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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported ) March 21, 1997
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CINCINNATI MICROWAVE, INC.
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(Exact name of registrant as specified in its charter)
Ohio 0-13136 31-0903863
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
One Microwave Plaza, Cincinnati, Ohio 45249-9502
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (513) 489-5400
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(Former name, former address and former fiscal year, if changed since
last report)
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Form 8-K Cincinnati Microwave, Inc.
Item 5. Other Events
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ASSET PURCHASE AGREEMENT
Cincinnati Microwave announced that it signed an Asset Purchase Agreement with
Escort Acquisition Corp. ("EAC") to purchase substantially all of the assets of
the Company's radar detector business and its real property for $10.9 million
plus the aggregate amount of certain interim advances. Escort Acquisition Corp.
is a company owned by Matthew Coleman, a Chicago-area businessman. On Friday,
March 21, 1997 the Company filed a motion with the United States Bankruptcy
Court, Southern District of Ohio, Western Division, for an order (i) granting
authority to sell the assets to EAC pursuant to Section 363 of the Bankruptcy
Code, (ii) establishing auction procedures and (iii) setting a hearing date of
April 7 on the sale of assets.
Cincinnati Microwave has been entertaining bids for its various businesses
following its filing on February 14, 1997 for protection from its creditors
under chapter 11 of the U.S. Bankruptcy Code. It has received preliminary
offers, including offers for the entire business and offers for portions of its
business, such as its detector, cordless phone and wireless modem businesses.
The Company believes the offer from Escort Acquisition Corp. appears to be the
best offer in order to maximize the return to the unsecured creditors.
The Company is continuing its efforts to find purchasers for the remainder of
its assets, its phone and modem businesses, and to determine whether a plan of
reorganization is possible. Based on its efforts to date, it appears that, even
if the Company were able to reorganize and emerge from bankruptcy, there is
little likelihood that any plan of reorganization would provide any or more than
only minimum value to its existing shareholders.
OUTSIDE DIRECTOR
The Company has appointed E. Ted Springstead to its board of directors as of
March 24, 1997. The appointment of Springstead brings the total number of
directors on the board to four.
Mr. Springstead, 62, has been a management consultant for high-technology
companies in the USA, Asia and Europe since 1993. He has experience with various
major world-wide corporations, such as Harman International, Wang Laboratories,
State Of The Art, Inc. and Sony Corporation. Between 1987 and 1992 Springstead
was Senior Vice President - Market Operations and Services at Amdahl Corporation
in Sunnyvale, California. Mr. Springstead holds a Master of Business
Administration Degree and a Bachelor of Science in Mechanical Engineering from
Northwestern University.
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FINANCIAL RESULTS
Cincinnati Microwave also reported unaudited results for its fourth quarter and
fiscal year ended December 29, 1996. For the year, unaudited net sales were
$56.8 million compared with $79.2 million in the prior year. The 1996 unaudited
net loss was $28.4 million, or $1.80 per share, including write offs of $12.1
million or 77 cents per share, compared to a loss of $13.0 million, or 90 cents
per share, in fiscal 1995. For the fourth quarter, unaudited net sales were
$10.3 million vs. $24.4 million in 1995, while the net loss increased to $15.6
million, or 99 cents per share, including writeoffs of $10.9 million or 69 cents
per share, from a loss of $9.0 million, or 58 cents per share, in 1995.
In 1996, the Company had a significant loss due to a number of factors. Net
sales were down 28 percent due to weak retail sales and the declining radar
detector market. Margins were impacted by lower production volume, which
impacted factory utilization and efficiency. The write offs of $12.1 million
related primarily to a $4.3 million write down of land and buildings to their
estimated net realizable value, write offs totaling $6.0 million of obsolete and
excess inventories, and a $1.2 million write off of accounts receivable from a
former distributor. In 1995 the write down for excess and obsolete inventory
totaled $4.4 million.
SHAREHOLDER LITIGATION SETTLEMENT
The Company announced that the U.S. District Court approved on Friday, March 21,
1997, an amended settlement of the pending class action lawsuit against the
Company's officers, directors and underwriters. The litigation remains pending
against the Company subject to the Bankruptcy Court's approval of a settlement
against the Company, which is being modified to substitute an unsecured claim
against the Company in the bankruptcy proceedings of $600,000 in lieu of the one
million dollars in common shares that the Company otherwise was to contribute to
the settlement.
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Form 8-K Cincinnati Microwave, Inc.
Item 7. Financial Statements and Exhibits
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(c) Exhibits.
99(i) - Asset Purchase Agreement between Cincinnati Microwave, Inc. and
Escort Acquisition Corp. without Exhibits and Schedules. (A list of the
Exhibits and Schedules is attached.)
99(ii) - Agreement to provide omitted Exhibits and Schedules upon
request.
99(iii) - Press release of Cincinnati Microwave, Inc. dated March 24,
1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Cincinnati
Microwave, Inc. has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
March 21, 1997
CINCINNATI MICROWAVE, INC.
By /s/ Kurt H. Stump
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Kurt H. Stump
Vice President and Chief Financial Officer/
Treasurer/Secretary
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Exhibit 99(i)
ASSET PURCHASE AGREEMENT
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THIS AGREEMENT is made this 21st day of March, 1997, by and among ESCORT
ACQUISITION CORP, an Illinois corporation ("Purchaser"), and CINCINNATI
MICROWAVE, INC., an Ohio corporation, individually and as Debtor in Possession
("Seller").
W I T N E S S E T H:
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WHEREAS, Seller is engaged in the business of designing, manufacturing and
marketing ultrahigh frequency and microwave wireless communications products
including radar warning devices ("Radar Detectors"), digital spread spectrum
cordless telephones ("Telephones") and wireless data modems ("Modems")
(collectively the "Business"); and
WHEREAS, on February 14, 1997 (the "Petition Date"), Seller filed a
voluntary petition under chapter 11 of Title 11 of the United States Bankruptcy
Code (the "Bankruptcy Code"), in the United States Bankruptcy Court of the
Southern District of Ohio, Western Division (the "Bankruptcy Court"), designated
as Case Number 97-10882 (the "Bankruptcy Case"); and
WHEREAS, Purchaser and Seller have agreed that Purchaser shall purchase and
Seller shall sell certain of the assets used in the Business on the terms and
subject to the conditions contained herein.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. SALE AND PURCHASE OF THE ASSETS. Seller agrees to sell to Purchaser, and
Purchaser agrees to purchase from Seller, on the terms and conditions herein
contained, and in reliance on the respective representations and warranties of
the parties, the following assets of Seller (hereinafter collectively referred
to as the "Purchased Assets"):
(a) All of the assets of Seller of every kind, nature and description,
wherever located, including, without limitation: the real property and
improvements thereto located at One Microwave Plaza, Cincinnati, Ohio (the
"Real Estate"); inventory (including raw materials, work-in-process,
finished goods, packaging, work in transit and returned and repossessed
goods); equipment, furniture and fixtures (except to the extent
specifically set forth as Excluded Assets); proprietary rights (including,
without limitation, copyrights, patents, trade names and trademarks
(including the names "Solo", "Passport" and "Escort"), and applications and
renewal rights therefor and all other rights associated therewith) and
trade secrets (including, without limitation, customer and vendor lists and
all related records and other
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information used in connection with the Purchased Assets); all rights under
the Assumed Executory Contracts (as defined in Paragraph 5 below); all
rights under assignable licenses and permits; all office supplies,
production supplies and spare parts; all prepayments and prepaid expenses
and deposits; all computer software; Seller's rights in telephone and
telecopy and post office box numbers used in connection with the Purchased
Assets; and all other tangible and intangible assets of Seller, including,
without limitation, the assets listed on Schedule 1(a)(1) attached hereto;
and excluding those assets set forth on Schedule 1(a)(2) attached hereto
(the "Excluded Assets").
2. NO ASSUMPTION OF LIABILITIES. Except for the liabilities, obligations,
commitments and obligations assumed under the executory contracts listed on
Schedule 5 (the "Assumed Liabilities"), it is expressly understood and agreed
that Purchaser shall not be liable for and shall not assume any liabilities,
obligations, commitments or indebtedness of Seller of any kind, character or
description, whether accrued, absolute, contingent or otherwise, including,
without limitation, liabilities, obligations and expenses (a) for federal, state
and local income taxes, employment taxes and property taxes, (b) arising out of
or relating to this Agreement, the negotiation hereof, and the consummation of
transactions contemplated hereby, (c) arising out of or relating to any pension
plan, profit sharing plan, deferred compensation plan, bonus plan, stock option
or purchase plan, or any other employee benefit plan, or (d) relating to any
product warranty, express or implied. In the event that the parties hereto have
not prorated all costs, expenses, and other items necessary at or before the
Closing Date, the parties hereto agree that all costs, expenses and other items
included within the Assumed Liabilities and marked as prorated items shall be
prorated to the Closing Date with Seller being responsible for any and all
costs, expenses or other items up to and including the Closing Date and
Purchaser being responsible for all costs, expenses and other items after the
Closing Date into the future.
3. PURCHASE PRICE. Subject to adjustment as set forth below in Paragraphs 6
and 15 and additional amounts that may be due under Paragraph 7 below, the
aggregate purchase price for the Assets shall be the sum of Ten Million Nine
Hundred Thousand Dollars ($10,900,000.00) which will be further increased by
that portion of the Six Hundred Thousand Dollars ($600,000.00) borrowed by
Seller pursuant to Paragraph 15 below (collectively, the "Purchase Price").
Purchaser may, in its sole discretion, elect to increase the amount of the
Purchase Price at the auction held at the Sale Hearing. In the event of an
increase in the Purchase Price, the increase shall be allocated among the
Purchased Assets in a manner agreed upon by Purchaser and Seller. Any price
increase shall increase the portion of the Purchase Price payable at the Closing
as set forth in Paragraph 4(a) below.
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4. PAYMENT OF PURCHASE PRICE. The Purchase Price will be paid as follows:
(a) The sum of Six Million Four Hundred Thousand Dollars
($6,400,000.00) shall be paid at the Closing in immediately available
funds, Four Hundred Thousand Dollars ($400,000.00) of which shall be deemed
the earnest money deposit (the "Earnest Money") in connection with the
purchase of the Real Estate. The Earnest Money shall be deposited with the
Title Company (as defined below) chosen by the parties hereto at the
Closing and shall be applied against the portion of the Purchase Price
payable with respect to the Real Estate on the Real Estate Closing Date.
The Earnest Money shall be invested in an interest bearing account for the
benefit of Purchaser.
(b) The sum of Four Million Five Hundred Thousand Dollars
($4,500,000.00) shall be paid by Purchaser on the ninetieth (90) day
following the Sale Hearing or the sixtieth (60) day following the Closing,
whichever is later (the "Real Estate Closing Date"), subject to the
satisfaction of the conditions herein applicable to the transfer of the
Real Estate.
At the Closing, an escrow shall be established (the "Escrow") under the
terms of the Escrow Agreement attached hereto as Exhibit A and the sum of Two
Hundred Fifty Thousand Dollars ($250,000.00) shall be deposited in such escrow
(the "Escrow Funds"). In addition, the deed to the Real Estate will be held in
the Escrow pending the payment of the balance of the Purchase Price referred to
in Paragraph 4(b) above.
5. EXECUTORY CONTRACTS. Schedule 5 attached hereto sets forth a list of
such of the contracts of Seller which Seller shall assume and assign to
Purchaser pursuant to Section 365 of the Bankruptcy Code (the "Assumed Executory
Contracts"). Any default in any Assumed Executory Contract as of the Closing
shall be cured by Seller from the sale proceeds as a condition to the assumption
thereof by Purchaser. The parties acknowledge that the list of Assumed Executory
Contracts may be amended and modified from time to time on or before the seventh
(7th) day prior to the Sale Hearing with the approval of the Unsecured Creditors
Committee.
6. ADJUSTMENT TO PURCHASE PRICE. Not less than twenty-four (24) hours prior
to the Closing, Seller and Purchaser shall determine the net amount of existing
inventory as of the Closing Date in the manner described below. The net amount
of inventory shall be calculated in a manner consistent with the calculation at
Schedule 6. A physical count shall determine the gross amount of finished goods
inventory. A factor of five percent (5%) shall be applied to the gross raw
materials categorized as detector or other inventory. A factor of five percent
(5%) shall be applied to gross work-in-process categorized as detector
inventory. A factor of one hundred percent (100%) shall be applied to the result
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of the gross finished goods inventory categorized as detector inventory less the
gross amount of P5000 inventory with the Polytronics display. A factor of five
percent (5%) shall be applied to the P5000 inventory with the Polytronics
display. A factor of zero percent (0%) shall be applied to any inventory
purchased with the proceeds of the loan described in Paragraph 15 below. The
aggregate of the above sums, after application of the above factors, shall be
the net amount of inventory. Categorization of the inventory shall be in a
manner consistent with the February 23, 1997, inventory analysis. The Purchase
Price shall be increased or reduced if the net amount of inventory, as
calculated above, is greater or less than One Million One Hundred Forty-Seven
Thousand Dollars ($1,147,000.00) as calculated on Schedule 6. The increase or
decrease in the Purchase Price will be paid by the applicable party to the other
within five (5) days of the determination of the net amount of inventory.
Interest will accrue at six percent (6%) per annum from the Closing Date to
payment.
7. PURCHASE OF PHONE ASSETS AND/OR MODEM ASSETS. For a period of ninety
(90) days from and after the Closing, Seller shall have the option to require
Purchaser to purchase the Phone Assets or the Modem Assets, or both, for a price
equal to the sum of (i) ninety-five percent (95%) of the gross amount of all
finished goods inventory included within the Phone Assets or the Modem Assets,
as the case may be, and (ii) three percent (3%) of the gross amount of all other
inventory included within the Phone Assets or the Modem Assets, as the case may
be, plus in the case of the exercise of the option with respect to the Phone
Assets, the sum of One Hundred Thousand Dollars ($100,000.00). Seller will
exercise its option(s) hereunder by delivering written notice of exercise to
Purchaser within such ninety (90) day period. The purchase price will be based
upon the inventory on hand as of the date of delivery of such notice. Purchaser
and Seller will determine the amount of such finished goods inventory through a
physical count. The values of the inventories purchased will be determined
following the same procedures as set forth in Paragraph 6 above. The closing of
the purchase of the Phone Assets or the Modem Assets, or both, will take place
within ten (10) days after the date of delivery of such notice and the purchase
price will be paid at such closing in immediately available funds. The Purchase
Price of the particular assets shall be subject to the same terms and conditions
herein as are applicable to the Purchased Assets to the same extent as if the
particular assets were purchased simultaneously with the Purchased Assets.
8. ALLOCATION OF PURCHASE PRICE. Purchaser and Seller agree that the
Purchase Price shall be allocated among the Purchased Assets in accordance with
Section 1060 of the Internal Revenue Code of 1986. Purchaser and Seller further
agree that all tax returns and reports which they file with respect to the
transaction contemplated hereby shall be consistent with such allocation. The
parties acknowledge and agree that the amount of the Purchase Price attributable
to the Real Estate is Four Million Nine Hundred Thousand Dollars ($4,900,000.00)
with the balance attributable to the other Purchased Assets.
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9. CLOSING. The consummation of the transaction contemplated hereby (the
"Closing") shall occur no later than three (3) business days following the date
the transactions contemplated hereby receive all necessary approvals , including
the approval of the United States Bankruptcy Court for the Southern District of
Ohio (Western Division) (the "Bankruptcy Court") and the conclusion of the
hearing approving a sale of the Purchased Assets pursuant to this Agreement (the
"Sale Hearing"). The date of closing is referred to herein as the "Closing
Date."
10. CONDITIONS TO OBLIGATIONS OF PURCHASER TO CLOSE. Purchaser's obligation
to close the transactions described herein shall be subject to the satisfaction,
on or before the applicable closing, of the following conditions unless waived
in writing by Purchaser:
(a) Each of the representations and warranties of Seller contained
herein, and in any certificate delivered pursuant hereto, shall be true and
correct in all material respects on and as of the Closing Date.
(b) The parties shall have (i) obtained all necessary approvals for
the proposed transaction from all applicable lending, governmental and
regulatory authorities, including, without limitation, the approval of the
Bankruptcy Court pursuant to one or more written final and non-appealable
court orders in form and substance satisfactory to Purchaser, which orders
shall include a finding that Purchaser is entitled to the protections of
Section 363(m) of the United States Bankruptcy Code; and (ii) obtained all
necessary or desirable approvals and consents under any material Assumed
Executory Contract.
(c) The Business shall have been operated as presently operated and
Seller shall not have sold any of the Purchased Assets, other than
inventory sold in the ordinary course of business, and shall have preserved
its business organization and assets substantially as they exist on the
date hereof, except as may be mutually agreed upon by the parties.
(d) Seller shall have delivered to Purchaser a certified copy of
Seller's Articles of Incorporation, including all amendments thereto, and a
Certificate of Good Standing issued by the Secretary of State of Ohio with
respect to Seller and each other jurisdiction where Seller conducts its
business, dated within fifteen (15) days of the Closing Date.
(e) Purchaser shall have received such Uniform Commercial Code search
reports, federal and state judgment and tax lien search reports, and
bankruptcy court search reports as Purchaser may deem reasonably necessary
with respect to Seller, dated within fifteen (15) days of the Closing Date,
evidencing the absence of any liens, claims, security interests or
encumbrances on the Purchased Assets
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other than liens which will be released as of the Closing or discharged by
entry of the order of the Bankruptcy Court approving the sale of the
Purchased Assets to Purchaser.
(f) An order (the "Bid Procedures Order") shall have been issued by
the Bankruptcy Court on or before March 21, 1997 establishing such bid
procedures, granting such bid protections and break-up fees and addressing
such other matters as Purchaser deems appropriate in its sole discretion.
If the Bid Procedures Order is unacceptable to Purchaser, Purchaser will so
notify Seller in writing within forty-eight (48) hours after the entry
thereof and this Agreement will automatically terminate.
(g) All aspects of the proposed transaction and the approval thereof
by the Bankruptcy Court (including, without limitation, all motion papers
and other pleadings, court orders, notice(s) to creditors and to other
parties in interest) shall be satisfactory to Purchaser in its reasonable
judgment.
(h) Not less than ten (10) business days prior to the Real Estate
Closing Date, Seller shall, at its expense, have furnished to Purchaser:
(i) A commitment for a title policy issued by a title company
reasonably acceptable to Purchaser (the "Title Company") in the amount
of Four Million Nine Hundred Thousand Dollars ($4,900,000.00). The
title commitment shall be subject only to the following exceptions
(collectively, the "Permitted Exceptions"): (I) general real estate
taxes for the year 1996 and subsequent years, (ii) covenants and
easements that do not materially interfere with any present use of the
Real Estate by Purchaser, and (iii) liens or encumbrances of a
definite or ascertainable amount which can be removed by the payment
of money at the time of closing in an amount not in excess of the
amount to be paid in cash hereunder by Purchaser at the Real Estate
Closing, and which Seller shall remove on or before the Real Estate
Closing; and
(ii) Legible copies of any documents shown on Schedule B to the
above-described title commitment (the "Title Documents"); and
(iii) A plat of survey of the Real Estate prepared by an Ohio
registered land surveyor, dated July 18, 1996, that has been prepared
in accordance with ALTA/ACSM Land Title Survey Standards and is
certified as of such date to Purchaser, the Title Company and
Purchaser's lender, if any, in form sufficient to obtain extended
coverage pursuant to the requirements of the Title Company and setting
forth the legal description and
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street address of the Real Estate and showing thereon all buildings
and other improvements, all easements which are visible or recorded,
all building lines, curb cuts, parking, sewage, water, electricity,
gas and other utility facilities together with any applicable
recording information, all roads and other rights of way and means of
ingress and egress and the gross area of the land and spotting all
improvements on adjoining property which are within five (5) feet of
the property lines of the Real Estate (the "Plat of Survey").
Within five (5) business days after receipt of the title commitment,
all of the Title Documents and the Plat of Survey, Purchaser shall give
written notice to Seller stating whether there are any exceptions on the
title commitment other than the Permitted Exceptions, which render title to
the Real Estate unmarketable or would otherwise interfere with Purchaser's
intended use of the Land and Improvements (the "Unpermitted Exceptions") or
items on the Plat of Survey, other than the Permitted Exceptions, which
render title to the Real Estate unmarketable or would otherwise materially
interfere with Purchaser's use of the Land and Improvements (the "Survey
Defects"). Purchaser's intended use of the Real Estate and improvements is
light industrial and office. Seller shall have ten (10) days from the date
of Purchaser's written notice (the "Cure Period") to have the Unpermitted
Exceptions removed from the title commitment or the Survey Defects removed
from the Plat of Survey or, with the consent of Purchaser, to have the
Title Company commit to insure against loss or damage that may be
occasioned by the Unpermitted Exceptions or the Survey Defects.
If Seller fails to have the Unpermitted Exceptions or the Survey
Defects removed or, in the alternative, to obtain the title commitment for
title insurance specified above as to the Unpermitted Exceptions and the
Survey Defects within the Cure Period, Purchaser may at any time after the
expiration of the Cure Period elect to receive a refund of the Earnest
Money and interest thereon and terminate this Agreement as to the purchase
of the Real Estate (but not as to the purchase of any of the other
Purchased Assets) upon written notice to Seller or may elect to take title
subject to the Unpermitted Exceptions and/or Survey Defects and deduct from
the Purchase Price liens or encumbrances of an ascertainable amount.
If Purchaser does not give written notice of the Unpermitted
Exceptions or the Survey Defects to Seller within the five (5) business day
period referred to above, then all matters shown on the Title Commitment
and the Plat of Survey shall be conclusively presumed to be acceptable to
the Purchaser and shall become Permitted Exceptions.
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(i) Seller shall have furnished to Purchaser at least ten (10) days
prior to the Real Estate Closing its existing Phase 1 environmental site
assessment of the Real Estate dated July 25, 1996, prepared by Civil and
Environmental Consultants, Inc., and the results of the foregoing shall be
acceptable to Purchaser.
(j) Seller shall have delivered to Purchaser the following transfer
documents at the applicable closing:
(i) A Bill of Sale in the form of Exhibit B attached hereto,
conveying to Purchaser good and marketable title to the Purchased
Assets but with no warranties.
(ii) Assignments duly executed by Seller and sufficient to
transfer to Purchaser all right, title and interest in and to the
names "Solo", "Escort" and "Passport" and all other intellectual
property included within the Assets.
(iii) Assignments duly executed by Seller assigning to Purchaser
all assignable licenses and permits issued with respect to the
Purchased Assets by any governmental entity.
(k) Seller shall have delivered to Purchaser certified resolutions of
Seller's board of directors authorizing Seller's execution, delivery and
performance of this Agreement.
(l) Seller shall have delivered to Purchaser at the Closing possession
of the Purchased Assets (except the Real Estate) at Seller's current
business address and at the Real Estate Closing possession of the Real
Estate.
(m) Seller shall have delivered to Purchaser at the Real Estate
Closing a recordable quit claim deed;
(n) Seller shall have delivered to Purchaser at the Real Estate
Closing an affidavit that Seller is not a "foreign person" pursuant to
Section 1445 of the Internal Revenue Code;
(o) Seller shall have delivered to Purchaser at the Real Estate
Closing an assignment of any warranties and guaranties with respect to the
Real Estate, if any;
(p) Seller shall have caused to be delivered to Purchaser, at
Purchaser's expense, at the Real Estate Closing an ALTA Form B owner's
title insurance policy issued by the Title Company showing that Seller is
the owner of fee simple title to
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the Real Estate subject only to the Permitted Exceptions, general real
estate taxes for the year 1996 and subsequent years and acts committed by
Purchaser, with extended coverage over general exceptions 1 through 5
inclusive and a 3.1 zoning endorsement with parking.
(q) Seller shall have delivered to Purchaser such other documents,
instruments and confirmations as may reasonably be required to fully effect
the transaction contemplated hereby.
11. CONDITIONS TO OBLIGATIONS OF SELLER TO CLOSE. Seller's obligation to
close the transactions described herein shall be subject to the satisfaction, on
or before the applicable closing, of the following conditions unless waived in
writing by Seller:
(a) Each of the representations and warranties of Purchaser contained
herein, and in any certificate delivered pursuant hereto, shall be true and
correct in all material respects on and as of the Closing Date.
(b) Purchaser shall have delivered to Seller certified resolutions of
Purchaser's board of directors and Purchaser's shareholders authorizing
Purchaser's execution, delivery and performance of this Agreement.
(c) The parties shall have obtained all necessary approvals for the
proposed transaction from all applicable lending, governmental and
regulatory authorities, including, without limitation, the approval of the
Bankruptcy Court pursuant to one or more written final and non-appealable
court orders in form and substance satisfactory to Seller, which orders
shall include a finding that Purchaser is entitled to the protections of
Section 363(m) of the United States Bankruptcy Code.
(d) Purchaser shall have delivered to Seller a certified copy of
Purchaser's Articles of Incorporation, including all amendments thereto,
and a Certificate of Good Standing issued by the Secretary of State of
Illinois with respect to Purchaser and each other jurisdiction where
Purchaser conducts its business, dated within fifteen (15) days of the
Closing Date.
(e) As a condition to the sale of the Purchased Assets, Purchaser
shall have delivered to Seller at the Closing the Purchase Price described
in Paragraph 4(a) above and, as a condition to the sale of the Real Estate
at the Real Estate Closing the Purchase Price described in Paragraph 4(b)
above; provided, however, that Purchaser shall have unrestricted access to
the Real Estate and right to use the Real Estate without charge to
Purchaser, for the purpose of
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conducting the portion of the Business relating to radar detectors (and
also for the purpose of conducting the portions of the Business related to
the phones and/or modems, if the Phone Assets and/or the Modem Assets are
sold to Purchaser, from the date of such sale) for the period from the
Closing to the Real Estate Closing. Purchaser acknowledges that Seller will
also be entitled to unrestricted access to and right to use the Real Estate
during the above described period and for ninety (90) days thereafter
without charge to Seller (unless the Phone Assets and Modem Assets are sold
to Purchaser, in which case until the date of such sale) for the conduct of
the portions of the Business related to the Phones and Modems.
(f) Purchaser shall have delivered to Seller a copy, certified by the
Secretary of Purchaser, of resolutions of the Board of Directors of
Purchaser authorizing the execution of this Agreement and the consummation
of the transactions provided for herein.
(g) Purchaser shall have delivered to Seller such other documents,
instruments and confirmations as may reasonably be required to fully effect
the transaction contemplated hereby.
12. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents and
warrants to Purchaser as of the date hereof and as of the Closing as follows:
(a) ORGANIZATION; QUALIFICATION. Seller is a duly organized and
validly existing corporation in good standing under the laws of the State
of Ohio. Seller is duly qualified to do business as a foreign corporation
in each jurisdiction where it is required to be so qualified. Schedule
12(a) sets forth each jurisdiction where Seller is duly qualified with
respect to the Business and Seller is in good standing in each such
jurisdiction. Seller has no active subsidiaries.
(b) AUTHORITY. Seller has taken all corporate action required to duly
and validly authorize and approve the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not violate any provision of, or
result in the breach of or accelerate or permit the acceleration of the
performance required by the terms of, any applicable law, rule or
regulation of any governmental body having jurisdiction over Seller, the
Articles of Incorporation or Regulations of Seller, or any agreement to
which Seller is a party or by which it may be bound, or of any order,
judgment or decree applicable to it, or result in the creation of any
claim, lien, charge, equity or encumbrance upon any of the Purchased
Assets. This Agreement is a legal, valid and binding agreement of Seller
and is enforceable against Seller in accordance with its terms.
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(c) FINANCIAL STATEMENTS. Schedule 12(c) hereto contains the following
financial statements (the "Financial Statements") (i) a true and complete
copy of the year-end financial statements of Seller for the fiscal years
1994 and 1995 which financial statements were prepared in accordance
generally accepted accounting practices applied on a basis consistent with
past practice; and (ii) unaudited financial statement for the year ending
1996 and an unaudited year-to-date financial statement as of January 26,
1997, which were prepared on a basis substantially consistent with past
practice.
(d) LICENSES AND PERMITS. Schedule 12(d) hereto correctly identifies
each license and permit which is necessary for the operation of the
Business with respect to the Purchased Assets, together with the name of
the governmental agency or entity issuing such license or permit. Such
licenses and permits are valid and in full force and effect, and comprise
all licenses and permits Seller has for the conduct of the Business with
respect to the Purchased Assets. The Business and the real estate utilized
by it, including, without limitation the Real Estate, conform to all
applicable laws, ordinances, rules or regulations.
(e) NO MATERIAL ADVERSE CHANGES. Except as described on Schedule 12(e)
attached hereto, since the date of the last Financial Statement, neither
the business, operations, financial condition, property nor affairs of the
Business have been materially adversely affected by any occurrence or
development, whether or not insured against, and to the knowledge of
Seller, no threatened occurrence or development exists which would
materially adversely affect the Assets, or the Business, operations, or
affairs of Seller.
(f) LIABILITIES. Except for liabilities incurred in the ordinary
course of business or existing prior to the Petition Date or incurred in
Seller's pending chapter 11 case or as disclosed on Schedule 12(f) or
Schedule 12(c), Seller has no liabilities of any kind whatsoever, whether
or not accrued or fixed, absolute or contingent, determined or
determinable, nor is there any condition or circumstance existing or which
has existed, and no event shall have occurred which could reasonably be
expected to have a material, adverse effect on the Purchased Assets.
(g) TITLE OF PROPERTIES AND CONDITION OF ASSETS. Except as disclosed
on Schedule 12(g), Seller will have, as of the Closing, and, subject to the
order of the Bankruptcy Court and except with respect to liabilities
arising under the Assumed Executory Contracts, is transferring to Purchaser
good, marketable and indefeasible title to all of the Assets, free and
clear of any security interests, liens, claims, charges, equities or
encumbrances whatsoever. For purposes hereof, an "encumbrance" shall be
deemed to mean any claim, judgement, license, sublease, lien, pledge,
option, charge, easement, security interest, conditional sales agreement,
title retention agreements which are intended as security, or other rights
of third parties, whether voluntarily or involuntarily incurred or arising
by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, any contingent sale or other title
retention agreement or lease in the nature thereof, and any "claim",
"lien", or "security interest" as those terms are defined in the Bankruptcy
Code.
(h) INSURANCE. Attached as Schedule 12(h) are Seller's insurance
policies and binders, or descriptions of them. Each such policy is in full
force and effect on the date hereof.
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(i) LABOR RELATIONS. Except as disclosed on Schedule 12(i), there is
no pending or, to the knowledge of Seller, threatened labor dispute with
any of the employees of the Business, or any claim or charge of any unfair
labor practice, as such term is defined in the National Labor Relations
Act, as amended or any other violation of any labor or employment law.
Seller is not a party to any collective bargaining agreement and Seller has
not received any notice of any proposed union certification or recognition
election.
(j) EMPLOYEE BENEFIT PLANS. Except as set forth on Schedule 12(j),
Seller does not have any pension, profit sharing or other plan which is
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). The Business maintains no health insurance or other employee
benefit plans except as disclosed on Schedule 12(j) attached hereto. Except
as set forth on Schedule 12(j), Seller is in full compliance with all its
obligations with respect to any employee benefit plans.
(k) COMPLIANCE WITH LAW. Except as set forth in Schedule 12(l) the
Business and the employment or engagement of its employees and agents have
been conducted in accordance with all applicable laws, regulations or
requirements of governmental authorities. No notice of violation of any
law, ordinance or administrative regulation including, without limitation,
all applicable environmental laws, regulations and requirements, has been
received with respect to the Business or, to the knowledge of Seller, has
been threatened.
(l) LITIGATION. Except as disclosed in Schedule 12(l), there are no
actions, suits, claims, proceedings or investigations pending or, to the
knowledge of Seller, threatened, in any court or before any governmental
agency or instrumentality against or affecting the Business or the
Purchased Assets, or which would prevent the carrying out of this Agreement
or any of the transactions contemplated hereby or which could cause this
Agreement to be declared unlawful or cause the rescission hereof. The
Business has not been charged with, nor is it, to the knowledge of Seller,
threatened with or under an investigation with respect to, any charge
concerning any violation of any provision of any federal, state or local
law, regulation, ordinance, order or administrative ruling, and the
Business is not in default with respect to any order, writ, injunction or
decree of any court, agency or instrumentality.
(m) DISCLOSURE. No representation or warranty of Seller and no written
certificate furnished or to be furnished by or on behalf of Seller to
Purchaser or its agents pursuant hereto or in connection with the
transactions contemplated hereby, contains any untrue statement of a
material fact or omits or will omit to state a material fact necessary in
order to make the statements contained herein or therein not misleading.
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(n) INTELLECTUAL PROPERTY. Schedule 12(n) correctly identifies all
issued patents, patent applications, domestic trademarks (whether or not
registered), trademark registrations, trademark registration applications,
copyrights, copyright registrations, copyright registration applications,
service marks, service mark registrations, service mark registration
applications, franchises, know-how agreements, licenses, logos, trade
names, slogans, know-how and trade secrets relating to the Purchased
Assets. Except as set forth on Schedule 12(n), Seller has not granted any
license to any person with respect to any intellectual property. Except as
set forth on Schedule 12(n), Seller has the exclusive right to use all
intellectual property used in connection with the Purchased Assets. Except
as set forth on Schedule 12(n), there are no challenges pending or, to the
knowledge of Seller, threatened to the validity of any of the intellectual
property.
(o) CONTINUING OBLIGATIONS. Except for the Assumed Executory
Contracts, there are no contracts, agreements or continuing obligations of
any nature whatsoever in respect to the Purchased Assets which will survive
the consummation of the transactions contemplated hereby or in any manner
bind or affect Purchaser or the Purchased Assets.
(p) CUSTOMER LISTS. The customer lists included within the Purchased
Assets are accurate, correct and complete and list each customer that has
done business with Seller in the twenty-four (24) month period prior to
Closing.
(q) SUFFICIENCY OF ASSETS. The Purchased Assets constitute all
property used by Seller in the conduct of Seller's radar detector business.
(r) ALL SALES FINAL. Except as set forth on Schedule 12(r), with the
exception of warranty claims under the Product Warranty (as defined in
Paragraph 12(t) below), within the twelve (12) month period immediately
preceding the Closing, all sales made by the Business with respect to the
Purchased Assets have been final and unconditional sales with no right of
return whatsoever, other than as a result of defective or nonconforming
goods.
(s) CUSTOMER DEPOSITS. Seller holds no customer deposits with respect
to the Purchased Assets.
(t) PRODUCT WARRANTIES. Except as set forth on Schedule 12(t) (the
"Product Warranty"), the Business offers no product warranties in
connection with the Purchased Assets.
(u) BROKERS. Except as identified on Schedule 12(u), Seller has not
dealt with any broker, finder or other person entitled to any broker's or
finder's fee, com-
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mission or other similar compensation in connection with the transaction
contemplated hereby.
(v) PRODUCT SAFETY. The Business has not been required to file any
notification or other report with or provide information to any product
safety agency, commission, board or other governmental authority concerning
actual or potential hazards with respect to the Purchased Assets. Each
product sold by the Business prior to the Closing complies with all
applicable product safety standards, disclosure requirements and testing
requirements.
(w) MATERIAL CONTRACTS. Schedule 5 hereto sets forth a complete list
of all Assumed Executory Contracts. On or before Closing, Seller shall
deliver to Purchaser true and correct copies of all of the above-described
contracts or written summaries of any such contracts that are oral. Seller
is not in breach under any such contract and to the knowledge of Seller, no
party is in breach under any such contract and no fact or circumstances
exist which would, with the passage of time or otherwise, constitute a
breach of any such contract.
(x) REAL PROPERTY. The only real property used in connection with the
Purchased Assets is the Real Estate. As to the Real Estate:
(i) Except to the extent corrected prior to the date hereof,
Seller has not received oral or written notice of any physical,
structural or mechanical defects or of violations of any laws,
including but limited to the Environmental Laws, as defined below, or
any regulations pursuant to such laws applicable to the Real Estate,
and Seller is unaware of any facts or conditions that would give rise
to such a notice under present Environmental Laws.
(ii) There is no existing, pending, or, to Seller's knowledge,
contemplated, threatened or anticipated (I) condemnation of any part
of the Real Estate; (ii) widening, change of grade or limitation on
use of streets abutting the Real Estate; (iii) special tax or
assessment to be levied against the Real Estate; (iv) change in the
zoning classification of the Real Estate; (v) change in the tax
assessment of the Real Estate; or (vi) special assessment regarding
the Real Estate.
(iii) To the best of Seller's knowledge, Seller has obtained all
licenses, permits, easements and rights-of-way, including proof of
dedication, if any, required from all governmental authorities having
jurisdiction over the Real Estate or from private parties to make use
of utilities serving the Real Estate and to insure ingress and egress
to and from the Real Estate.
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(iv) Except as may be disclosed on the Phase I environmental
assessment supplied by Seller pursuant to Paragraph 10(i) above, no
Hazardous Materials (as defined below) have been used, stored,
generated, disposed of or located on the Real Estate or have been
released into the environment, or discharged, placed or disposed of
at, on or under the Real Estate by Seller;
(v) Except as set forth on Schedule 12(x), no underground storage
tanks have been located on the Real Estate;
(vi) To the best of Seller's knowledge the Real Estate is and at
all times has been, in compliance with all Environmental Laws, as
defined below;
(vii) No asbestos or asbestos containing materials have been
installed, used, or incorporated into or disposed at, on or under the
Real Estate.
For purposes of this Agreement, the term "Hazardous Materials"
shall mean any substance, material, waste, gas or particulate matter
which is regulated by any local governmental authority, the State of
Ohio, or the United States Government, except for de minimus
quantities of such substances (for example, consumer products stored
in their original containers and used in accordance with manufacturer
instructions) including, but not limited to, any material or substance
which is (I) defined as a "hazardous waste," "hazardous material,"
"hazardous substance," "extremely hazardous waste." or "restricted
hazardous waste" under any provision of federal or Ohio law; (ii)
petroleum except where used or present in strict compliance with the
Environmental Laws, as defined below; (iii) asbestos or asbestos
containing materials that require encapsulation, removal or other
response under law or so as to protect human health or the
environment; (iv) polychlorinated biphenyls; or (v) radioactive
material.
For purposes of this Agreement, the term "Environmental Laws"
shall mean all federal, state, and local environmental health and
safety statutes, ordinances, codes, rules, regulations, orders and
decrees regulating, relating to or imposing liability or standards,
including but not limited to those concerning or in connection with
Hazardous Materials.
(y) FOREIGN ASSETS. Except as shown on Schedule 12(y), Seller does not
have any tangible or intangible assets in any country or jurisdiction other
than the United States.
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(z) COMPUTER SOFTWARE. Schedule 12(z) sets forth a correct and
complete description of each computer software program utilized by Seller
in connection with the Purchased Assets (the "Software"). Such schedule
also identifies which of the Software is owned by Seller (the "Owned
Software") and which of the Software is used pursuant to a license from a
third party (the "Licensed Software"). All of the Owned Software is owned
by Seller free and clear of the rights of others except any security
interest of Foothill Capital Corporation ("Foothill") and is freely
transferable to Purchaser free and clear of all liens, claims and
encumbrances whatsoever and except as otherwise set forth in Schedule
12(z), all of the Licensed Software is freely transferable to Purchaser
pursuant to a fully paid, assignable license granted to Seller by the third
party with full rights to grant such license. There are no infringement
suits pending, or to the knowledge of Seller, threatened against Seller
with respect to any Software.
13. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby
represents and warrants to Seller as follows:
(a) ORGANIZATION. Purchaser is a duly organized and validly existing
corporation in good standing under the laws of the State of Illinois.
(b) AUTHORITY. Purchaser is duly authorized to execute, deliver and
perform this Agreement and all required corporate action with respect
thereto has been duly and validly taken. Purchaser has taken all corporate
action required to duly and validly authorize and approve the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not violate any
provision of, or result in the breach of or accelerate or permit the
acceleration of the performance required by the terms of, any applicable
law, rule or regulation of any governmental body having jurisdiction over
Purchaser, the Certificate of Incorporation or By-Laws of Purchaser, or any
agreement to which Purchaser is a party or by which it may be bound, or of
any order, judgment or decree applicable to it, or result in the creation
of any claim, lien, charge, equity or encumbrance upon any of the Assets.
This Agreement is a legal, valid and binding agreement of Purchaser and is
enforceable against Purchaser in accordance with its terms.
(c) BROKERS. Purchaser has not dealt with any broker, finder or other
person entitled to any broker's or finder's fee, commission or other
similar compensation in connection with the transaction contemplated
hereby.
(d) CONSENTS. All authorizations, approvals and consents necessary for
the execution and delivery by Purchaser of this Agreement and for the
consummation by Purchaser of the transactions contemplated hereby have
been given,
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which if not given would have a materially adverse effect on Seller and/or
Purchaser.
(e) FINANCIAL ABILITY. Purchaser has or will have as of the Closing
and the Real Estate Closing, as applicable, the financial ability to pay
the Purchase Price at the Closing and the Real Estate Closing provided
that, if Purchaser intends to overbid the Purchase Price at the Sale
Hearing, it will provide Seller in advance of the Sale Hearing with
evidence of Purchaser's financial ability to pay the amount of any such
overbid to the same extent such evidence is required of other competing
bidders.
14. COVENANTS OF SELLER. Seller hereby covenants and agrees with Purchaser
as follows:
(a) From and after the Closing Seller shall not have any right or
interest in or to the names "Solo", "Escort" or "Passport" or any
variations thereof and shall not use such names for any purpose whatsoever,
except with respect to its telephone business.
(b) Seller agrees to take any and all actions reasonably requested by
Purchaser to permit Purchaser to use any telephone numbers associated with
the Business.
(c) In the event that Seller settles or recovers judgment in the case
entitled Cincinnati Microwave, Inc. v. Whistler Corporation of
Massachusetts and Dynatech Corporation, Case No. C-1-96-647 pending in the
United States District Court for the Southern District of Ohio (the
"Whistler Litigation") any monetary award or settlement proceeds for
infringements by the defendants prior to Closing are included within the
Excluded Assets and any settlement proceeds or monetary recovery for
infringements by the defendants after Closing are included in the Purchased
Assets. In calculating the division of settlement proceeds or the monetary
recovery, the parties will use a reasonable pro rata calculation based upon
the number of units sold by the defendants prior to the Closing versus the
number of units sold by the defendants after the Closing. Any settlement
involving use of any intellectual property of the Business from and after
Closing shall be reasonable and customary and agreed to by Seller after
first giving written notice to Purchaser. Purchaser will not grant Whistler
any right to use any intellectual property at issue in the Whistler
litigation prior to a settlement or final judgment regarding such
litigation.
15. COVENANTS OF PURCHASER. Purchaser hereby covenants and agrees with
Seller that Purchaser shall provide interim financing to Seller in an amount not
to exceed the sum of Six Hundred Thousand Dollars ($600,000.00) or such lesser
amounts as the
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parties may agree, subject to the approval of the Bankruptcy Court, the approval
of Foothill and the entry of an order pursuant to Section 364 of the Bankruptcy
Code granting to Purchaser the right to receive repayment of any amounts
advanced to Seller second only to the rights of Foothill to be repaid. In
accordance with the terms of the Bankruptcy Court's order approving such
financing, the foregoing amount shall be made available to Seller retroactive as
of March 7, 1997, in amounts not to exceed Seventy-Five Thousand Dollars
($75,000.00) per week or such greater amount as Purchaser may agree. The
proceeds from Purchaser hereunder shall be used solely for the purchase of
future advertising and raw materials purchased and received on or after the date
of the first advance of funds hereunder and for such other purposes as may be
agreed by Purchaser. If Purchaser is the successful purchaser at the Sale
Hearing, any amounts advanced shall be deemed to be additional purchase price as
set forth in Paragraph 3 above.
16. TRANSACTION TAXES AND EXPENSES. Seller shall be responsible for all
transfer, sales or transaction taxes relating to the transaction contemplated
hereby. Each party shall bear their own expenses incident to this Agreement and
the transactions contemplated hereby, including without limitation, all fees of
counsel, accountants and consultants incurred in connection with this
transaction.
17. ESCROW. The transaction regarding the Real Estate described herein
shall be closed through an escrow ("Closing Escrow") with the Title Company in
accordance with the general provisions of the standard form of Deed and Money
Escrow Agreement then in use by the Title Company, with such special provisions
inserted in the escrow agreement as may be required to conform with this
Agreement and to facilitate a so-called "New York Style" closing. The attorneys
for the parties are authorized to execute the escrow instructions and any
amendments thereto. Upon the creation of such an escrow, anything herein to the
contrary notwithstanding, payment of the Purchase Price for the Real Estate and
delivery of the deed shall be made through the escrow. The cost of the escrow,
including the cost of a "New York style" closing, shall be divided equally
between Seller and Purchaser. In the event of any inconsistencies between the
terms of the Closing escrow instructions and the terms of this Agreement, then
the terms of this Agreement shall control. No part of the Purchase Price or
other escrow deposits shall be disbursed from escrow until the Title Company is
prepared to insure in the amount of Four Million Nine Hundred Thousand Dollars
($4,900,000.00) that Purchaser owns fee simple title to the Real Estate in
accordance with the terms of this Agreement, subject only to the Permitted
Exceptions.
18. PRORATIONS REGARDING THE REAL ESTATE. Real estate taxes, utilities and
other proratable items shall be prorated to the date of the Real Estate Closing.
For purposes of
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Closing, real estate taxes shall be prorated based on the most recent
ascertainable real estate taxes against the Real Estate. Seller shall pay any
state and county transfer taxes and Purchaser shall pay any municipal transfer
taxes. All prorations shall be final.
19. INDEMNIFICATION.
(a) INDEMNIFICATION OF PURCHASER. From and after the Closing, Seller
hereby agrees to indemnify, defend and hold Purchaser and its shareholders,
directors, officers, employees, agents successors and assigns harmless from
and against any and all costs, expenses, losses, damages, fines, penalties
or liabilities, court costs, litigation expenses, reasonable attorneys'
fees and accounting fees (collectively "Damages") suffered, sustained or
incurred by any of such indemnified parties with respect to, arising from
or in connection with, or alleged to result from, arise out of, or in
connection with:
(i) A breach by Seller of any representation, warranty or
agreement made by or applicable to Seller and contained in this
Agreement or in any certificate or other document delivered to
Purchaser hereunder;
(ii) Any other threatened or instituted claim, suit, action or
cause of action, investigation or proceeding of any kind whatsoever
whether instituted or commenced prior to or after the date hereof, and
which relates to, or arises from the Business as conducted with
respect to the Purchased Assets on or before the Closing Date.
In the event Purchaser is entitled to indemnification hereunder,
Purchaser is hereby authorized to set off against any payments due to
Seller the amount of Seller's indemnification obligation hereunder.
(b) INDEMNIFICATION OF SELLER. From and after the Closing, Purchaser
shall indemnify, defend and hold Seller and its shareholders, directors,
officers, employees, agents, successors and assigns harmless from and
against any and all Damages suffered, sustained or incurred by Seller with
respect to, arising from or in connection with, or alleged to result from,
arise out of or in connection with:
(i) A breach by Purchaser of any representation, warranty or
agreement made by or applicable to Purchaser and contained in this
Agreement or in any certificate or other document delivered by
Purchaser hereunder;
(ii) Any other threatened or instituted claim, suit, action or
cause of action, investigation or proceeding of any kind whatsoever,
whether instituted or commenced after the date hereof which relates to
or arises from
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Purchaser's operation of the Business with respect to the Purchased
Assets after the Closing Date.
20. SURVIVAL. All covenants, agreements, representations and warranties of
any party hereto set forth herein, including but not limited to each party's
obligation to indemnify the other as set forth in Paragraph 19 above, shall
survive the Closing for a period of three (3) months. Any representation and
warranty herein or in any such certificate or writing shall be deemed to be
material and to have been relied upon by the party or parties to which made,
notwithstanding any investigation or inspection made by or on behalf of such
party or parties and shall not be affected in any respect by any such
investigation or inspection.
21. REMEDIES. In the event Purchaser defaults in its obligations hereunder,
then if such default occurs prior to the Closing, all amounts advanced by
Purchaser pursuant to Paragraph 15 will be deemed paid in full and, if such
default occurs between the Closing and the Real Estate Closing, the Earnest
Money and interest thereon shall be paid to Seller, as liquidated damages, in
lieu of all other legal or equitable remedies which might be available to
Seller. In the event Seller defaults in its obligations hereunder with respect
to the purchase of the Real Estate, then the Earnest Money and interest thereon
shall be refunded to Purchaser and Purchaser shall be entitled to all its
remedies at law or in equity. If the purchase of the Real Estate fails to close
because of the failure of any condition precedent applicable to the sale of the
Real Estate under Paragraphs 10(a), 10(b), 10(h), 10(i), 10(j), 10(l), 10(m),
10(n), 10(o) or 10(p) then Purchaser shall receive a lease of the Real Estate on
terms reasonably acceptable to Purchaser, including without limitation, the
following: (i) a term of not less than six (6) months at a rental of Fifty
Thousand Dollars ($50,000.00) per month, payable on the first day of each month
unless the transaction does not close due to the failure of the conditions
precedent described above, in which case no rent shall be payable; (ii)
requiring that Purchaser pay all out-of-pocket costs in connection with the use
of the Real Estate for the period of its occupancy, including utilities and
routine maintenance; (iii) allowing Purchaser to conduct an auction of its
assets at the Real Estate subject to proper procedures to avoid the inadvertent
sale of Seller's assets; and (iv) providing that Seller's activities to sell off
its remaining assets will not adversely affect Purchaser's operations from the
Real Estate. Until the Real Estate Closing Seller will continue to list the Real
Estate for sale or for lease with a real estate agent, and shall have the right
to place customary "for sale" or "for lease" signs on the Real Estate. Seller
and its representatives and designees will have the right to enter the Real
Estate at reasonable times (upon notice to Purchaser's representative at the
Real Estate) for the purposes of inspecting the Real Estate or showing the Real
Estate to brokers or prospective purchasers, mortgagees or tenants.
22. NOTICES. All notices shall be in writing and shall be delivered
personally, sent by overnight courier, sent by facsimile or telecopier, or sent
by United States certified or registered mail, postage prepaid, return receipt
requested, addressed as follows:
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(a) If to Purchaser:
Escort Acquisition Corp.
2550 Commonwealth
North Chicago, Illinois 60064
Attn: Mr. Matthew Coleman
with a copy to:
Ray & Glick, Ltd.
P.O. Box 400
611 South Milwaukee Avenue
Libertyville, Illinois 60048
Attn: Sidney A. Glick, Esq.
(b) If to Seller:
Cincinnati Microwave, Inc.
One Microwave Plaza
Cincinnati, Ohio 45249
Attn: Ms. Erika Williams
with a copy to:
Frost & Jacobs LLP
2500 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202
Attn: Edmund J. Adams, Esq. and
Douglas S. Tripp, Esq.
or to such other address or addresses as the intended recipient shall from time
to time designate by written notice delivered in accordance herewith. Notice by
courier or certified or registered mail shall be effective on the date it is
officially recorded as delivered to the intended recipient by return receipt or
the date of attempted delivery where delivery is refused by the intended
recipient. All notices and communications required, contemplated or permitted by
this Agreement to be delivered in person shall be deemed to have been delivered
to and received by the addressee, and shall be effective, on the date of
personal delivery. Any notice sent by facsimile or telecopier as provided above
shall be deemed delivered upon its actual receipt by the intended recipient.
23. MODIFICATION AND WAIVER. Any party hereto may by written instrument
unilaterally waive any right or benefit to which such party is entitled under
this Agreement.
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Failure to insist upon strict compliance with any of the terms, covenants or
conditions hereof shall not be deemed a waiver of such term, covenant or
condition, nor shall any waiver or relinquishment of any right or remedy
hereunder at any one or more times be deemed a waiver or relinquishment of such
right or remedy at any other time or times.
24. SEVERABILITY. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision hereof, and any provision hereof which is adjudicated to be invalid or
unenforceable shall be severed from this Agreement, provided however that such
severance is to apply only with respect to the operation of such provision in
the particular jurisdiction in which such adjudication is made.
25. BENEFIT. This Agreement and the rights and obligations of the parties
hereto shall inure to the benefit of and be binding upon the parties hereto and
their respective heirs, executors, administrators, personal representatives,
successors and assigns.
26. FURTHER ACTION. Each of the parties hereto agrees to do, execute,
acknowledge and deliver all such further acts, instruments and assurances on or
after the date hereof, as shall be necessary or desirable to consummate and
effect the transaction contemplated hereby.
27. EXHIBITS AND CAPTIONS. Each of the Exhibits and Schedules hereto shall
be deemed a part of this Agreement and the contents thereof are hereby
incorporated herein by this reference. The captions and headings are inserted
for convenience of reference only and are not a part hereof, and this Agreement
shall not be construed or interpreted by reference thereto. Any information or
documentation which is supplied pursuant to one exhibit or schedule, which
information is also applicable or to be supplied pursuant to another exhibit or
schedule, shall be deemed to have been supplied.
28. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one document. For all purposes facsimile signatures
shall be deemed to be original signatures.
29. GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereto shall be governed by and construed in accordance with the laws of
the State of Ohio, notwithstanding its conflicts of laws rules.
30. FORUM. The parties agree that the Bankruptcy Court will be the
exclusive forum and have exclusive jurisdiction to implement and enforce the
terms of this Agreement, including any litigation relating to a dispute
involving this Agreement or the Purchased Assets, whether or not a plan is
confirmed with respect to Seller.
30A. RIGHT OF FIRST REFUSAL. Seller will have a right of first refusal
within ninety (90) days after the Closing to repurchase the equipment listed on
Pages 189, 190 and 191 of Schedule 1(a)(1) for a price equal to that offered to
Purchaser by any prospective, bona fide, unrelated third party.
22
<PAGE> 23
31. ATTORNEYS' FEES. In the event of any action in connection with this
Agreement, the prevailing party shall be entitled to an award of reasonable
attorneys' fees, court costs and other reasonable litigation fees in addition to
any other relief or award that may apply.
32. ENTIRE AGREEMENT. This Agreement and the exhibits and schedules hereto
represent the entire agreement of the parties with respect to the subject matter
hereof, and all prior negotiations, understandings and agreements are merged
herein. This Agreement may not be modified or rescinded except pursuant to a
written instrument signed by the party against whom enforcement is sought.
IN WITNESS WHEREOF, the parties hereto have executed this Asset Purchase
Agreement as of the date first above written.
ESCORT ACQUISITION CORP.,
an Illinois corporation
By: /s/ Matthew Coleman
-----------------------------
Its: President
------------------------
CINCINNATI MICROWAVE, INC.,
an Ohio corporation, individually and as
Debtor in Possession
By: /s/ E. Williams
-----------------------------
Its: CEO
------------------------
23
<PAGE> 24
ASSET PURCHASE AGREEMENT
between
CINCINNATI MICROWAVE, INC.
and
ESCORT ACQUISITION CORP.
EXHIBIT AND SCHEDULE LIST
-------------------------
Exhibit A Escrow Agreement
Exhibit B Bill of Sale
Schedule 1(a)1 Purchased Assets
Schedule 1(a)2 Excluded Assets
Schedule 5 Executory Contracts
Schedule 6 Adjustment to Purchase Price
Schedule 12(a) Organization; Qualification
Schedule 12(c) Financial Statements
Schedule 12(d) Licenses and Permits
Schedule 12(e) No Material Adverse Changes
Schedule 12(f) Liabilities
Schedule 12(g) Title to Property and Condition of Assets
Schedule 12(h) Insurance
Schedule 12(i) Labor Relations
Schedule 12(j) Employee Benefit Plans
Schedule 12(l) Litigation
Schedule 12(n) Intellectual Property
Schedule 12(r) All Sales Final
Schedule 12(t) Product Warranties
Schedule 12(u) Brokers
Schedule 12(x) Underground Tanks
Schedule 12(y) Foreign Assets
Schedule 12(z) Computer Software
Page 1 of 1
<PAGE> 1
Exhibit 99(ii)
The Asset Purchase Agreement between Cincinnati Microwave, Inc. and Escort
Acquisition Corp., which is being filed as an exhibit to the Form 8-K of
Cincinnati Microwave, Inc., date of report March 21, 1997, is being filed
without the Exhibits and Schedules. Attached to the Asset Purchase Agreement is
a list briefly identifying the contents of all omitted Exhibits and Schedules.
Cincinnati Microwave, Inc. hereby agrees to furnish supplementally a copy of any
omitted exhibit or schedule to the Securities and Exchange Commission upon
request.
CINCINNATI MICROWAVE, INC.
By: /s/ E. Williams
------------------------------
E. Williams
Chairman of the Board (Acting),
President and Chief Executive Officer
<PAGE> 1
Exhibit 99(iii)
FOR FURTHER INFORMATION:
- -----------------------
AT THE COMPANY: AT THE FINANCIAL RELATIONS BOARD:
Elaine Bacon Bill Schmidle, Analyst Inquiries
513-489-5400 312-640-6753
[email protected] Karl Plath, General Inquiries
312-640-6738
FOR IMMEDIATE RELEASE
CINCINNATI MICROWAVE SIGNS ASSET PURCHASE AGREEMENT;
APPOINTS OUTSIDE DIRECTOR;
ANNOUNCES FOURTH QUARTER AND FISCAL 1996 RESULTS AND
REVISED SETTLEMENT OF THE CLASS ACTION SECURITIES LITIGATION
CINCINNATI, MARCH 24, 1997--CINCINNATI MICROWAVE, INC. (NASDAQ: CNMW) announced
today that it signed an Asset Purchase Agreement with Escort Acquisition Corp.
("EAC") to purchase substantially all of the assets of the Company's radar
detector business and its real property for $10.9 million plus the aggregate
amount of certain interim advances. Escort Acquisition Corp. is a company owned
by Matthew Coleman, a Chicago-area businessman. On Friday, March 21, 1997 the
Company filed a motion with the United States Bankruptcy Court, Southern
District of Ohio, Western Division, for an order (i) granting authority to sell
the assets to EAC pursuant to Section 363 of the Bankruptcy Code, (ii)
establishing auction procedures and (iii) setting a hearing date of April 7 on
the sale of assets.
Cincinnati Microwave has been entertaining bids for its various businesses
following its filing on February 14, 1997 for protection from its creditors
under chapter 11 of the U.S. Bankruptcy Code. It has received preliminary
offers, including offers for the entire business and offers for portions of its
business, such as its detector, cordless phone and wireless modem businesses.
Williams said, "The offer from Escort Acquisition Corp. appears to be the best
offer in order to maximize the return to the unsecured creditors. EAC intends to
take the detector business forward and continue manufacturing quality radar,
laser, and safety detectors."
The Company is continuing its efforts to find purchasers for the remainder of
its assets, its phone and modem businesses, and to determine whether a plan of
reorganization is possible. Based on its efforts to date, it appears that, even
if the Company were able to reorganize and emerge from bankruptcy, there is
little likelihood that any plan or reorganization would provide any or more than
only minimum value to its existing shareholders.
-MORE-
<PAGE> 2
CINCINNATI MICROWAVE
ADD -1-
OUTSIDE DIRECTOR
The Company indicated that today it has appointed E. Ted Springstead to its
board of directors. The appointment of Springstead brings the total number of
directors on the board to four.
Commenting on the appointment, Erika Williams said, "Cincinnati Microwave needed
to fill outside director positions left vacant since December 1996. The Company
welcomes Mr. Springstead and the experience he will add to the board."
Mr. Springstead, 62, has been a management consultant for high-technology
companies in the USA, Asia and Europe since 1993. He has experience with various
major world-wide corporations, such as Harman International, Wang Laboratories,
State Of The Art, Inc. and Sony Corporation. Between 1987 and 1992 Springstead
was Senior Vice President - Market Operations and Services at Amdahl Corporation
in Sunnyvale, California. Mr. Springstead holds a Master of Business
Administration Degree and a Bachelor of Science in Mechanical Engineering from
Northwestern University.
FINANCIAL RESULTS
Cincinnati Microwave also reported unaudited results for its fourth quarter and
fiscal year ended December 29, 1996. For the year, unaudited net sales were
$56.8 million compared with $79.2 million in the prior year. The 1996 unaudited
net loss was $28.4 million, or $1.80 per share, including write offs of $12.1
million or 77 cents per share, compared to a loss of $13.0 million, or 90 cents
per share, in fiscal 1995. For the fourth quarter, unaudited net sales were
$10.3 million vs. $24.4 million in 1995, while the net loss increased to $15.6
million, or 99 cents per share, including writeoffs of $10.9 million or 69 cents
per share, from a loss of $9.0 million, or 58 cents per share, in 1995.
In 1996, the Company had a significant loss due to a number of factors. Net
sales were down 28 percent due to weak retail sales and the declining radar
detector market. Margins were impacted by lower production volume, which
impacted factory utilization and efficiency. The writeoffs of $12.1 million
related primarily to a $4.3 million write down of land and buildings to their
estimated net realizable value, write offs totaling $6.0 million of obsolete and
excess inventories, and a $1.2 million write off of accounts receivable from a
former distributor. In 1995 the write down for excess and obsolete inventory
totaled $4.4 million.
-MORE-
<PAGE> 3
CINCINNATI MICROWAVE
ADD -2-
SHAREHOLDER LITIGATION SETTLEMENT
The Company announced that the U.S. District Court approved on Friday, March 21,
1997, an amended settlement of the pending class action lawsuit against the
Company's officers, directors and underwriters. The litigation remains pending
against the Company subject to the Bankruptcy Court's approval of a settlement
against the Company, which is being modified to substitute an unsecured claim
against the Company in the bankruptcy proceedings of $600,000 in lieu of the one
million dollars in common shares that the Company otherwise was to contribute to
the settlement.
Cincinnati Microwave designs, manufactures and markets ultrahigh frequency and
microwave wireless communications products. The Company's product lines include
radar warning devices, digital spread spectrum cordless telephones and wireless
data modems for use on the Cellular Digital Packet Data (CDPD) network.
ADDITIONAL INFORMATION ON THE COMPANY, ITS PRODUCTS AND MARKETS CAN BE OBTAINED
FROM THE COMPANY'S WORLDWIDE WEB SITE: HTTP://WWW.CNMW.COM/WELCOME.HTM.
INFORMATION ABOUT CINCINNATI MICROWAVE ALSO IS AVAILABLE, FREE OF CHARGE
VIA FAX, BY DIALING 1-800-PRO-INFO AND USING TICKER SYMBOL CNMW.
FINANCIAL TABLES TO FOLLOW....
<PAGE> 4
CINCINNATI MICROWAVE, INC.
STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
------------------------------ -------------------------------
DEC. 29 DEC. 31 DEC. 29 DEC. 31
1996 1995 PERCENT 1996 1995 PERCENT
(UNAUDITED)(UNAUDITED) CHANGE (UNAUDITED) (AUDITED) CHANGE
------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C> <C>
RADAR DETECTORS $6,749 $12,141 (44)% $31,181 $51,484 (39)%
CORDLESS TELEPHONES 3,379 12,171 (72)% 23,905 26,602 (10)%
OTHER 145 105 38% 1,697 1,113 52%
NET SALES 10,273 24,417 (58)% 56,783 79,199 (28)%
COST OF SALES 14,611 25,244 (42)% 55,804 67,061 (17)%
-------- ------- -------- --------
GROSS PROFIT (4,338) (827) 425% 979 12,138 (92)%
-------- ------- -------- --------
OPERATING EXPENSES:
RESEARCH & DEVELOPMENT 1,228 1,811 (32)% 5,559 7,442 (25)%
SELLING EXPENSES 2,776 4,683 (41)% 11,579 12,990 (11)%
ADMINISTRATIVE EXPENSES 6,704 1,403 378% 11,081 4,978 123%
-------- ------- -------- --------
10,708 7,897 36% 28,219 25,410 11%
-------- ------- -------- --------
OPERATING INCOME (LOSS) (15,046) (8,724) (27,240) (13,272)
-------- ------- -------- --------
OTHER INCOME (EXPENSE), NET (497) (308) (1,125) (1,200)
INCOME (LOSS) BEFORE INCOME TAXES (15,543) (9,032) (28,365) (14,472)
-------- ------- -------- --------
INCOME TAX EXPENSE (BENEFIT) 0 0 0 (1,438)
-------- ------- -------- --------
NET INCOME (LOSS) ($15,543) ($9,032) ($28,365) ($13,034)
======== ======= ======== ========
EARNINGS (LOSS) PER SHARE ($0.99) ($0.58) ($1.80) ($0.90)
WEIGHTED AVERAGE SHARES OUTSTANDING 15,767 15,619 1% 15,744 14,539 8%
</TABLE>
CINCINNATI MICROWAVE, INC.
BALANCE SHEET
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF
-----------------------
DEC. 29 DEC. 31
1996 1995
(UNAUDITED) (AUDITED)
-------- --------
<S> <C> <C>
ASSETS
CASH & INVESTMENTS $ 95 $ 11
ACCOUNTS RECEIVABLE, NET 3,570 10,923
INVENTORIES, NET 6,332 25,370
OTHER CURRENT ASSETS 708 779
-------- --------
TOTAL CURRENT ASSETS 10,705 37,083
RESTRICTED CASH 881 429
PROPERTY, PLANT & EQUIPMENT 9,828 14,649
INTANGIBLES 1,217 2,035
-------- --------
TOTAL ASSETS $ 22,631 $ 54,196
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
ACCOUNTS PAYABLE $ 10,092 $ 15,729
NOTES PAYABLE 1,250 6,934
ACCRUED TAXES 82 81
UNEARNED REVENUE 468 684
CURRENT LEASE OBLIGATIONS 2,076 1,075
OTHER 8,679 4,212
-------- --------
TOTAL CURRENT LIABILITIES 22,647 28,715
UNEARNED REVENUE-NONCURRENT 190 350
LONG-TERM CAPITAL LEASE OBLIGATIONS 0 753
NOTE PAYABLE-NONCURRENT 3,334 0
SHAREHOLDERS' EQUITY (3,540) 24,378
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 22,631 $ 54,196
======== ========
</TABLE>
