in Warren County, Ohio (hereinafter collectively the "Real and Personal
Property"); and
D. The Bank's security interests and mortgage in the Real and
Personal Property were perfected properly by the filing of financing statements
and the recording of a mortgage with various recording authorities; and
E. In connection with the Loan Agreement and the Note, the Company
executed and delivered to the Bank certain other loan documents, a promissory
note, lockbox agreements, consents, assignments, security agreements,
agreements, instruments and financing statements in connection with the
indebtedness referred to in the Loan Agreement (all of the foregoing, together
with the Note and the Loan Agreement, are hereinafter collectively referred to
as the "Loan Documents"); and
F. The Company remains the owner of the Real and Personal Property
and the Bank holds the Loan Documents; and
G. The Company and the Bank desire and are willing to increase the
principal sum of the Note.
<PAGE> 56
NOW, THEREFORE, in consideration of the mutual covenants, agreements
and promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the Company and the Bank, for
themselves and their successors and assigns do hereby agree, recite, represent
and warrant as follows:
1. The first paragraph on page 1 of the Note is hereby amended to
recite in its entirety that:
FOR VALUE RECEIVED, the undersigned promises
to pay to the order of The Huntington National Bank
(hereinafter called the "Bank," which term shall include
any holder hereof) at such place as the Bank may
designate or, in the absence of such designation, at any
of the Bank's offices, the sum of Seven Million Dollars
($7,000,000.00) or so much thereof as shall have been
advanced by the Bank at any time and not thereafter
repaid (hereinafter referred to as "Principal Sum")
together with interest as hereinafter provided and
payable at the time and in the manner hereinafter
provided. The proceeds of the loan evidenced hereby
may be advanced, repaid and readvanced in partial
amounts during the term of this revolving note (this
"Note") and prior to maturity. Each such advance shall
be made to the undersigned upon receipt by the Bank of
the undersigned's application therefor and disbursement
instructions, which shall be in such form as the Bank
shall from time to time prescribe. The Bank shall be
entitled to rely on any oral or telephonic
communication requesting an advance and/or providing
disbursement instructions hereunder, which shall be
received by it in good faith from anyone reasonably
believed by the Bank to be the undersigned's authorized
agent. The undersigned agrees that all advances made
by the Bank will be evidenced by entries made by the
Bank into its electronic data processing system and/or
internal memoranda maintained by the Bank. The
undersigned further agrees that the sum or sums shown
on the most recent printout from the Bank's electronic
data processing system and/or on such memoranda shall
be rebuttably presumptive evidence of the amount of
the Principal Sum and of the amount of any accrued
interest.
2. The Company hereby covenants and agrees that the Bank's agreement in
this Agreement to modify the Note shall not be construed and shall not be the
Bank's agreement to further modify the Note.
3. Nothing contained in this Amendment shall be construed to in any
manner affect, modify, cure, or effect a waiver of the occurrence and/or
continuance of any "Event of Default" by the Company under the terms of the Loan
Agreement or the Loan Documents or other documents executed in connection
therewith.
-2-
<PAGE> 57
4. Except as modified herein, the Note, the Loan Agreement, the Loan
Documents and all other agreements as to payment, guarantee of payment or
security executed in connection therewith shall remain as written originally
and in full force and effect in all respects, and nothing herein shall affect,
modify, limit or impair any of the rights and powers which the Bank may have
thereunder.
5. The Company agrees to perform and observe all of the covenants,
agreements, stipulations, and conditions to be performed under the Note, the
Loan Agreement, Loan Documents and all other related agreements, as amended
hereby. Except as modified by this Agreement, all the terms, conditions and
covenants of the Note, the Loan Agreement, the Loan Documents and any other
related agreements shall remain as originally written.
6. The Company agrees to execute such continuation statements,
financing statements, or other documents, if any, as may be necessary or
desirable to continue in full force and effect the security interest granted to
the Bank.
7. THIS AGREEMENT shall become effective only upon its execution by all
parties hereto.
IN WITNESS WHEREOF, the Company and the Bank have hereunto set their
hands at Cincinnati, Ohio on the date first set forth above.
COMPANY:
CINCINNATI MICROWAVE, INC.
By: /s/ JOHN W. NOLAND
-------------------------------------
Its: Executive Vice President and
Chief Operating Officer
BANK:
THE HUNTINGTON NATIONAL BANK
By: /s/ STEVEN M. KUHN
-------------------------------------
Its: Vice President
<PAGE> 58
SECOND NOTE MODIFICATION AGREEMENT
(REVOLVING NOTE)
This Second Note Modification Agreement (this "Agreement") is entered
into as of the 28th day of December, 1994, by and between The Huntington
National Bank (hereinafter the "Bank") and Cincinnati Microwave, Inc.
(hereinafter the "Company").
WITNESSETH:
A. As of May 27, 1994, the Bank and the Company entered into and
executed a certain Loan and Security Agreement, which was amended by a certain
First Amendment to Loan and Security Agreement dated December 28, 1994
(hereinafter collectively the "Loan Agreement"); and
B. As of May 27, 1994, the Company executed and delivered to the Bank,
inter alia, a certain revolving promissory note in the original principal
amount of Six Million Dollars ($6,000,000.00), which was modified by a certain
First Note Modification Agreement (Revolving Note) dated December 28, 1994
(hereinafter collectively the "Note"); and
C. To secure the repayment of the Note, the Company granted to the
Bank (a) a security interest in the collateral described in the Loan Agreement,
and (b) a mortgage upon certain real property owned by the Company and located
in Warren County, Ohio (hereinafter collectively the "Real and Personal
Property"); and
D. The Bank's security interests and mortgage in the Real and Personal
Property were perfected properly by the filing of financing statements and the
recording of a mortgage with various recording authorities; and
E. In connection with the Loan Agreement and the Note, the Company
executed and delivered to the Bank certain other loan documents, a promissory
note, lockbox agreements, consents, assignments, security agreements,
agreements, instruments and financing statements in connection with the
indebtedness referred to in the Loan Agreement (all of the foregoing, together
with the Note and the Loan Agreement, are hereinafter collectively referred to
as the "Loan Documents"); and
F. The Company remains the owner of the Real and Personal Property and
the Bank holds the Loan Documents; and
<PAGE> 59
G. The Company and the Bank desire and are willing to modify
certain terms of the Note.
NOW, THEREFORE, in consideration of the mutual covenants, agreements
and promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the Company and the Bank, for
themselves and their successors and assigns do hereby agree, recite, represent
and warrant as follows:
1. The first two paragraphs of the section of the Note designated
"Interest" are hereby amended to recite in their entirely that:
Interest will accrue on the unpaid balance of the Principal
Sum until paid at a variable rate of interest per annum,
which shall change in the manner set forth below, equal to
one and one-quarter percentage points in excess of the Prime
Commercial Rate.
Upon the occurrence of an "Event of Default" pursuant to the
Loan and Security Agreement, interest will accrue on the
unpaid balance of the Principal Sum and unpaid interest, if
any, at a variable rate of interest per annum, which shall
change in the manner set forth below, equal to four and
one-quarter percentage points in excess of the Prime Commercial
Rate.
The remainder of the section designated "Interest" shall remain as originally
written.
2. The Company hereby covenants and agrees that the Bank's
agreement in this Agreement to modify the Note shall not be construed and shall
not be the Bank's agreement to further modify the Note.
3. Nothing contained is this Amendment shall be construed to in
any manner affect, modify, cure, or effect a waiver of the occurrence and/or
continuance of any "Event of Default" by the Company under the terms of the
Loan Agreement or the Loan Documents or other documents executed in connection
therewith.
4. Except as modified herein, the Note, the Loan Agreement, the
Loan Documents and all other agreements as to payment, guarantee of payment or
security executed in connection therewith shall remain as written originally
and in full force and effect in all respects, and nothing herein shall affect,
modify, limit or impair any of the rights and powers which the Bank may have
thereunder.
5. The Company agrees to perform and observe all of the covenants,
agreements, stipulations, and conditions to be performed under the Note, the
Loan Agreement, Loan Documents, and all other related agreements, as amended
hereby. Except as modified by this
-2-
<PAGE> 60
Agreement, all the terms, conditions and convenants of the Note, the Loan
Agreement, the Loan Documents and any other related agreements shall remain as
originally written.
6. The Company agrees to execute such continuation statements,
financing statements, or other documents, if any, as may be necessary or
desirable to continue in full force and effect the security interest granted to
the Bank.
7. THIS AGREEMENT shall become effective only upon its execution by
all parties hereto.
IN WITNESS WHEREOF, the Company and the Bank have hereunto set their
hands at Cincinnati, Ohio on the date first set forth above.
COMPANY:
CINCINNATI MICROWAVE, INC.
By: /s/ JOHN W. NOLAND
------------------------------
Its: Executive Vice President and
Chief Operating Officer
BANK:
THE HUNTINGTON NATIONAL BANK
By: /s/ STEVEN M. KUHN
-----------------------------
Its: Vice President
- 3 -
<PAGE> 61
FIRST NOTE MODIFICATION AGREEMENT
(TERM NOTE)
This First Note Modification Agreement (this "Agreement") is entered
into as of the 28th day of December, 1994, by and between The Huntington
National Bank (hereinafter the "Bank") and Cincinnati Microwave, Inc.
(hereinafter the "Company").
WITNESSETH:
A. As of May 27, 1994, the Bank and the Company entered into and
executed a certain Loan and Security Agreement (hereinafter the "Loan
Agreement"); and
B. As of May 27, 1994, the Company executed and delivered to the
Bank, inter alia, a certain commercial loan promissory note in the original
principal amount of Four Million Dollars ($4,000,000.00) (hereinafter the
"Note"); and
C. To secure the repayment of the Note, the Company granted to the
Bank (a) a security interest in the collateral described in the Loan Agreement,
and (b) a mortgage upon certain real property owned by the Company and located
in Warren County, Ohio (hereinafter collectively the "Real and Personal
Property"); and
D. The Bank's security interests and mortgage in the Real and
Personal Property were perfected properly by the filing of financing statements
and the recording of a mortgage with various recording authorities; and
E. In connection with the Loan Agreement and the Note, the Company
executed and delivered to the Bank certain other loan documents, a promissory
note, lockbox agreements, consents, assignments, security agreements,
agreements, instruments and financing statements in connection with the
indebtedness referred to in the Loan Agreement (all of the foregoing, together
with the Note and the Loan Agreement, are hereinafter collectively referred to
as the "Loan Documents"); and
F. The Company remains the owner of the Real and Personal Property
and the Bank holds the Loan Documents; and
G. The Company and the Bank desire and are willing to decrease the
principal sum of the Note.
<PAGE> 62
NOW, THEREFORE, in consideration of the mutual covenants, agreements
and promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the Company and the Bank, for
themselves and their successors and assigns do hereby agree, recite, represent
and warrant as follows:
1. The first paragraph on page 1 of the Note is hereby amended to
recite in its entirety that:
FOR VALUE RECEIVED, the undersigned promises
to pay to the order of The Huntington National Bank
(hereinafter called the "Bank," which term shall include
any holder hereof), at such place as the Bank may
designate or, in the absence of such designation, at any
of the Bank's offices, the sum of up to Three Million
Dollars ($3,000,000.00) or so much thereof as shall
have been advanced by the Bank at any time and not
thereinafter repaid (hereinafter called the "Principal
Sum"), together with interest as hereinafter provided.
Subject to the terms and conditions hereof and of the
Loan and Security Agreement (as hereafter defined),
the proceeds of the loan evidenced hereby may be
advanced in partial amounts during the term of this note
(this "Note") prior to December 31, 1994. Each such
advance shall be made to the undersigned upon receipt
by the Bank of the undersigned's application therefor
and disbursement instructions, which shall be in such
form as the Bank shall from time to time prescribe.
The Bank shall be entitled to rely on any written
communication requesting an advance and/or providing
disbursement instructions hereunder, which shall be
received by it in good faith from anyone reasonably
believed by the Bank to be the undersigned's authorized
agent. The undersigned agrees that all advances made
by the Bank will be evidenced by entries made by the
Bank into its electronic data processing system and/or
internal memoranda maintained by the Bank. The
undersigned further agrees that the sum or sums shown
on the most recent printout from the Bank's electronic
data processing system, the grid attached hereto, or on
such memoranda shall be rebuttably presumptive
evidence of the amount of the Principal Sum and of the
amount of any accrued interest. The undersigned
promises to pay the Principal Sum and the interest
thereon at the time and in the manner hereinafter
provided in this Note.
2. The Company hereby covenants and agrees that the Bank's agreement
in this Agreement to modify the Note shall not be construed and shall not be
the Bank's agreement to further modify the Note.
3. Nothing contained in this Amendment shall be construed to in any
manner affect, modify, cure, or effect a waiver of the occurrence and/or
continuance of any "Event of
<PAGE> 63
Default" by the Company under the terms of the Loan Agreement or the Loan
Documents or other documents executed in connection therewith.
4. Except as modified herein, the Note, the Loan Agreement, the Loan
Documents and all other agreements as to payment, guarantee of payment or
security executed in connection therewith shall remain as written originally
and in full force and effect in all respects, and nothing herein shall affect,
modify, limit or impair any of the rights and powers which the Bank may have
thereunder.
5. The Company agrees to perform and observe all of the covenants,
agreements, stipulations, and conditions to be performed under the Note, the
Loan Agreement, Loan Documents, and all other related agreements, as amended
hereby. Except as modified by this Agreement, all the terms, conditions
and covenants of the Note, the Loan Agreement, the Loan Documents and any other
related agreements shall remain as originally written.
6. The Company agrees to execute such continuation statements,
financing statements, or other documents, if any, as may be necessary or
desirable to continue in full force and effect the security interest granted to
the Bank.
7. THIS AGREEMENT shall become effective only upon its execution by
all parties hereto.
IN WITNESS WHEREOF, the Company and the Bank have hereunto set their
hands at Cincinnati, Ohio on the date first set forth above.
COMPANY:
CINCINNATI MICROWAVE, INC.
By: /s/ JOHN W. NOLAND
----------------------------------
Its: Executive Vice President and
Chief Operating Officer
BANK:
THE HUNTINGTON NATIONAL BANK
By: /s/ STEVEN M. KUHN
----------------------------------
Its: Vice President
<PAGE> 64
SECOND NOTE MODIFICATION AGREEMENT
(TERM NOTE)
This Second Note Modification Agreement (this "Agreement") is entered
into as of the 28th day of December, 1994, by and between The Huntington
National Bank (hereinafter the "Bank") and Cincinnati Microwave, Inc.
(hereinafter the "Company").
WITNESSETH:
A. As of May 27, 1994, the Bank and the Company entered into and
executed a certain Loan and Security Agreement, which was amended by a certain
First Amendment to Loan and Security Agreement dated December 28, 1994
(hereinafter collectively the "Loan Agreement"); and
B. As of May 27, 1994, the Company executed and delivered to the Bank,
inter alia, a certain commercial loan promissory note in the original principal
amount of Four Million Dollars ($4,000,000.00), which was modified by a certain
First Note Modification Agreement (Term Note) dated December 28, 1994
(hereinafter collectively the "Note"); and
C. To secure the repayment of the Note, the Company granted to the
Bank (a) a security interest in the collateral described in the Loan Agreement,
and (b) a mortgage upon certain real property owned by the Company and located
in Warren County, Ohio (hereinafter collectively the "Real and Personal
Property"); and
D. The Bank's security interests and mortgage in the Real and Personal
Property were perfected properly by the filing of financing statements and the
recording of a mortgage with various recording authorities; and
E. In connection with the Loan Agreement and the Note, the Company
executed and delivered to the Bank certain other loan documents, a promissory
note, lockbox agreements, consents, assignments, security agreements,
agreements, instruments and financing statements in connection with the
indebtedness referred to in the Loan Agreement (all of the foregoing, together
with the Note and the Loan Agreement, are hereinafter collectively referred to
as the "Loan Documents"); and
F. The Company remains the owner of the Real and Personal Property and
the Bank holds the Loan Documents; and
G. The Company and the Bank desire and are willing to modify certain
terms of the Note.
<PAGE> 65
NOW, THEREFORE, in consideration of the mutual covenants, agreements
and promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the Company and the Bank, for
themselves and their successors and assigns do hereby agree, recite, represent
and warrant as follows:
1. The first two paragraphs of the section of the Note designated
"Interest" are hereby amended to recite in their entirety that:
Interest will accrue on the unpaid balance of the Principal
Sum until paid at a variable rate of interest per annum,
which shall change in the manner set forth below, equal to
one and one-half percentage points in excess of the Prime
Commercial Rate.
Upon the occurrence of an "Event of Default" pursuant to the
Loan and Security Agreement, interest will accrue on the
unpaid balance of the Principal Sum and unpaid interest,
if any, at a variable rate of interest per annum, which
shall change in the manner set forth below, equal to four
and one-half percentage points in excess of the Prime
Commercial Rate.
The remainder of the section designated "Interest" shall remain as originally
written.
2. The section titled "Manner of Payment" of the Note is hereby
amended to recite in its entirety that:
The Principal Sum shall be due and payable in eighteen
consecutive installments, beginning on January 31, 1995,
and continuing on the last day of each month thereafter,
and at maturity whether by demand, acceleration or
otherwise. Each installment of Principal Sum shall be in
the amount of $50,000.00 except the final installment
shall be for the unpaid balance. Accrued interest shall
be payable on the same dates as installments of the
Principal Sum.
3. The Company hereby covenants and agrees that the Bank's
agreement in this Agreement to modify the Note shall not be construed and shall
not be the Bank's agreement to further modify the Note.
4. Nothing contained is this Amendment shall be construed to in
any manner affect, modify, cure, or effect a waiver of the occurrence and/or
continuance of any "Event of Default" by the Company under the terms of the
Loan Agreement or the Loan Documents or other documents executed in connection
therewith.
5. Except as modified herein, the Note, the Loan Agreement, the
Loan Documents and all other agreements as to payment, guarantee of payment or
security executed in connection therewith shall remain as written originally
and in full force and effect in all respects,
<PAGE> 66
and nothing herein shall affect, modify, limit or impair any of the rights and
powers which the Bank may have thereunder.
6. The Company agrees to perform and observe all of the covenants,
agreements, stipulations, and conditions to be performed under the Note, the
Loan Agreement, Loan Documents, and all other related agreements, as amended
hereby. Except as modified by this Agreement, all the terms, conditions and
convenants of the Note, the Loan Agreement, the Loan Documents and any other
related agreements shall remain as originally written.
7. The Company agrees to execute such continuation statements,
financing statements, or other documents, if any, as may be necessary or
desirable to continue in full force and effect the security interest granted to
the Bank.
8. THIS AGREEMENT shall become effective only upon its execution by all
parties hereto.
IN WITNESS WHEREOF, the Company and the Bank have hereunto set their
hands at Cincinnati, Ohio on the date first set forth above.
COMPANY:
CINCINNATI MICROWAVE, INC.
By: /s/ JOHN W. NOLAND
-----------------------------------
Its: Executive Vice President and
Chief Operating Officer
BANK:
THE HUNTINGTON NATIONAL BANK
By: /s/ STEVEN M. KUHN
-----------------------------------
Its: Vice President
<PAGE> 67
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
THIS THIRD AMENDMENT (this "Amendment") to the Loan and Security Agreement
is entered into as of the first day of August 1995, by and between Cincinnati
Microwave, Inc. (hereinafter the "Company") and The Huntington National Bank
(hereinafter the "Bank").
RECITALS:
A. As of May 27, 1994, the Company and the Bank executed a certain Loan
and Security Agreement, which was amended by a certain First Amendment to Loan
and Security Agreement dated as of December 28, 1994, and a certain Second
Amendment to Loan and Security Agreement dated as of March 17, 1995,
(hereinafter collectively the "Loan Agreement"), setting forth the terms of
certain loans to the Company; and
B. As of May 27, 1994, the Company executed and delivered to the Bank,
INTER ALIA, a revolving promissory note in the original principal sum of Six
Million Dollars ($6,000,000.00), which was amended by a certain First Note
Modification Agreement (Revolving Note) and by a certain Second Note
Modification Agreement (Revolving Note), both dated as of December 28, 1994
(hereinafter collectively the "Revolving Note"); and
C. As of May 27, 1994, the Company executed and delivered to the Bank,
INTER ALIA, a commercial loan promissory note in the original principal sum of
Four Million Dollars ($4,000,000.00), which was amended by a certain First Note
Modification Agreement (Term Note) and by a certain Second Note Modification
Agreement (Term Note), both dated as of December 28, 1994 (hereinafter
collectively the "Term Note"); and
D. In connection with the Loan Agreement, the Revolving Note and the Term
Note, the Company executed and delivered to the Bank certain other loan
documents, an open-end mortgage, assignment of rents and security agreement,
lockbox agreements, consents, assignments, security agreements, agreements,
instruments and financing statements in connection with the indebtedness
referred to in the Loan Agreement (all of the foregoing, together with the
Revolving Note, the Term Note and the Loan Agreement, are hereinafter
collectively referred to as the "Loan Documents"); and
E. The Company and the Bank desire to amend and modify certain terms in
the Loan Agreement.
<PAGE> 68
NOW, THEREFORE, in consideration of the mutual convenants, agreements and
promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the Company and the Bank, for
themselves and their successors and assigns do hereby agree, recite, represent
and warrant as follows:
1. Section 1.1, "THE LOAN." of the Loan Agreement is hereby amended to
recite in its entirety that:
1.1 THE LOAN. The Bank, subject to the terms and conditions
hereof, will make loans and advances to the Company up to the
aggregate principal sum of $14,000,000.00 (the "Loan"). The Loan shall
be comprised of (a) loans and advances on a revolving basis up to the
principal sum of $7,000,000.00, subject to the terms and conditions
hereof (the "Revolving Loan"), (b) loans and advances on a revolving
basis up to the principal sum of $4,000,000.00 from August 1, 1995,
through and including September 30, 1995, subject to the terms and
conditions hereof (the "Supplemental Revolving Loan"), (c) a term loan
providing for advances up to the principal sum of $3,000,000.00,
subject to the terms and conditions hereof (the "Term Loan"), and (d)
a standby letter of credit facility for the issuance of standby
letters of credit with an aggregate maximum stated value not to exceed
$1,000,000.00 (the "Letters of Credit"). Notwithstanding the
individual limits of the Revolving Loan, the Supplemental Revolving
Loan and the Letters of Credit set forth in the immediately preceding
sentence, the outstanding principal balance of the Revolving Loan,
plus the principal balance of the Supplemental Revolving Loan, plus
the aggregate stated value of the outstanding Letters of Credit shall
not exceed $11,000,000.00.
2. Section 1.2. "LENDING FORMULA," of the Loan Agreement is hereby
amended to recite in its entirety that:
1.2 LENDING FORMULA. The principal balance of the Revolving Loan,
plus the principal balance of the Supplemental Revolving Loan, plus
the aggregate stated value of the outstanding Letters of Credit shall
not exceed an amount equal to the sum of (a) the lesser of (i)
$5,000,000.00 beginning August 1, 1995, through and including
September 30, 1995, and $3,000,000.00 thereafter or (ii) 40% of
Eligible Inventory, (except for and excluding Eligible Finished Goods
Inventory beginning August 1, 1995, through and including September
30, 1995), plus (b) 60% of Eligible Finished Goods Inventory beginning
July 28, 1995, through and including September 30, 1995, plus (c) 80%
of Eligible Accounts (collectively the "Borrowing Base"); provided,
however, that the Bank will permit loans and advance in excess of the
Borrowing Base of up to $1,000,000.00, beginning July 28, 1995,
through and including September 15, 1995 (the "Temporary
Overadvance"); provided, however, that the Temporary Overadvance shall
be reduced $50,000 per week beginning on August 4, 1995, and
continuing with a $50,000 reduction on each Friday thereafter until
September 15, 1995, with the final reduction being for the remainder
of the
- 2 -
<PAGE> 69
Temporary Overadvance. The Bank, in its sole discretion, reserves the
right upon notice to the Company to increase or decrease the foregoing
percentages or the maximum dollar amount attributable to Eligible
Inventory; provided, however, that the Bank shall not increase or
decrease the foregoing percentages by more than ten percentage points
or increase or decrease the maximum dollar amount attributable to
Eligible Inventory by more than ten percent in the aggregate, unless
an Event of Default or Pending Default shall have occurred and be
continuing or unless the Bank shall have determined in good faith
that a material change in the Company's business, prospects,
properties or condition (financial or otherwise) has occurred. With
respect to the Temporary Overadvance, the Company agrees to pay to
the Bank a fee of $50,000.00, which shall be fully earned as of July
28, 1995, but which shall be payable in installments of $25,000.00
each due August 31, 1995, and September 30, 1995, respectively.
3. A new section 2.3, entitled "ELIGIBLE FINISHED GOODS INVENTORY," is
hereby added to the Loan Agreement and shall recite in its entirety that:
2.3 ELIGIBLE FINISHED GOODS INVENTORY. The term "Eligible Finished
Goods Inventory" means that part of Eligible Inventory which consists
of finished goods, beginning July 28, 1995, through and including
September 30, 1995, only.
4. Section 6.7 "MINIMUM SECURITY" of the Loan Agreement is hereby
amended to recite in its entirety that:
6.7 MINIMUM SECURITY. The Company shall maintain, as minimum
security for (x) the Revolving Loan, the Supplemental Revolving Loan
and the Letters of Credit, Eligible Inventory, Eligible Finished Goods
Inventory and Eligible Accounts having an aggregate value such that
the Borrowing Base will equal or exceed the aggregate unpaid
principal balances of the Revolving Loan and the Supplemental
Revolving Loan, plus the aggregate stated value of the outstanding
Letters of Credit, and if the Company fails to do so, the Company
shall immediately pay to the Bank the difference between (a) the sum
of (i) the aggregate unpaid principal balances of the Revolving Loan
and the Supplemental Revolving Loan, plus (ii) the aggregate stated
value of the outstanding Letters of Credit, and (b) the Borrowing
Base; and (y) the Term Loan, Equipment in which the Bank has a first
and exclusive perfected security interest and Real Property upon
which the Bank has a first and exclusive perfected mortgage, such
that the 80% of the orderly liquidation value (or other similar method
of computing value as reflected in appraisals or other methods
satisfactory to the Bank) of the Equipment, plus 70% of the fair
market value of the Real Property (as reflected in appraisals or
other evaluations acceptable to the Bank in its sole and absolute
discretion) (collectively, the "Term Loan Collateral Value"), equals
or exceeds the principal balance of the Term Loan, and if the Company
fails to do so, then the Company shall immediately pay to the Bank
the difference between the principal of the Term Loan and the Term
Loan Collateral Value.
-3-
<PAGE> 70
5. Concurrently with the execution of this Amendment, the Company shall
execute and deliver to the Bank a promissory note dated the same date as this
Amendment with the blanks appropriately filled in, and such note shall be in
the form of EXHIBIT A-1 attached to this Amendment to evidence the Supplemental
Revolving Loan described in the Loan Agreement.
6. Concurrently with the execution of this Amendment, the Company shall
pay to the Bank a fee in respect of the Supplemental Revolving Loan in the
amount of $25,000.00.
7. Effective upon the execution of this Amendment, the Company represents
and warrants that no "Event of Default," as defined in the Loan Agreement, has
occurred and is continuing, nor will any occur immediately after the execution
and delivery of this Amendment by the performance or observance of any
provision hereof.
8. Each reference to the Loan Agreement, whether by use of the phrase
"Loan and Security Agreement," "Loan Agreement," "Agreement," the prefix
"herein" or any other term, and whether contained in the Loan Agreement itself,
in this Amendment or any document executed concurrently herewith or in any loan
documents executed hereafter, shall be construed as a reference to the Loan
Agreement as amended by this Amendment.
9. The Company hereby reaffirms each and every warranty and representation
made in the Loan Documents as if the same were made as of the date this
Amendment becomes effective, except to the extent that such warranties and
representations expressly relate to an earlier date.
10. Except as modified herein, the Loan Agreement, Loan Documents and all
other agreements as to payment, guarantee of payment or security executed in
connection therewith shall remain as written originally and in full force and
effect in all respects, and nothing herein shall affect, modify, limit or
impair any of the rights and powers which the Bank may have thereunder. Any
modification or waiver of any of the agreements, covenants, or terms of the
Loan Agreement or the Loan Documents shall not be construed as the Bank's
agreement or intention to agree to any further modifications or waivers.
11. The Company agrees to perform and observe all of the covenants,
agreements, stipulations, and conditions to be performed under the Loan
Agreement, Loan Documents, and all other related agreements, as amended
hereby.
-4-
<PAGE> 71
12. The Company hereby represents and warrants to the Bank that (a) the
Company has legal power and authority to execute and deliver the within
Amendment; (b) the officer executing the within Amendment on behalf of the
Company has been duly authorized to execute and deliver the same and bind the
Company with respect to the provisions provided for herein; (c) the execution
and delivery hereof by the Company and the performance and observance by the
Company of the provisions hereof do not violate or conflict with the articles
of incorporation, regulations or by-laws of the Company or any law applicable
to the Company or result in the breach of any provision of or constitute a
default under any agreement, instrument or document binding upon or enforceable
against the Company; and (d) this Amendment constitutes a valid and legally
binding obligation upon the Company in every respect.
13. THIS AMENDMENT shall become effective only upon its execution by all
parties hereto.
14. The capitalized terms herein shall have the same meanings as the
capitalized terms in the Loan Agreement as amended hereby.
IN WITNESS WHEREOF, the Company and the Bank have hereunto set their hands
at Cincinnati, Ohio on the date first set forth above.
COMPANY;
CINCINNATI MICROWAVE, INC.
By: /s/ Walter P. Masavage
--------------------------
Its: Treasurer 8/1/95
-------------------------
BANK:
THE HUNTINGTON NATIONAL BANK
By:
--------------------------
Its:
-------------------------
- 5 -
<PAGE> 72
THE HUNTINGTON NATIONAL BANK
REVOLVING NOTE
==============================================================================
City Office __________________ Division _________ Branch ________ [XX] Secured
Account No. __________________ Note No. _______________________ [ ] Unsecured
Account Name CINCINNATI MICROWAVE, INC.
[XX] Corporation [ ] Partnership [ ] Individual/Proprietorship
[ ] Other ___________________________________________________________________
==============================================================================
$4,000,000.00 Cincinnati, Ohio August 1, 1995
FOR VALUE RECEIVED, the undersigned promises to pay to the order of The
Huntington National Bank (hereinafter called the "Bank," which term shall
include any holder hereof) at such place as the Bank may designate or, in the
absence of such designation, at any of the Bank's offices, the sum of Four
Million Dollars ($4,000,000.00) or so much thereof as shall have been advanced
by the Bank at any time and not thereafter repaid (hereinafter referred to as
"Principal Sum") together with interest as hereinafter provided and payable at
the time and in the manner hereinafter provided. The proceeds of the loan
evidenced hereby may be advanced, repaid and readvanced in partial amounts
during the term of this revolving note (this "Note") and prior to maturity.
Each such advance shall be made to the undersigned upon receipt by the Bank of
the undersigned's application therefor and disbursement instructions, which
shall be in such form as the Bank shall from time to time prescribe. The Bank
shall be entitled to rely on any oral or telephonic communication requesting an
advance and/or providing disbursement instructions hereunder, which shall be
received by it in good faith from anyone reasonably believed by the Bank to be
the undersigned's authorized agent. The undersigned agrees that all advances
made by the Bank will be evidenced by entries made by the Bank into its
electronic data processing system and/or internal memoranda maintained by the
Bank. The undersigned further agrees that the sum or sums shown on the most
recent printout from the Bank's electronic data processing system and/or on
such memoranda shall be rebuttably presumptive evidence of the amount of the
Prinicpal Sum and of the amount of any accrued interest.
This Note is executed and the advances contemplated hereunder are to be
made pursuant to a Loan and Security Agreement by and between the undersigned
and the Bank dated May 27, 1994, and all amendments, modifications, and
supplements thereto from time to time including without limitation, a certain
First Amendment to Loan and Security Agreement dated December 28, 1994, a
Second Amendment to Loan and Security Agreement dated March 17, 1995, and a
Third Amendment to Loan and Security Agreement dated of even date herewith
(hereinafter called the "Loan and Security Agreement"), and all the covenants,
representations, agreements, terms, and conditions contained therein, including
but not limited to additional conditions of default, are incorporated herein as
if fully rewritten.
INTEREST
Interest will accrue on the unpaid balance of the Principal Sum until paid
at a variable rate of interest per annum, which shall change in the manner set
forth below, equal to one and one-quarter percentage points in excess of the
Prime Commercial Rate.
<PAGE> 73
Upon the occurrence of an "Event of Default" pursuant to the Loan and
Security Agreement, interest will accrue on the unpaid balance of the Principal
Sum and unpaid interest, if any, at a variable rate of interest per annum,
which shall change in the manner set forth below, equal to four and one quarter
percentage points in excess of the Prime Commercial Rate.
All interst shall be calculated on the basis of a 360 day year for the
actual number of days the Principal Sum or any part thereof remains unpaid.
As used herein, "Prime Commercial Rate" shall mean the rate established
by the Bank from time to time based on its consideration of econommic, money
market, business and competitive factors. The Prime Commercial Rate is not
necessarily the Bank's most favored rate. Subject to any maximum or minimum
interest rate limitation specified herein or by applicable law, any variable
rate of interest on the obligations evidenced hereby shall change automatically
without notice to the undersigned immediately with each change in the Prime
Commerical Rate.
MANNER OF PAYMENT
- -----------------
The Principal Sum shall be due and payable on September 30, 1995, and
at maturity, whether by demand, accelertion or otherwise. Accrued interest
shall be due and payable monthly beginning on September 1, 1995, and continuing
on the first day of each month thereafter, and at maturity, whether by
accelertion or otherwise.
LATE CHARGE
- -----------
Any installment or other payment not made within 10 days of the date
such payment or installment is due shall be subejct to a late charge equal to
5% of the amount of the installment or payment.
SECURITY
- --------
This Note is secured by the security interests, assignments, and
mortgages granted and/or referenced in the Loan and Security Agreement.
DEFAULT
- -------
Upon the occurrence of any of the following events:
(a) the undersigned fails to make any payment of interest or
of the Principal Sum on or before the date such payment is due;
(b) an "Event of Default" under the Loan and Security
Agreement shall have occurred;
then the Bank may, at its option, without notice or demand, accelerate the
maturity of the obligations evidenced hereby, which obligations shall become
immediately due and payable. In the event the Bank shall institute any action
for the enforcement or collection of the obligations evidenced hereby, the
undersigned agrees to pay all costs and expenses of such action, including
reasonable attorneys' fees, to the extent permitted by law.
GENERAL PROVISIONS
- ------------------
The undersigned, and any indorser, surety, or guarantor, hereby
severally waive presentment, notice of dishonor, protest, notice of protest,
and diligence in bringing suit against any party hereto, and consent that,
without discharging any of them, the time of payment may be extended an
unlimited number of times before or after maturity without notice. The Bank
shall not be required to pursue any party hereto, including any guarantor, or
to exercise any rights against any collateral herefor before exercising any
other such rights.
- 2 -
<PAGE> 74
The obligations evidenced hereby may from time to time be evidenced by
another note or notes given in substitution, renewal or extension hereof. Any
security interest or mortgage which secures the obligations evidenced hereby
shall remain in full force and effect notwithstanding any such substitution,
renewal, or extension.
The captions used herein are for references only and shall not be
deemed a part of this Note. If any of the terms or provisions of this Note
shall be deemed unenforceable, the enforceability of the remaining terms and
provisions shall not be effected. This Note shall be governed by and construed
in accordance with the law of the State of Ohio.
WAIVER OF RIGHT TO TRIAL BY JURY
- --------------------------------
THE UNDERSIGNED HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS NOTE OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE UNDERSIGNED OR THE BANK WITH RESPECT TO THIS NOTE OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH,
OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND THE UNDERSIGNED HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT THE UNDERSIGNED OR THE BANK MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
UNDERSIGNED TO THE WAIVER OF THE RIGHT OF THE UNDERSIGNED TO TRIAL BY JURY.
WARRANT OF ATTORNEY
- -------------------
The undersigned authorizes any attorney at law to appear in any Court
of Record in the State of Ohio or in any state or territory of the United
States after the above indebtedness becomes due, whether by acceleration or
otherwise, to waive the issuing and service of process, and to confess judgment
against the undersigned in favor of the Bank for the amount then appearing due
together with costs of suit, and thereupon to waive all errors and all rights
of appeal and stays of execution.
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
CINCINNATI MICROWAVE, INC.
By: Walter P. Masavage 8/1/95
---------------------------------
Its: Treasurer
--------------------------------
- 3 -
<PAGE> 1
Exhibit 23(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement of Form S-3 of our report
dated February 3, 1995 appearing on page S-1 of Cincinnati Microwave, Inc.
Annual Report on Form 10-K for the year ended December 24, 1994. We also
consent to the references to us under the headings "Experts" and "Selected
Financial Data" in such Prospectus. However, it should be noted that Price
Waterhouse LLP has not prepared or certified such "Selected Financial Data."
/s/ Price Waterhouse LLP
-----------------------
Price Waterhouse LLP
Cincinnati, Ohio
August 11, 1995
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, CINCINNATI MICROWAVE, INC., an Ohio corporation (hereinafter
referred to as the "Company"), proposes shortly to file with the Securities and
Exchange Commission under the provisions of the Securities Act of 1933, as
amended, and the Rules and Regulations thereunder, a Registration Statement on
Form S-3 registering 4,600,000 common shares of the Company; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jacques A.
Robinson, Walter P. Masavage and Elaine M. Bacon, and each of them singly, his
attorneys for him and in his name, place and stead, and each of his offices and
capacities in the Company, to execute and file such Registration Statement,
including the prospectus, and thereafter to execute and file any amended
registration statement or statements and amended prospectus or prospectuses or
amendments or supplements to any of the foregoing, hereby giving and granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite and necessary to be done in and about the
premises as fully to all intents and purposes as he might or could do if
personally present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 21st day of
June, 1995.
/s/ Charles M. Fullgraf
___________________________________
Charles M. Fullgraf
Director
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
On the 21st day of June, 1995, personally appeared before me Charles M.
Fullgraf, to me known and known to me to be the person described in and who
executed the foregoing instrument, and he duly acknowledged to me that he
executed and delivered the same for purposes therein expressed.
Witness my hand and official seal this 21st day of June, 1995.
/s/ Mary K. Perkins
__________________________________
Notary Public
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, CINCINNATI MICROWAVE, INC., an Ohio corporation (hereinafter
referred to as the "Company"), proposes shortly to file with the Securities and
Exchange Commission under the provisions of the Securities Act of 1933, as
amended, and the Rules and Regulations thereunder, a Registration Statement on
Form S-3 registering 4,600,000 common shares of the Company; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jacques A.
Robinson, Walter P. Masavage and Elaine M. Bacon, and each of them singly, his
attorneys for him and in his name, place and stead, and each of his offices and
capacities in the Company, to execute and file such Registration Statement,
including the prospectus, and thereafter to execute and file any amended
registration statement or statements and amended prospectus or prospectuses or
amendments or supplements to any of the foregoing, hereby giving and granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite and necessary to be done in and about the
premises as fully to all intents and purposes as he might or could do if
personally present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 28th day of
June, 1995.
/s/ Joseph M. O'Donnell
___________________________________
Joseph M. O'Donnell
Director
STATE OF Florida )
) SS:
COUNTY OF Palm Beach )
On the 28th day of June, 1995, personally appeared before me Joseph M.
O'Donnell, to me known and known to me to be the person described in and who
executed the foregoing instrument, and he duly acknowledged to me that he
executed and delivered the same for purposes therein expressed.
Witness my hand and official seal this 28th day of June, 1995.
/s/ Rosalind S. Seiden
__________________________________
Notary Public
Personally appeared before me.
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, CINCINNATI MICROWAVE, INC., an Ohio corporation (hereinafter
referred to as the "Company"), proposes shortly to file with the Securities and
Exchange Commission under the provisions of the Securities Act of 1933, as
amended, and the Rules and Regulations thereunder, a Registration Statement on
Form S-3 registering 4,600,000 common shares of the Company; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jacques A.
Robinson, Walter P. Masavage and Elaine M. Bacon, and each of them singly, his
attorneys for him and in his name, place and stead, and each of his offices and
capacities in the Company, to execute and file such Registration Statement,
including the prospectus, and thereafter to execute and file any amended
registration statement or statements and amended prospectus or prospectuses or
amendments or supplements to any of the foregoing, hereby giving and granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite and necessary to be done in and about the
premises as fully to all intents and purposes as he might or could do if
personally present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this ___ day of
June, 1995.
/s/ Gil Wachsman
___________________________________
Gilbert L. Wachsman
Director
STATE OF Minnesota )
) SS:
COUNTY OF Hennepin )
On the ___ day of June, 1995, personally appeared before me Gilbert L.
Wachsman, to me known and known to me to be the person described in and who
executed the foregoing instrument, and he duly acknowledged to me that he
executed and delivered the same for purposes therein expressed.
Witness my hand and official seal this ___ day of June, 1995.
/s/ Donna J. Gongoll
__________________________________
Notary Public
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, CINCINNATI MICROWAVE, INC., an Ohio corporation (hereinafter
referred to as the "Company"), proposes shortly to file with the Securities and
Exchange Commission under the provisions of the Securities Act of 1933, as
amended, and the Rules and Regulations thereunder, a Registration Statement on
Form S-3 registering 4,600,000 common shares of the Company; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jacques A.
Robinson, Walter P. Masavage and Elaine M. Bacon, and each of them singly, her
attorneys for her and in her name, place and stead, and each of her offices and
capacities in the Company, to execute and file such Registration Statement,
including the prospectus, and thereafter to execute and file any amended
registration statement or statements and amended prospectus or prospectuses or
amendments or supplements to any of the foregoing, hereby giving and granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite and necessary to be done in and about the
premises as fully to all intents and purposes as she might or could do if
personally present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand this 26th day of
June, 1995.
/s/ Erika Williams
___________________________________
Erika Williams
Director
STATE OF California )
) SS:
COUNTY OF Santa Clara )
On 6-26-95 before me, Henry Shepherd Notary Public, personally appeared Erika
Williams personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is subscribed to the within
instrument and acknowledged to me that she executed the same in her authorized
capacity(ies), and that by her signature(s) on the instrument the person(s), or
the entity upon behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
Signature /s/ Henry Shepherd
________________________________ (Seal)
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, CINCINNATI MICROWAVE, INC., an Ohio corporation (hereinafter
referred to as the "Company"), proposes shortly to file with the Securities and
Exchange Commission under the provisions of the Securities Act of 1933, as
amended, and the Rules and Regulations thereunder, a Registration Statement on
Form S-3 registering 4,600,000 common shares of the Company; and
WHEREAS, the undersigned is an officer and director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Walter P.
Masavage and Elaine M. Bacon, and each of them singly, his attorneys for him
and in his name, place and stead, and each of his offices and capacities in the
Company, to execute and file such Registration Statement, including the
prospectus, and thereafter to execute and file any amended registration
statement or statements and amended prospectus or prospectuses or amendments or
supplements to any of the foregoing, hereby giving and granting to said
attorneys full power and authority to do and perform all and every act and
thing whatsoever requisite and necessary to be done in and about the premises
as fully to all intents and purposes as he might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 21st day of
June, 1995.
/s/ Jacques Robinson
___________________________________
Jacques A. Robinson
President, Chief Executive Officer and
Director
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
On the 21st day of June, 1995, personally appeared before me Jacques A.
Robinson, to me known and known to me to be the person described in and who
executed the foregoing instrument, and he duly acknowledged to me that he
executed and delivered the same for purposes therein expressed.
Witness my hand and official seal this 21st day of June, 1995.
/s/ Robin Eppinghoff
__________________________________
Notary Public
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, CINCINNATI MICROWAVE, INC., an Ohio corporation (hereinafter
referred to as the "Company"), proposes shortly to file with the Securities and
Exchange Commission under the provisions of the Securities Act of 1933, as
amended, and the Rules and Regulations thereunder, a Registration Statement on
Form S-3 registering 4,600,000 common shares of the Company; and
WHEREAS, the undersigned is an officer of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jacques A.
Robinson, Walter P. Masavage and Elaine M. Bacon, and each of them singly, his
attorneys for him and in his name, place and stead, and each of his offices and
capacities in the Company, to execute and file such Registration Statement,
including the prospectus, and thereafter to execute and file any amended
registration statement or statements and amended prospectus or prospectuses or
amendments or supplements to any of the foregoing, hereby giving and granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite and necessary to be done in and about the
premises as fully to all intents and purposes as he might or could do if
personally present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th day of
June, 1995.
/s/ John W. Noland
___________________________________
John W. Noland
Executive Vice President
Chief Operating Officer and
Director
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
On the 8th day of June, 1995, personally appeared before me John W. Noland,
to me known and known to me to be the person described in and who executed the
foregoing instrument, and he duly acknowledged to me that he executed and
delivered the same for purposes therein expressed.
Witness my hand and official seal this 8th day of June, 1995.
/s/ Robin Eppinghoff
__________________________________
Notary Public
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, CINCINNATI MICROWAVE, INC., an Ohio corporation (hereinafter
referred to as the "Company"), proposes shortly to file with the Securities and
Exchange Commission under the provisions of the Securities Act of 1933, as
amended, and the Rules and Regulations thereunder, a Registration Statement on
Form S-3 registering 4,600,000 common shares of the Company; and
WHEREAS, the undersigned is an officer and director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jacques A.
Robinson, Walter P. Masavage and Elaine M. Bacon, and each of them singly, his
attorneys for him and in his name, place and stead, and each of his offices and
capacities in the Company, to execute and file such Registration Statement,
including the prospectus, and thereafter to execute and file any amended
registration statement or statements and amended prospectus or prospectuses or
amendments or supplements to any of the foregoing, hereby giving and granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite and necessary to be done in and about the
premises as fully to all intents and purposes as he might or could do if
personally present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th day of
August, 1995.
/s/ James L. Jaeger
___________________________________
James L. Jaeger
Chairman of the Board of Directors
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
On the 8th day of August, 1995, personally appeared before me James L.
Jaeger, to me known and known to me to be the person described in and who
executed the foregoing instrument, and he duly acknowledged to me that he
executed and delivered the same for purposes therein expressed.
Witness my hand and official seal this 8th day of August, 1995.
/s/ Kimberly S. Smith
__________________________________
Notary Public
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Exhibit 99
INDEMNIFICATION AGREEMENT
-------------------------
Indemnification Agreement ("Agreement") entered into this ______ day of
_________________, 1995 between CINCINNATI MICROWAVE, INC., an Ohio corporation
(the "Company") and JAMES L. JAEGER (the "Selling Shareholder").
RECITALS
A. The Company and the Selling Shareholder have, contemporaneously with
the execution of this Agreement, executed an Underwriting Agreement (the
"Underwriting Agreement") whereby the Company and the Selling Shareholder have,
in the aggregate, agreed to sell the Firm Shares and the Optional Common Shares
to the Underwriters (as such terms are defined in the Underwriting Agreement).
B. All capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Underwriting Agreement unless the context
hereof otherwise requires.
C. The Selling Shareholder, who is the Chairman of the Board of Directors
of the Company, spends substantially all of his time on activities outside of
the Company.
D. The Selling Shareholder has, individually and through the engagement
of professional advisors, undertaken a due diligence investigation of the
Company and is not aware of any untrue statement or alleged untrue statement of
any material fact in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or any amendment or supplement thereof and is not aware of the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading.
E. The Company has agreed to furnish a certificate to the Selling
Shareholder on the First Closing Date and Second Closing Date making
representations and warranties to the Selling Shareholders substantially the
same as those made to the Underwriters.
F. The Underwriting Agreement requires the Selling Shareholder and the
Company to indemnify and hold the Underwriters harmless from certain
liabilities, losses, claims and expenses arising from the transactions
described in the Underwriting Agreement.
G. The parties desire to enter into this Agreement to provide that the
Company will indemnify the Selling Shareholder against certain liabilities,
losses, claims and expenses that the Selling Shareholder may incur as a result
of the registration and sale of the Common Shares by virtue of the Selling
Shareholder's position as a selling shareholder as described in the
Underwriting Agreement.
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NOW, THEREFORE, the parties agree as follows:
1. The Company agrees to indemnify and hold harmless the Selling
Shareholder against any losses, claims, damages, liabilities or expenses, joint
or several, to which the Selling Shareholder may become subject, under the Act,
the Exchange Act, or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company), arising from
the Selling Shareholder's position as a selling shareholder of the Company,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof as contemplated below) arise out of or are based upon any
untrue statement by the Company or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment, or supplement thereto, or arise out of or are
based upon the omission by the Company or alleged omission to state in any of
them a material fact required to be stated therein or necessary to make the
statements in any of them not misleading, or arise out of or are based in whole
or in part on any inaccuracy in the representations and warranties of the
Company contained in the Underwriting Agreement or any failure of the Company
to perform its obligations in the Underwriting Agreement or under law; and will
reimburse the Selling Shareholder for any legal and other expenses as such
expenses are reasonably incurred by the Selling Shareholder in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with the
information furnished to the Company by the Selling Shareholder; and provided
further in no event shall the aggregate liability of the Company for
indemnification, contribution, reimbursement of expenses and breach of a
representation or warranty exceed the net proceeds received by the Company in
the offering described in the Underwriting Agreement. In addition to its other
obligations under the Underwriting Agreement or this Agreement, the Company
agrees that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
statement or omission by the Company, or any alleged statement or omission, or
any inaccuracy in the representations and warranties of the Company under the
Underwriting Agreement or this Agreement or the failure to perform its
obligations under this Agreement, it will reimburse the Selling Shareholder on
a quarterly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or
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other procedding, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the Company's obligations to reimburse the
Selling Shareholder for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent jurisdiction.
To the extent that any such interim reimbursement payment is so held to have
been improper, the Selling Shareholder shall promptly return it to the Company
together with interest, compounded daily, determined on the basis of the Prime
Rate. Any such interim reimbursement payments which are not made to the Selling
Shareholder within 30 days of a request for reimbursement, shall bear interest
at the Prime Rate from the date of such request. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
2. Notwithstanding any other provision contained herein, the Comany shall
have no indemnification obligation to the Selling Shareholder hereunder,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof as contemplated below) arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with the
information furnished by the Selling Shareholder or furnished to the Company by
the Selling Shareholder; and in such instance the Selling Shareholder will
reimburse the Company for any legal and other expense reasonably incurred by
the Company in connection with investigating, defending, settling, compromising
or paying any such loss, claim, damage, liability, expense or action.
3. Promptly after receipt by the Selling Shareholder of notice of the
commencement of any action, the Selling Shareholder will, if a claim in respect
thereto is to be made against the Company under this Agreement, notify the
Company in writing of the commencement thereof; but the omission so to notify
the Company will not relieve it from any liability which it may have to the
Selling Shareholder for contribution or otherwise under this Agreement to the
extent it is not prejudiced as a proximate result of such failure. In case any
such action is brought against the Selling Shareholder and he seeks or intends
to seek indemnity from the Company, the Company will be entitled to participate
in, and, to the extent that it may wish, to assume the defense thereof with
counsel reasonably satisfactory to the Selling Shareholder; provided, however,
if the defendants in any such action include
<PAGE> 4
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both the Company and the Selling Shareholder and the Selling Shareholder shall
have reasonably concluded that there may be a conflict between the positions of
the Company and the Selling Shareholder in conducting the defense of any such
action or that there may be legal defenses available to it which are different
from or additional to those available to the Company, the Selling Shareholder
shall have the right to select separate counsel to assume such legal defenses
and to otherwise participate in the defense of such action on behalf of Selling
Shareholder. Upon receipt of notice from the Company to the Selling Shareholder
of its election so to assume the defense of such action and approval by the
Selling Shareholder of counsel, the Company will not be liable to the Selling
Shareholder under this Agreement for any legal or other expenses subsequently
incurred by the Selling Shareholder in connection with the defense thereof
unless (i) the Selling Shareholder shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
to the next preceding sentence it being understood, however, that the Company
shall not be liable for the expenses of more than one separate counsel, or (ii)
the Company shall not have employed counsel reasonably satisfactory to the
Selling Shareholder to represent the Selling Shareholder within a reasonable
time after notice of commencement ofthe action, in each of which cases the fees
and expenses of counsel shall be at the expense of the Company.
4. If the indemnification provided for in this Agreement is required
by its terms but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless the Selling Shareholder under this Agreement in
respect of any losses, claims, damages, liabilities or expenses referred to
herein, then the Company shall contribute to the amount paid or payable by the
Selling Shareholder as a result of any losses, claims, damages, liabilities or
expenses referred to herein (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the Selling Shareholder from
the offering of the Common Shares or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Selling Shareholder in
connection with the statements or omissions or inaccuracies in the
representations and warranties in the Underwriting Agreement which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The respective relative benefits received by
the Company and the Selling Shareholder shall be deemed to be in the same
proportion as the total price paid to the Company and to the Selling
Shareholder, respectively, for the Common Shares sold by them to the
Underwriters (net of underwriting commissions but before deducting expenses)
bears to the total price to the public set forth on the cover of the
Prospectus. The relative
<PAGE> 5
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fault of the Company and the Selling Shareholder shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact or the inaccurate or the alleged inaccurate representation and/or
warranty relates to information supplied by the Company or the Selling
Shareholder and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in Section 3 of this Agreement, any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 3 hereof with respect to notice of commencement of any action shall
apply if a claim for contribution is to be made under this Section 4; provided,
however, that no additional notice shall be required with respect to any
action for which notice has been given under Section 3 for purposes of
indemnification. The Company and the Selling Shareholder agree that it would
not be just and equitable if contribution pursuant to this Agreemenet were
determined solely by pro rata allocation or by any other method or allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. No person guilty of fraudulent
misrepresentation (within the meaning Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentations.
5. The Selling Shareholder has, individually and through the
engagement of professional advisors, undertaken a due diligence investigation
of the Company and is not aware of any untrue statement or alleged untrue
statement of any material fact in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereof and is not
aware of the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
6. This Agreement shall inure to the benefit of the Selling
Shareholder, his heirs, successors and assigns and shall be binding upon the
Company and the Selling Shareholder, their heirs, successors and assigns.
CINCINNATI MICROWAVE, INC.
By:________________________________
Name:
Title:
<PAGE> 6
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________________________________
JAMES L. JAEGER
