<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 15, 1995
REGISTRATION NO.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LSI INDUSTRIES INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
OHIO 31-0888951
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
</TABLE>
10000 ALLIANCE ROAD
CINCINNATI, OHIO 45242
(513) 793-3200
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
GARY P. KREIDER, ESQ.
KEATING, MUETHING & KLEKAMP
1800 PROVIDENT TOWER
ONE EAST FOURTH STREET
CINCINNATI, OHIO 45202
(513) 579-6400
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
WITH COPIES TO:
TIMOTHY E. HOBERG, ESQ.
TAFT, STETTINIUS & HOLLISTER
425 WALNUT STREET
CINCINNATI, OHIO 45202
(513) 381-2838
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
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 of the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please 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. / /
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SHARES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER SHARE OFFERING PRICE(1) FEE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Common Shares, without par
value........................... 1,800,000 $15.875 $28,575,000 $9,854
</TABLE>
================================================================================
(1) Estimated pursuant to Rule 457(c) under the Securities Act of 1933 solely
for the purpose of calculating the registration fee.
------------------------
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.
================================================================================
<PAGE> 2
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 DECEMBER 15, 1995
P R O S P E C T U S
1,800,000 SHARES
COMMON SHARES
------------------------
Of the 1,800,000 Common Shares, without par value, offered hereby,
1,100,000 shares are being offered by LSI Industries Inc. and 700,000 shares are
being offered by the Selling Shareholders. The Company will receive no proceeds
from the sale of Common Shares by the Selling Shareholders. See "Principal and
Selling Shareholders." The Company's Common Shares are listed on the Nasdaq
National Market under the symbol "LYTS." On December 14, 1995, the last reported
sale price of the Common Shares as reported on the Nasdaq National Market was
$15.75 per share.
SEE "RISK FACTORS" ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON SHARES OFFERED
HEREBY.
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS(3)
- ----------------------------------------------------------------------------------------------------
Per Share...... $ $ $ $
- ----------------------------------------------------------------------------------------------------
Total(3)....... $ $ $ $
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses of this Offering, all of which are payable by the
Company, estimated at $ .
(3) The Company and the Selling Shareholders have granted to the Underwriters a
30-day option to purchase up to an additional 270,000 Common Shares at the
Price to Public to cover over-allotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, Proceeds to Company, and Proceeds to Selling Shareholders will
be $ , $ , $ , and $ , respectively. See
"Underwriting."
------------------------
The Common Shares are offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by them and subject to certain
conditions. The Underwriters reserve the right to withdraw, cancel, or modify
such offer and to reject orders, in whole or in part. Delivery of the
certificates representing the Common Shares against payment therefor is expected
on or about , 1996 through the Depository Trust Company or at the
offices of Robert W. Baird & Co. Incorporated, Milwaukee, Wisconsin.
ROBERT W. BAIRD & CO.
INCORPORATED
A.G. EDWARDS & SONS, INC.
THE OHIO COMPANY
The date of this Prospectus is , 1996.
<PAGE> 3
[INSERT GATEFOLD HERE]
The three pages of the gatefold contain seventeen pictures of the Company's
products which include pictures depicting automobile dealership lighting,
the Company's Image Center and menu boards, retail store lighting, gasoline
station lighting, fleet graphics on tanker trucks, canopy lighting fixtures
and landscape lightings.
<PAGE> 4
AVAILABLE INFORMATION
LSI Industries Inc. is subject to the informational requirements of the
Securities Exchange Act of 1934 (File No. 0-13375) and in accordance therewith
files periodic reports and other information with the Securities and Exchange
Commission. LSI Industries Inc. has filed a Registration Statement on Form S-3
together with all amendments and exhibits thereto with the Commission under the
Securities Act of 1933 with respect to the offering (the "Offering") of
1,800,000 common shares, without par value (the "Common Shares"). This
Prospectus does not contain all the information contained in the Registration
Statement, to which reference is hereby made. Statements contained in this
Prospectus as to the terms of any contract or other document are not necessarily
complete with respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement. Reference is made to the exhibits
for a more complete description of the matter involved and each such statement
is qualified in its entirety by such references. Such reports, proxy and
information statements and other information filed with the Commission by LSI
Industries Inc. may be inspected at and obtained from the Commission at its
public reference facilities at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices located at Northwestern Atrium, 500
West Madison Street, Suite 1400, Chicago, Illinois, and at 7 World Trade Center,
Suite 1300, New York, New York. Copies of such material can also be obtained, at
prescribed rates, by mail from the Public Reference Section of the Commission at
its Washington, D.C. address set forth above. In addition, material filed by LSI
Industries Inc. can be obtained and inspected at the offices of the Nasdaq
National Market, 9513 Key West Avenue, Rockville, Maryland 20850, on which LSI's
Common Shares are listed.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus incorporates by reference certain documents relating to LSI
Industries Inc. which are not delivered herewith. These documents (other than
the exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents) are available, without charge, on
oral or written request by any person to whom this Prospectus is delivered.
Written or telephone requests should be directed to Ronald S. Stowell, Chief
Financial Officer and Treasurer, 10000 Alliance Road, Cincinnati, Ohio 45242.
The following documents, which have been filed by LSI Industries Inc. with the
Commission, are hereby incorporated by reference in this Prospectus:
1. LSI Industries Inc.'s Annual Report on Form 10-K for the fiscal year
ended June 30, 1995.
2. LSI Industries Inc.'s Quarterly Report on Form 10-Q for the Quarter
ended September 30, 1995.
3. The description of LSI Industries Inc.'s Common Shares contained in the
Registration Statement on Form 8-A filed on April 11, 1985.
All documents filed by LSI Industries Inc. pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 prior to the
termination of this Offering shall be deemed to be incorporated by reference in
this Prospectus. Any statement contained in a document incorporated by reference
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 also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON SHARES
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 THE OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON SHARES ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934.
3
<PAGE> 5
PROSPECTUS SUMMARY
The following is a summary of the more detailed information and financial
statements appearing elsewhere in this Prospectus. Unless otherwise indicated,
the information in this Prospectus assumes that the Underwriters' over-allotment
option will not be exercised. Unless the context otherwise requires, references
to the "Company" or "LSI" are to LSI Industries Inc.
THE COMPANY
LSI designs, engineers, manufactures and markets a broad array of quality,
high-value lighting and graphics products for commercial/industrial lighting
applications and corporate visual image programs. The Company's two core
business segments are the Lighting Group and the Graphics Group. The Lighting
Group is a leading supplier of outdoor, indoor, landscape and architectural
lighting for the commercial/industrial and the petroleum/convenience store
markets. The products of the Graphics Group comprise the major visual image
elements for the petroleum/convenience store market and for multi-site retail
operations. LSI integrates its lighting and graphics capabilities in order to
provide the principal indoor and outdoor aspects of a retail customer's
comprehensive image identification program.
The Company utilizes its lighting and graphics expertise and its nationwide
service capabilities to position itself as a single-source provider of
state-of-the-art lighting and graphics for image conscious retailers. To enhance
its competitive position, the Company has recently developed and opened its
Image Center which allows customers to create a computer generated "virtual"
prototype of their facilities after undergoing an LSI lighting and graphics
re-imaging program. The Company is the leading provider of lighting products and
services to the petroleum/convenience store industry and has effectively used
this leadership position to market its graphics expertise to customers in this
industry. The Company continues to use this strategy to penetrate other national
retailers with multi-site operations, including quick service and casual
restaurants, video rental and eyewear chains, retail chain stores and automobile
dealerships. Representative customers include Amoco, Arco, Chevron, Clark, Fina,
Shell, Texaco, Circle K, National Convenience Stores, Boston Market, Burger
King, Taco Bell, Wendy's, Best Buy, Target Stores, Chrysler, Ford, General
Motors, Saturn and Toyota.
The Company's sales growth has been driven by a number of factors,
including the general state of the economy and, in particular, LSI's core
petroleum customers. Additionally, the Company believes it has benefitted and
will continue to benefit from corporate downsizing and the related outsourcing
of certain non-core activities, such as visual identification projects, in
addition to several trends, including: (i) importance of improved lighting in
deterring crime and improving overall safety and security at retail facilities;
(ii) retailers' extended operating hours; (iii) consolidation within retailing
and the commensurate need to re-image acquired properties; (iv) retailers' need
to present a uniform visual corporate identity; and (v) retailers' efforts to
improve the effectiveness of merchandising and advertising through the use of
indoor and outdoor lighting and graphics.
LSI is a leader in both the commercial/industrial lighting market and in
the graphics markets. The Company attributes its success to its focus on an
ongoing business strategy, the principal components of which are to: maintain
leadership in commercial/industrial lighting; target select markets; serve as a
single-source provider of visual image programs; develop innovative products;
optimize product mix and manufacturing; and pursue complementary acquisitions.
From fiscal 1993 to fiscal 1995 net sales increased from $72.6 million to
$119.9 million while net income increased from $1.7 million to $6.2 million. In
fiscal 1995 the Lighting and Graphics segments represented 60.7% and 39.3% of
net sales and 48.1% and 51.9% of operating income, respectively.
4
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common Shares offered by the Company......... 1,100,000 shares
Common Shares offered by the Selling
Shareholders............................... 700,000 shares
Total Common Shares offered.................. 1,800,000 shares
Common Shares to be outstanding after the
Offering(1)................................ 8,722,705 shares
Use of Proceeds.............................. To repay all bank indebtedness and for general
corporate purposes, including possible
acquisitions. See "Use of Proceeds."
Nasdaq National Market symbol................ LYTS
</TABLE>
- ---------------
(1) Based upon Common Shares outstanding as of November 30, 1995.
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
------------------------------------------------ -------------------
1991 1992 1993 1994 1995 1994 1995
------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................. $68,782 $69,182 $72,563 $93,535 $119,927 $29,320 $35,882
Gross profit.............. 21,730 21,793 22,774 31,105 39,771 9,858 11,942
Operating income.......... 645 306 2,618 7,140 10,262 2,953 3,630
Income (loss) from
continuing
operations............. (99) (531) 1,669 4,190 6,174 1,849 2,194
Discontinued
operations(1).......... (995) (4,262) -- -- -- -- --
Net income (loss)......... $(1,094) $(4,793) $ 1,669 $ 4,190 $ 6,174 $ 1,849 $ 2,194
PER SHARE DATA:
Income (loss) from
continuing
operations............. $ (0.01) $ (0.07) $ 0.23 $ 0.55 $ 0.79 $ 0.24 $ 0.28
Net income (loss)......... (0.15) (0.65) 0.23 0.55 0.79 0.24 0.28
Cash dividends............ 0.03 0.03 0.03 0.03 0.15 0.07 0.09
Average shares
outstanding(2)......... 7,367 7,367 7,385 7,656 7,802 7,748 7,961
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
------------------------
ACTUAL AS ADJUSTED(3)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital..................................................... $18,473
Total assets........................................................ 64,652
Long-term debt, including current maturities........................ 7,903
Total indebtedness.................................................. 9,403
Shareholders' equity................................................ 31,088
</TABLE>
- ---------------
(1) Reflects loss from operations and loss on sale of the Company's discontinued
European operations, net of related income taxes. See "The Company."
(2) Average shares outstanding represents Common Shares outstanding plus common
share equivalents.
(3) Adjusted to reflect the sale of 1,100,000 Common Shares by the Company and
the application of the estimated net proceeds. See "Use of Proceeds" and
"Capitalization."
5
<PAGE> 7
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus, the following factors in evaluating
the Company and its business before purchasing the Common Shares offered hereby.
DEPENDENCE ON THE PETROLEUM INDUSTRY
During the most recent five years, approximately 44% to 50% of the
Company's net sales have been to the retail marketing segment of the petroleum
industry. Sales to this market segment are dependent upon the general conditions
prevailing in and the profitability of the petroleum industry. As such, the
Company's business is subject to reactions of the petroleum industry to world
political events, particularly those in the Middle East, and to the price and
supply of oil. Major disruptions in the petroleum industry generally result in a
curtailment of retail marketing efforts by the industry and thereby adversely
affect the Company's business.
CUSTOMER CONCENTRATION AND EARNINGS FLUCTUATIONS
Although the Company's primary customers change from time-to-time, the
Company has derived a significant portion of its sales from one or two large
petroleum companies in recent years. There can be no assurance that this pattern
will continue and that such major customers will always be replaced as major
visual image programs are completed. In addition, LSI's operating results
fluctuate due to the unpredictable nature and timing of orders from and
shipments to major corporate customers.
SEASONALITY
The Company's revenues are affected by the impact of weather on
construction and installation programs and the annual budget cycles of major
customers. Because of these seasonal factors, the Company typically experiences
its lowest sales for each year in the third quarter ending March 31. Third
quarter results in several fiscal years prior to 1994 show losses for that
quarter.
COMPETITION
The lighting and graphics industries are highly competitive. LSI encounters
strong competition in all its markets. Competitors include manufacturers of
various sizes, some of which have greater financial and other resources than
does the Company.
6
<PAGE> 8
THE COMPANY
LSI was founded by its current senior management in 1976 to capitalize on
the experience of its founders in the lighting industry. LSI's business
originally emphasized sales of lighting products in the retail petroleum market.
LSI became a publicly held corporation in 1985.
Since 1985, the Company has expanded its original lighting business through
acquisitions and internal development, resulting in the Company's ability to
combine lighting and graphics products to meet the image development needs of
its large multi-site retail customers. The Company also produces menu boards for
restaurant operations and is a major supplier of outdoor, indoor, landscape and
architectural lighting for the commercial/industrial and the
petroleum/convenience store markets.
Acquisitions have been important to the Company's growth. Key acquisitions
have included Abolite Lighting which manufactures indoor commercial and
industrial lighting products and lighting fixtures, Greenlee Lighting Inc. which
manufactures specialty outdoor landscape and architectural feature lighting, and
SGI Integrated Graphic Systems, Inc. which produces corporate identity and
graphic elements including decals, structural graphics and fleet markings. The
Company's acquisition in December 1989 of a United Kingdom company, Duramark,
proved to be unsuccessful and the Company disposed of Duramark in the fourth
quarter of fiscal 1992 and reported losses from discontinued operations from
that business.
The Company's sales growth has been driven by a number of factors,
including the general state of the economy and, in particular, LSI's core
petroleum customers. Additionally, the Company believes it has benefitted and
will continue to benefit from corporate downsizing and the related outsourcing
of certain non-core activities, such as visual identification projects, in
addition to several trends, including: (i) importance of improved lighting in
deterring crime and improving overall safety and security at retail facilities;
(ii) retailers' extended operating hours; (iii) consolidation within retailing
and the commensurate need to re-image acquired properties; (iv) retailers' need
to present a uniform visual corporate identity; and (v) retailers' efforts to
improve the effectiveness of merchandising and advertising through the use of
indoor and outdoor lighting and graphics.
LSI is a leader in both the commercial/industrial lighting market and in
the graphics markets. The Company attributes its success to its focus on an
ongoing business strategy, the principal components of which are to: maintain
leadership in commercial/industrial lighting; target select markets; serve as a
single source provider of visual image programs; develop innovative products;
optimize product mix and manufacturing; and pursue complementary acquisitions.
From fiscal 1993 to fiscal 1995 net sales increased from $72.6 million to
$119.9 million while net income increased from $1.7 million to $6.2 million. In
fiscal 1995 the Lighting and Graphics segments represented 60.7% and 39.3% of
net sales and 48.1% and 51.9% of operating income, respectively.
The Company's executive offices are located at 10000 Alliance Road, P. O.
Box 42728, Cincinnati, Ohio 45242, and its telephone number is (513) 793-3200.
7
<PAGE> 9
USE OF PROCEEDS
The net proceeds to the Company from the sale of 1,100,000 Common Shares
offered hereby are estimated to be $ , after deducting estimated
underwriting commissions and Offering expenses payable by the Company
($ if the Underwriters' over-allotment option is exercised in full).
LSI will not receive any of the proceeds from the sale of 700,000 Common Shares
by the Selling Shareholders.
The Company intends to use approximately $ of the net proceeds to
repay all outstanding indebtedness under its revolving lines of credit and its
term loan facility with its banks. This indebtedness bears interest at rates
from 6.8% to 7.3% per annum and was incurred for capital expenditures and
working capital purposes. At November 30, 1995, approximately $4.1 million was
outstanding under the Company's two revolving lines of credit which expire on
December 31, 1995 and November 21, 1996, respectively. At the same date,
approximately $6.2 million was outstanding under the Company's term loan
facility which matures December 2004. The revolving lines of credit will remain
in place after the Offering.
LSI intends to use the balance of the net proceeds for general corporate
purposes, including working capital to finance its planned growth and for
potential acquisitions. Although the Company frequently evaluates potential
acquisitions, the Company has no current understandings, agreements or
commitments with respect to any acquisition. Pending application, the net
proceeds will be invested in short-term investment grade securities.
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1995, and as adjusted to give effect to the sale by the Company of
1,100,000 Common Shares offered hereby, and the application of the net proceeds
therefrom. See "Use of Proceeds." The table should be read in conjunction with
the Company's Consolidated Financial Statements and related Notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
-------------------------------------
ACTUAL ADJUSTMENTS AS ADJUSTED
------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
SHORT-TERM DEBT:
Notes payable to banks................................... $ 1,500 $ $
Current maturities of long-term debt..................... 843
------- ------- -------
Total short-term debt................................. $ 2,343 $ $
======= ======= =======
LONG-TERM DEBT............................................. $ 7,060 $ $
------- ------- -------
SHAREHOLDERS' EQUITY(1):
Preferred shares, without par value; 1,000,000 shares
authorized, none issued............................... --
Common shares, without par value; 30,000,000 shares
authorized, 7,613,776 shares outstanding, 8,713,776 as
adjusted.............................................. 8,040
Retained earnings........................................ 23,048
------- ------- -------
Total shareholders' equity............................ 31,088
------- ------- -------
Total capitalization............................. $38,148 $ $
======= ======= =======
</TABLE>
- ---------------
(1) As of December 14, 1995, there were 905,166 Common Shares reserved for
issuance under the Company's stock option plans, of which 163,000 shares
were available for future grant, and options for 742,166 shares were
outstanding.
8
<PAGE> 10
DIVIDEND POLICY
LSI has paid cash dividends each year since 1988. Cash dividends of three
cents per share were paid in fiscal 1994 and fifteen cents per share in fiscal
1995. In addition, the Company paid a five percent stock dividend in fiscal
1995. In September 1995, the Company paid a special year-end cash dividend of
five cents per share plus a regular quarterly cash dividend of four cents per
share, and in November 1995 the Company paid a regular quarterly cash dividend
of four cents per share.
The Company's dividend policy is to pay regular cash dividends on a
quarterly basis which are expected to represent a payout ratio of between 10 and
20 percent of expected net income in the year of payment. In addition, the
policy calls for the payment of special year-end dividends in cash and/or stock
that, in conjunction with regular quarterly dividends, would achieve a target
payout ratio of between 20 and 40 percent of reported net income. Although the
Company intends to continue this policy, the payment of future dividends is at
the discretion of the Board of Directors and will depend upon, among other
things, future earnings, capital requirements, the general financial condition
of the Company, general business conditions and other factors.
PRICE RANGE OF COMMON SHARES
LSI's Common Shares are traded on the Nasdaq National Market under the
symbol LYTS. The following table sets forth for the fiscal periods indicated the
high and low closing sale prices for the Common Shares, as adjusted to give
effect to all stock splits and stock dividends, as reported on the Nasdaq
National Market.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL YEAR ENDED JUNE 30, 1994
First Quarter.............................................................. $ 4.50 $ 3.25
Second Quarter............................................................. 7.09 4.59
Third Quarter.............................................................. 7.83 6.33
Fourth Quarter............................................................. 7.67 6.00
FISCAL YEAR ENDED JUNE 30, 1995
First Quarter.............................................................. $ 8.33 $ 6.67
Second Quarter............................................................. 8.00 6.67
Third Quarter.............................................................. 9.67 7.33
Fourth Quarter............................................................. 12.92 9.33
FISCAL YEAR ENDED JUNE 30, 1996
First Quarter.............................................................. $15.50 $12.17
Second Quarter (through December 14, 1995)................................. 19.63 14.50
</TABLE>
On December 14, 1995, the last reported sale price for the Common Shares on
the Nasdaq National Market was $15.75 per share. As of November 30, 1995, there
were approximately 500 holders of record of the Common Shares, which the Company
believes represent approximately 2,500 beneficial holders.
9
<PAGE> 11
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected consolidated financial information for each of the
years in the five-year period ended June 30, 1995 has been derived from the
consolidated financial statements of the Company which have been audited by
Price Waterhouse LLP, independent accountants. The report of Price Waterhouse
LLP for each of the three years in the period ended June 30, 1995 appears
elsewhere in this Prospectus. The financial data for the three months ended
September 30, 1994 and 1995 are derived from the Company's unaudited
consolidated financial statements. In the opinion of management, the three-month
financial data reflect all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of such data and are not necessarily
indicative of results to be expected for the full year. The selected
consolidated financial data should be read in conjunction with the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Prospectus
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
-------------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1994 1995
------- ------- ------- ------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.................. $68,782 $69,182 $72,563 $93,535 $119,927 $29,320 $35,882
Cost of products sold...... 47,052 47,389 49,789 62,430 80,156 19,462 23,940
------- ------- ------- ------- -------- ------- -------
Gross profit............... 21,730 21,793 22,774 31,105 39,771 9,858 11,942
Operating expenses......... 21,085 19,351 20,156 23,965 29,509 6,905 8,312
Restructuring charges(1)... -- 2,136 -- -- -- -- --
------- ------- ------- ------- -------- ------- -------
Operating income........... 645 306 2,618 7,140 10,262 2,953 3,630
Interest expense........... 718 580 503 199 459 64 143
Other (income) expense..... 38 539 (481) 290 160 9 5
------- ------- ------- ------- -------- ------- -------
Income (loss) from
continuing operations
before income taxes...... (111) (813) 2,596 6,651 9,643 2,880 3,482
Income taxes............... (12) (282) 927 2,461 3,469 1,031 1,288
------- ------- ------- ------- -------- ------- -------
Income (loss) from
continuing operations.... (99) (531) 1,669 4,190 6,174 1,849 2,194
Discontinued
operations(2)............ (995) (4,262) -- -- -- -- --
------- ------- ------- ------- -------- ------- -------
Net income (loss).......... $(1,094) $(4,793) $ 1,669 $ 4,190 $ 6,174 $ 1,849 $ 2,194
======= ======= ======= ======= ======== ======= =======
PER SHARE DATA:
Income (loss) from
continuing operations.... $ (0.01) $ (0.07) $ 0.23 $ 0.55 $ 0.79 $ 0.24 $ 0.28
Net income (loss).......... (0.15) (0.65) 0.23 0.55 0.79 0.24 0.28
Cash dividends............. 0.03 0.03 0.03 0.03 0.15 0.07 0.09
Average shares
outstanding(3)........... 7,367 7,367 7,385 7,656 7,802 7,748 7,961
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
-------------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1994 1995
------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............ $10,846 $12,241 $10,268 $11,223 $ 17,788 $14,612 $18,473
Total assets............... 43,651 41,231 38,051 46,287 62,553 50,465 64,652
Long-term debt, including
current maturities....... 9,840 8,454 3,957 3,600 8,099 6,071 7,903
Total indebtedness......... 9,840 8,454 5,269 3,600 8,099 6,446 9,403
Shareholders' equity....... 23,246 18,220 19,655 23,981 29,453 25,454 31,088
</TABLE>
- ---------------
(1) 1992 results include a non-recurring restructuring charge of $2,136,000
resulting from the consolidation of facilities.
(2) Reflects loss from operations and loss on sale of the Company's discontinued
European operations, net of related income taxes. See "The Company."
(3) Average shares outstanding represents Common Shares outstanding plus common
share equivalents.
10
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and the Notes thereto appearing
elsewhere in this Prospectus.
OVERVIEW
LSI designs, engineers, manufactures and markets a broad array of quality,
high-value lighting and graphics products for commercial/industrial lighting
applications and for corporate visual image programs. The Company's two core
business segments are the Lighting Group and the Graphics Group. The Lighting
Group is a major supplier of outdoor, indoor, landscape and architectural
lighting for the commercial/industrial and the petroleum/convenience store
markets and is a producer and marketer of menu board systems. The Graphics
Group's products comprise the major visual image elements for the
petroleum/convenience store market and for multi-site retail operations. LSI
integrates its lighting and graphics capabilities in order to manufacture all
indoor and outdoor aspects of a retail customer's comprehensive image
identification program.
Net sales have increased from $72.6 million in fiscal 1993 to $119.9
million in fiscal 1995. Net income grew from $1.7 million to $6.2 million over
the same period. In fiscal 1995 the Lighting segment represented 60.7% of net
sales and 48.1% of operating income. The Graphics segment in fiscal 1995
represented 39.3% of net sales and 51.9% of operating income. This mix of net
sales and operating income has remained relatively constant over the last three
years and demonstrates the emergence of LSI as a lighting and graphics company
from its origins as a lighting business.
Net sales are affected by the annual budget cycles of major customers and
by the impact of weather on construction and installation programs. Due to these
seasonal factors, the third fiscal quarter ending March 31 typically contributes
the lowest net sales in each fiscal year. Third quarter results in several
fiscal years prior to 1994 show losses for that quarter.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain income
statement data as a percentage of total revenues and the percentage change
between periods.
<TABLE>
<CAPTION>
PERCENTAGE CHANGE
-----------------------------
PERCENTAGE OF NET SALES THREE MONTHS
------------------------------------- YEARS ENDED ENDED
THREE MONTHS JUNE 30, SEPTEMBER 30,
ENDED ------------- -------------
YEARS ENDED JUNE 30, SEPTEMBER 30, 1994 1995 1995
--------------------- ------------- OVER OVER OVER
1993 1994 1995 1994 1995 1993 1994 1994
----- ----- ----- ----- ----- ----- ----- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................................... 100.0% 100.0% 100.0% 100.0% 100.0% 28.9% 28.2% 22.4%
Cost of products sold....................... 68.6 66.7 66.8 66.4 66.7 25.4 28.4 23.0
Gross profit................................ 31.4 33.3 33.2 33.6 33.3 36.6 27.9 21.1
Selling and administrative expenses......... 27.8 25.7 24.6 23.5 23.2 18.9 23.1 20.4
Operating income............................ 3.6 7.6 8.6 10.1 10.1 172.7 43.7 22.9
Interest expense............................ .7 .2 .4 .3 .4 (60.4) 130.7 123.4
Other (income) expense...................... (.7) .3 .2 -- -- -- (44.8) (44.4)
Income before income taxes.................. 3.6 7.1 8.0 9.8 9.7 156.2 45.0 20.9
Income tax expense.......................... 1.3 2.6 2.8 3.5 3.6 165.5 41.0 24.9
Net income.................................. 2.3% 4.5% 5.2% 6.3% 6.1% 151.0% 47.4% 18.7%
</TABLE>
Three Months Ended September 30, 1995 Compared to Three Months Ended
September 30, 1994
Net sales of $35.9 million increased 22.4% over first quarter sales last
year of $29.3 million. Lighting segment sales increased 38.7% and Graphics
segment sales increased 2.1%, as a result of strong lighting sales
11
<PAGE> 13
in the petroleum/convenience store and the multi-site retail markets. One
customer, Chevron U.S.A., accounted for 10.6% of net sales in the first quarter
of fiscal 1996 and 14.5% of net sales in the corresponding period of 1995. The
Company believes that it continues to maintain a good business relationship with
this major customer; however, the level of total sales is never assured in the
future. The increase in net sales in the three months ended September 30, 1995
was primarily the result of increased volume. While sales prices were increased,
inflation did not have a significant impact on sales in the first quarter of
fiscal 1996 as competitive pricing pressures held price increases to a minimum.
Gross profit of $11.9 million, or 33.3% of net sales, increased over last
year's first quarter gross profit of $9.9 million or 33.6% of net sales. The
increase in amount of gross profit is attributed primarily to the 22.4% increase
in sales. A sales mix shift in the Company's Graphics segment to somewhat lower
margin programs in the first quarter and an increase in lighting sales to the
petroleum/convenience store market both provided influences that reduced the
gross profit percentage. Selling and administrative expenses increased to $8.3
million primarily as a result of increased sales volume, and were reduced to
23.2% of net sales in fiscal 1996 from 23.5% of net sales in fiscal 1995.
Interest expense increased from $64,000 to $143,000, primarily as a result
of increased average borrowings on the Company's revolving lines of credit and
term loan facilities in addition to increased effective borrowing rates. The
Company's effective tax rate increased to 37.0% as a result of the increased
provision for state income taxes.
Net income of $2.2 million or $.28 per share increased 18.7% from last
year's first quarter net income of $1.8 million or $.24 per share as a result of
increased sales and gross profit, partially offset by increased operating
expenses and increased provision for income taxes.
As discussed in Note 9 to the financial statements and as previously
discussed in the Company's prior reports on Form 10-Q, the Company has been
involved in a dispute with the Internal Revenue Service (IRS) in which the IRS
has proposed audit adjustments which could result in a payment of income taxes
by the Company of approximately $2.0 million, plus interest. The proposed
adjustments relate to the Company's 1992 discontinued operations and are
associated with income tax which had been refunded to the Company with the
filing of its 1992 income tax return. An agreement reached in December 1995
re-characterizes a portion of the 1992 loss associated with discontinued
European operations as a long term capital loss. The agreement will result in
payment of approximately $1.7 million (composed of taxes and interest), and in
a charge to discontinued operations of approximately $1.5 million to increase
the Company's reserve for remaining liabilities associated with the
discontinued operations. During the quarter ending December 31, 1995, the
Company exhausted all alternatives to mitigate this issue and will record the
$1.5 million additional reserve for discontinued operations in the second
quarter of fiscal 1996. The Company anticipates no further charges associated
with the discontinued European operations.
Comparison of Fiscal Years Ended June 30, 1995 and June 30, 1994
Net sales of $119.9 million increased 28.2% over 1994 net sales of $93.5
million. Lighting segment sales increased 29.6% with sales increases in all
major markets served: the petroleum/convenience store market, the multi-site
retail market, and the commercial/industrial lighting market. Graphics segment
sales increased 26.1%, primarily as a result of strong sales into the
petroleum/convenience store market. One customer, Chevron U.S.A., accounted for
13.8% of net sales in 1995 and 12.6% of net sales in 1994. The Company believes
that it continues to maintain a good business relationship with this major
customer; however, the level of total sales is never assured in the future. The
increase in sales in 1995 was primarily the result of increased volume. While
sales prices were increased, inflation did not have a significant impact on
sales in 1995 as competitive pricing pressures held price increases to a
minimum.
Gross profit of $39.8 million or 33.2% of net sales, increased over last
year's gross profit of $31.1 million or 33.3% of net sales. The increase in
amount of gross profit is attributed primarily to the 28.2% increase in net
sales. Increased sales volume caused some manufacturing inefficiencies,
increased employment levels and related training, and overtime and additional
shifts in the first half of the year. The Company experienced cost increases in
several raw materials and components from suppliers in the first half for which
sales price
12
<PAGE> 14
increases were implemented in the second half of the year. Selling and
administrative expenses of $29.5 million increased from $24.0 million but
decreased as a percentage of net sales to 24.6% from 25.7%, primarily as a
result of increased sales volume.
Interest expense increased in 1995 from $199,000 to $459,000 as a result of
increased average borrowings on the Company's revolving lines of credit and
long-term debt facilities in addition to increased effective borrowing rates.
Other expense consists primarily of losses on disposition of assets of $122,000
and $250,000 in 1995 and 1994, respectively. Income tax expense of $3.5 million
or 36.0% of income before taxes compares to tax expense of $2.5 million or 37.0%
last year. The increase in income tax expense is related primarily to the
increased taxable income. Net income of $6.2 million or $.79 per share increased
from last year's net income of $4.2 million or $.55 per share as a result of
increased sales and gross profit, partially offset by increased selling and
administrative expenses and an increased provision for taxes.
Comparison of Fiscal Year ended June 30, 1994 and June 30, 1993
Net sales of $93.5 million increased 28.9% over 1993 net sales of $72.6
million. Lighting segment sales increased 34.5% with sales increases in all
major markets served: the commercial/industrial lighting market, the
petroleum/convenience store market, and the multi-site retail market. Graphics
segment sales increased 21.4% with increases in sales of both graphics and
printed products in the petroleum/convenience store market, the multi-site
retail market, as well as other markets served. One customer, Chevron U.S.A.,
accounted for 12.6% of consolidated net sales in 1994 and 12.9% in 1993. The
Company believes that it continues to maintain a good business relationship with
this major customer; however, the level of total sales is never assured in the
future. Inflation did not have a significant impact on sales in 1994 as
competitive pricing pressures held price increases to a minimum.
Gross profit of $31.1 million, or 33.3% of net sales, increased over last
year's gross profit of $22.8 million or 31.4% of net sales. The 36.6% increase
in amount of gross profit is directly related to the 28.9% increase in net
sales, to economies associated with increased production and manufacturing
throughput, to facilities consolidation, and to an improved materials cost
percentage related to product mix and cost reduction programs. Selling and
administrative expenses of $24.0 million increased from $20.2 million, but
decreased as a percentage of net sales to 25.7% from 27.8%. The increase in
amount is primarily related to the increased sales volume and improved operating
performance.
Interest expense decreased in 1994 from $503,000 to $199,000 primarily as a
result of decreased average borrowings and also due to reduced effective
borrowing rates. Other expense consists primarily of $250,000 net loss on
disposition of assets in 1994 and a $520,000 gain on sale of an asset in 1993.
Income tax expense of $2.5 million or 37.0% of income before taxes compares to
tax expense of $0.9 million or 35.7% in 1993. The increase in income tax expense
is related primarily to the increased taxable income.
Net income of $4.2 million or $.55 per share increased from 1993 net income
of $1.7 million or $.23 per share due to the increased gross profit on higher
sales volume and to reduced interest expense, partially offset by the increased
selling and administrative expenses, loss on disposition of assets, and
increased tax provision.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995 the Company had working capital of $18.5 million,
compared to $17.8 million at June 30, 1995. The ratio of current assets to
current liabilities remained at 1.74 to 1. The increased working capital is
primarily attributed to increases in accounts receivable and inventories, and to
a reduction in accrued expenses, partially offset by increases in notes payable
to banks, to increases in accounts payable (related to increased sales and
production volumes), and to decreased cash.
The Company generated $1.8 million in cash from operating activities in
fiscal year 1995 as compared to $7.6 million in fiscal year 1994. The Company
generated less cash from operating activities in 1995 due to payment of $5.8
million of income tax (includes fiscal 1994 taxes as well as fiscal 1995
estimated tax payments), a $4.9 million increase in accounts receivable related
entirely to increased net sales, and a $7.5 million increase in inventories
related generally to increased sales and production volumes. Approxi-
13
<PAGE> 15
mately $4.9 million of the $7.5 million increase in inventories between years is
specifically related to a temporary inventory stocking program for the Company's
largest customer, with approximately $4.2 million having been received from this
customer as a cash prepayment that has been classified as a current liability
until the inventory is shipped and revenue is recorded.
Total long-term debt increased $4.5 million in fiscal year 1995 primarily
in support of $5.1 million of facilities and equipment expansion, and for
increased working capital to fund both the growth in business and a total of
$1.1 million of cash dividend payments. The Company used $0.6 million in cash
for operating activities in the first quarter of fiscal year 1996 as compared to
a use of $2.9 million in the first quarter of fiscal year 1995. During the first
quarter of fiscal 1996 receivables increased $2.4 million in line with increased
sales volume while days sales outstanding decreased over the quarter. Accrued
expenses decreased by $1.7 million in the first quarter of fiscal 1996 primarily
as a result of a reduction in customer prepayments resulting from inventory
shipments, and decreased by $2.5 million in the first quarter of fiscal 1995
primarily as a result of payment of federal income taxes.
The combined effect during the first quarter of fiscal 1996 of inventories
increasing by $0.7 million with continued increased sales and production
requirements, capital spending of approximately $1 million, and cash dividend
payments of $0.7 million resulted in a reduction of cash during the quarter and
in a $1.5 million increase in the Company's revolving line of credit. The debt
to equity ratio of .28 to 1 at September 30, 1995 decreased from .30 to 1 as of
June 30, 1995. The Company's primary source of liquidity continues to be its
lines of credit, which carried $8.9 million of available borrowing capacity as
of November 30, 1995.
Capital expenditures of $1.0 million in the first quarter of fiscal year
1996 compare to $0.8 million in the comparable period last year. Spending in
fiscal year 1996 is primarily related to manufacturing equipment and process
improvements and is expected to total approximately $4.4 million for the full
year, with funding principally out of cash flows from operations as well as from
the Company's lines of credit.
The Company has two revolving lines of credit totaling $13.0 million, with
$8.9 million available as of November 30, 1995. One of the Company's lines of
credit in the amount of $5.0 million was renewed in November 1995 and will
expire in November 1996. After the Offering, the Company will have approximately
$ in working capital and will have $13.0 million available under its
two bank revolving lines of credit. The Company believes that the total of
available lines of credit plus cash flows from operating activities is adequate
for the Company's 1996 operational and capital expenditure needs. The Company is
in compliance with all of its loan covenants.
The Company continues to seek opportunities to invest in new products and
markets, and in acquisitions which fit its strategic growth plans in the
lighting and graphics markets. The Company believes that adequate financing for
any such investments or acquisitions will be available through future borrowings
due to the enhanced financial condition of the Company after the Offering or
through the issuance of Common Shares in payment for acquired businesses.
QUARTERLY RESULTS
The following table presents certain unaudited financial information for
the last nine fiscal quarters:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------------------------------
9/30/93 12/31/93 3/31/94 6/30/94 9/30/94 12/31/94 3/31/95 6/30/95 9/30/95
-------- -------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............. $ 23,571 $ 25,312 $ 20,273 $ 24,379 $ 29,320 $ 32,364 $ 26,920 $ 31,323 $ 35,882
Gross profit.......... 8,169 8,764 6,325 7,847 9,858 11,174 8,570 10,169 11,942
Operating income...... 2,162 2,340 850 1,788 2,953 3,486 1,291 2,532 3,630
Net income............ 1,317 1,403 453 1,017 1,849 2,159 749 1,417 2,194
Net income per
share.............. $ 0.18 $ 0.18 $ 0.06 $ 0.13 $ 0.24 $ 0.28 $ 0.10 $ 0.18 $ 0.28
</TABLE>
14
<PAGE> 16
BUSINESS
OVERVIEW
LSI designs, engineers, manufactures and markets a broad array of quality,
high-value lighting and graphics products for commercial/industrial lighting
applications and corporate visual image programs. The Company's two core
business segments are the Lighting Group and the Graphics Group. The Lighting
Group is a leading supplier of outdoor, indoor, landscape and architectural
lighting for the commercial/industrial and the petroleum/convenience store
markets. The products of the Graphics Group comprise the major elements of
visual image programs for the petroleum/convenience store market and for
multi-site retail operations. LSI integrates its lighting and graphics
capabilities in order to provide the principal indoor and outdoor aspects of a
retail customer's comprehensive image identification program.
The Company utilizes its lighting and graphics expertise and its nationwide
service capabilities to position itself as a single-source provider of
state-of-the-art lighting and graphics for image conscious retailers. The
Company is the leading provider of lighting products and services to the
petroleum/convenience store industry and has effectively used this leadership
position to market its graphics expertise to customers in this industry. The
Company continues to use this strategy to penetrate other national retailers
with multi-site operations, including quick service and casual restaurants,
video rental and eyewear chains, retail chain stores and automobile dealerships.
Representative customers include Amoco, Arco, Chevron, Clark, Fina, Shell,
Texaco, Circle K, National Convenience Stores, Boston Market, Burger King, Taco
Bell, Wendy's, Best Buy, Target Stores, Chrysler, Ford, General Motors, Saturn
and Toyota.
The integration of LSI's lighting and graphics capabilities allows its
customers to outsource to LSI the development of an entire visual image program
from design stage through installation. The Company believes national retailers
increasingly are seeking single-source suppliers that possess the ability to
combine a wide offering of lighting and graphics solutions with the project
management skills necessary to execute a comprehensive visual image program.
Management believes that LSI's unique ability to combine its extensive line of
lighting and graphics products and services differentiates the Company from its
competition.
The Company's sales growth has been driven by a number of factors,
including the general state of the economy and, in particular, LSI's core
petroleum customers. Additionally, the Company believes it has benefitted, and
will continue to benefit, from corporate downsizing and the related outsourcing
of certain non-core activities, such as visual identification projects, in
addition to several trends, including:
- importance of improved lighting in deterring crime and improving overall
safety and security at retail facilities;
- retailers' extended operating hours;
- consolidation within retailing and the commensurate need to re-image
acquired properties;
- retailers' need to present a uniform visual corporate identity; and
- retailers' efforts to improve the effectiveness of merchandising and
advertising through the use of indoor and outdoor lighting and graphics.
The Company has further increased the demand for both lighting and graphics
products by improving the energy efficiency and maintenance requirements of
several of its products. These improvements, together with the trends described
above, motivate customers to upgrade or "retrofit" older, established retail
locations. Such upgrades and "retrofits" account for a significant portion of
the Company's net sales.
15
<PAGE> 17
[The Schematic drawing on pages 16 and 17 shows the integration of the
Company's lighting and 9 graphic products]
LSI Industries Inc. designs, engineers and manufactures a wide array of
lighting and graphics products for corporate identity programs. The Company can
coordinate all elements of a customer's program - design, color schemes,
materials, and products - to create a consistent image both day and night.
Supported by a strong manufacturing base, LSI offers a family of services to
develop, produce and implement these products.
- Site Lighting
- Building Lighting
- Interior Lighting
- Landscape Lighting
- Illuminated Fascia
- Structural Graphics
- Menu Board Systems
- Lightboxes
- Graphics
- Interior
- Exterior
- Window
- Fleet
- Graphic Overlays
- Membrane Switches
The rendering below shows LSI's lighting and graphics elements in a typical
petroleum/convenience store application. Many of these elements can be used in
any retail application.
16
<PAGE> 18
17
<PAGE> 19
BUSINESS STRATEGY
The Company is a leader in both the commercial/industrial lighting market
and in the graphics market. The Company attributes its success to its focus on
an on-going business strategy, the principal components of which are to:
- Maintain Leadership in Commercial/Industrial Lighting. LSI has
established itself as a leading supplier to the commercial/industrial
lighting market. With its wide selection of outdoor, indoor, landscape
and architectural lighting products and its large manufacturers'
representative force, LSI believes it is well positioned to increase its
penetration in this broad market.
- Target Select Markets. The Company focuses its marketing and
manufacturing activities on specific niche markets. Markets are evaluated
on the basis of size, profit opportunity, and market share potential. LSI
targets national retail customers who seek vendors that can provide a
consistent customer image across the country on a high volume basis. By
offering a full-range of industry-specific lighting and graphic products
and services, the Company believes it can offer unparalleled value to its
customers, thereby gaining competitive advantage. The Company is the
leading supplier of lighting products and a leading supplier of graphics
products to the petroleum/convenience store industry. The Company
believes its market share is in excess of 70% in the lighting segment of
the petroleum/convenience store industry.
- Serve as Single-Source Provider. LSI has positioned itself as a
single-source provider of integrated lighting and graphics products and
services for its customers, thereby allowing the Company to successfully
distinguish itself from its competitors. As the trend toward outsourcing
continues, the Company believes its customers place increasingly high
value on its one-stop service approach.
- Develop Innovative Products. LSI continually seeks to develop and
introduce technologically advanced and innovative products that
anticipate the changing needs of its customers. The Company pursues
alliances with certain key suppliers for the purpose of developing
high-value lighting and graphics products, such as the recently
introduced ScottsdaleTM (patent pending) canopy lighting fixture. This
fixture, which was designed for new and "retrofit" canopy installations
primarily in the petroleum/convenience store market, generates levels of
light output equivalent to higher wattage fixtures while using
significantly less energy. In addition to cost advantages, the new
fixture provides ease of installation, low maintenance, and superior
long-term operating performance. The Scottsdale lighting fixture was
designed and developed in alliance with leading lamp and ballast
manufacturers.
- Optimize Product Mix and Manufacturing. The Company's products are
designed and manufactured to provide maximum value and meet the
high-quality, moderately-priced product requirements of the niche markets
served. LSI generally avoids specialty or custom-designed, low-volume
products and concentrates on relatively high-volume, standard product
lines. By focusing its product offerings, the Company achieves
significant manufacturing and cost efficiencies. The Company's lighting
products are generally produced and shipped within two weeks after
receipt of order. LSI believes its prompt shipment capability is
important to its customers.
- Pursue Complementary Acquisitions. LSI will continue to pursue
acquisitions of companies engaged in various aspects of the lighting and
graphics industries that it believes will be complementary to its
existing business. The Company's past acquisitions have contributed to
its historical growth in its commercial/industrial markets, provided
entry into new market segments and product line diversification, as well
as facilitated the integration of the Company's lighting and graphics
disciplines.
18
<PAGE> 20
PRODUCTS AND SERVICES
LSI operates in two business segments, the Lighting Group and the Graphics
Group. The schematic diagram on pages 16 and 17 shows the integration of some of
the Company's lighting and graphics products and illustrates the convenience of
using a single-source supplier.
The following table sets forth net sales and operating income data for the
Company's two business segments for the past three fiscal years and for the
three months ended September 30, 1995.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
---------------------------------
1993 1994 1995 THREE MONTHS ENDED
------- -------- -------- SEPTEMBER 30, 1995
(IN THOUSANDS) -------------------
<S> <C> <C> <C> <C>
NET SALES:
Lighting....................... $41,768 $ 56,159 $ 72,782 $22,531
Graphics....................... 30,795 37,376 47,145 13,351
------- ------- -------- -------
Total.................. $72,563 $ 93,535 $119,927 $35,882
======= ======= ======== =======
OPERATING INCOME:
Lighting....................... $ 1,004 $ 3,684 $ 4,937 $ 1,901
Graphics....................... 1,614 3,456 5,325 1,729
------- ------- -------- -------
Total.................. $ 2,618 $ 7,140 $ 10,262 $ 3,630
======= ======= ======== =======
</TABLE>
LIGHTING
The Company's lighting fixtures, poles and brackets are produced in a
variety of designs, styles and finishes. Important functional variations include
types of mounting, such as pole, bracket and surface, and the nature of the
light requirement, such as down-lighting, wall-wash lighting, flood-lighting,
area lighting and security lighting. The Company's engineering staff conducts
site studies, photometric analyses, and windload safety studies for its
customers and also designs the Company's fixtures and systems. The Company's
lighting products utilize high-intensity lamps, particularly metal-halide. All
of the Company's products are designed for economy and energy efficiency,
reliability, ease of installation and service, as well as attractive appearance.
The Company's Lighting Group, in descending order of contribution to net sales,
consists of:
LSI Lighting Systems
Lighting Systems, founded in 1976, produces a wide range of outdoor
lighting fixtures, poles and brackets. This business unit serves all major
segments of the outdoor lighting market, including petroleum/convenience
stores, automobile dealerships, recreational areas, landscaped areas,
sports facilities, shopping centers, roadways, parking garages, warehouses
and apartment and office complexes.
Abolite Lighting
Abolite, acquired in 1989, produces a select line of indoor and
outdoor lighting products and specializes in designer-type fixtures
focusing on several market areas, including retail/shopping centers, casual
dining restaurants, sports facilities, theme parks, automotive dealerships
(interior) and various specialty commercial and recreational facilities.
Greenlee Lighting Inc.
Greenlee, acquired in 1988, produces specialty outdoor lighting for
commercial and residential landscape and architectural lighting
applications.
LSI Images
Images, established in fiscal 1995, is a manufacturer of menu board
systems. This business unit also markets the LSI family of products, both
lighting and graphics, to the quick service restaurant industry. Images
will focus on both freestanding quick service restaurants and less
traditional locations such as food
19
<PAGE> 21
service areas in petroleum/convenience stores, food courts, retail stores,
airports, and school lunchrooms. Sales of graphics products are reported
with the results of the Graphics Group.
GRAPHICS
The Graphics segment designs, manufactures and sells a variety of interior
and exterior screen printed graphics products used in visual image programs.
LSI's extensive product offering, capability of managing nationwide installation
programs, and lighting and graphics expertise provide significant competitive
advantages. The Company's staff works with corporations and their design firms
to establish and implement cost effective image programs. Increasingly, the
Company is asked to be the primary supplier of exterior and interior graphics
for its clients. The Company's Graphics Group, in descending order of
contribution to net sales, consists of:
SGI Integrated Graphic Systems, Inc.
SGI, acquired in 1989, produces various corporate identity graphic
elements including structural, point of purchase, fleet markings, and decal
graphics. This business unit's major markets are the petroleum/convenience
store, restaurant, and specialty retail markets. SGI also produces
high-tolerance graphics for the electronics and instrumentation industries.
In addition, SGI manages installation programs for its customers by hiring
local and regional contractors.
Insight Graphic Systems
Insight produces illuminated and non-illuminated fascia systems for
the petroleum/convenience store, quick service restaurant and banking
markets.
LIGHTING + GRAPHICS = IMAGE
LSI has been successful in its efforts to market its lighting and graphics
products and services on an integrated basis to customers in the
petroleum/convenience store market. The Company is actively promoting this dual
capability to other national retailers that have multi-site locations and
require a consistent visual image. The Company's unique ability to integrate
lighting and graphics allows it to position itself as a primary supplier of
visual image programs. With LSI's capabilities, a customer can avoid having to
separate its lighting and graphics projects among multiple suppliers.
Consequently, customers can consolidate project coordination with LSI to ensure
proper production, timely delivery of all elements and uniform presentation of
colors, logos and graphics. With the recent opening of the Image Center in
Cincinnati, Ohio, LSI can now offer its customers assistance with all phases of
their nationwide image programs: planning, implementation, installation and
maintenance.
The Image Center, unique within the lighting and graphics industry, is a
facility that can produce a computer-generated "virtual" prototype of a
customer's facility on a large screen through the combination of high tech
computer software with sophisticated audio/visual presentation. With this
system, the customer can instantly explore a wide variety of lighting and
graphics options developing consistent day and nighttime images.
LSI's Image Center gives the customer more options, greater control, and
more effective timing in the development of lighting and graphics solutions, all
with much less expense than traditional prototyping. The Image Center's
comprehensive product display areas, both inside and outside, aid the customer
in making quick and effective lighting and graphic design decisions through
hands-on product demonstration and training.
With the investment in the Image Center, LSI has further enhanced its
position as a highly qualified outsourcing partner capable of guiding a customer
through various image alternatives utilizing the Company's lighting and graphics
products and services. LSI believes this capability distinguishes it from its
competitors and will become increasingly beneficial in attracting customers in
the future.
20
<PAGE> 22
The following table sets forth the Company's principal product categories
sold to representative major markets:
<TABLE>
<CAPTION>
MAJOR MARKETS SERVED
----------------------------------------------------------------------------------------------
PETROLEUM/
CONVENIENCE COMMERCIAL/ AUTOMOTIVE QUICK SERVICE SHOPPING SPECIALTY
PRODUCT CATEGORIES STORE INDUSTRIAL DEALERSHIP RESTAURANT CENTER RETAIL
- ------------------------ -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Site Lighting X X X X X X
- ------------------------------------------------------------------------------------------------------------------
Building Lighting X X X X X X
- ------------------------------------------------------------------------------------------------------------------
Landscape Lighting X X X X X X
- ------------------------------------------------------------------------------------------------------------------
Interior Lighting X X X X X
- ------------------------------------------------------------------------------------------------------------------
Fascia X X X
- ------------------------------------------------------------------------------------------------------------------
Menu Boards X
- ------------------------------------------------------------------------------------------------------------------
Lightboxes X X X X X X
- ------------------------------------------------------------------------------------------------------------------
Decals X X X
- ------------------------------------------------------------------------------------------------------------------
Fleet Markings X
- ------------------------------------------------------------------------------------------------------------------
Point-of-Sale Products X X X
- ------------------------------------------------------------------------------------------------------------------
Structural Graphics X
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
MARKETING AND CUSTOMERS
The Company's lighting products are sold nationwide using a combination of
regional sales managers, manufacturer representatives, and distributors. LSI
utilizes over 450 commissioned manufacturers' representatives employed by
approximately 100 independent sales agencies. Although in some cases the Company
sells directly to national firms, more frequently LSI is designated as a
preferred vendor for product sales to customer-owned as well as franchised,
licensed and dealer operations. The Company's graphics products are sold through
its own sales force and select manufacturer representatives. LSI's marketing
approach and means of distribution vary by product line and by type of market.
Both the Company's regional sales managers and its engineering staff provide
recommendations and full technical support for site studies, photometric
engineering, and windload safety factors.
Sales are developed by contacts with national retail marketers, franchise
and dealer operations. In addition, sales are also achieved through planning
departments, local architects, engineers, petroleum and electrical distributors
and contractors.
Representative customers in each of the Company's primary markets are set
forth in the following table:
<TABLE>
<CAPTION>
PETROLEUM/CONVENIENCE COMMERCIAL/ AUTOMOTIVE
STORE INDUSTRIAL DEALERSHIP
--------------------- ----------- ----------
<S> <C> <C>
Amoco Texaco Chrysler
Arco Celebration Stations Ford
Chevron Disney Pleasure Island General Motors
Circle K Kenosha Dog Track Honda
Clark MGM Studios Nissan
Exxon Paramount Entertainment Saturn
Fina Pittsburgh Airport Toyota
Shell Washington Metro Transit Authority
</TABLE>
<TABLE>
<CAPTION>
QUICK SERVICE SHOPPING SPECIALTY
RESTAURANT CENTER RETAIL
-------------- --------- ---------
<S> <C> <C>
Boston Market Albertson's Ann Taylor
Burger King Best Buy Disney Imaginarium
Long John Silver's Builders Square Frank's Nursery
KFC KMart The Limited
McDonald's Kohl's Tommy Hilfiger
Taco Bell Target Stores Value City
Wendy's Winn Dixie
</TABLE>
21
<PAGE> 23
MANUFACTURING AND PRODUCTION
LSI designs, engineers and manufactures substantially all of its lighting
and graphics products. By emphasizing high-volume production of standard product
lines LSI achieves significant manufacturing efficiencies. When appropriate, the
Company utilizes alliances with vendors to outsource certain products and
assemblies.
LSI Metal Fabrication, acquired in 1994, primarily serves as a support
facility for all of LSI's business units providing a wide range of precision
metal fabrication, metal stamping and powder coat finishing services.
The principal raw materials and purchased components used in manufacturing
the Company's products are steel, aluminum, wire, sockets, lamps, certain
fixture housings, acrylic and glass lenses, lighting ballasts, inks and various
substrates (decal material, vinyls, etc. for graphics). LSI sources these
materials and components from a variety of suppliers. Although an interruption
of these supplies and components could disrupt the Company's operations, LSI
believes that alternative sources of supply exist and could be readily arranged.
LSI strives to reduce price volatility in its purchases of raw materials and
components through quarterly and, in some cases, annual contracts with certain
of its suppliers.
The Company's manufacturing operations are subject to various federal,
state and local regulatory requirements relating to environmental protection and
occupational health and safety. The Company does not expect to incur material
capital expenditures with regard to these matters and believes its facilities
are in compliance with such regulations.
LSI relies on proprietary expertise, trademarks and, to a lesser extent,
patents to protect its rights regarding products, manufacturing processes, and
product development, all of which the Company believes are important to its
competitive position and success. The Company does not have any license
agreements and does not believe that patent protection is critical to the
success of its business.
COMPETITION
The lighting and graphics industries are highly competitive. LSI encounters
strong competition in all markets served by the Company's product lines. The
Company has many competitors, some of which have greater financial and other
resources. LSI considers product quality and performance, price, customer
service, prompt delivery and reputation to be important competitive factors.
EMPLOYEES
The Company has approximately 800 full-time employees, of whom 120 are
sales and marketing, 90 administrative, 40 engineering, and the remainder
manufacturing. In addition, the Company from time-to-time during high production
periods uses a substantial number of temporary employees, which may average as
high as 300, in order to meet customer demand for products. The Company has a
comprehensive compensation and benefit program for employees, including
competitive wages, a discretionary bonus plan, a profit-sharing plan, a
retirement plan, a stock option plan, and medical and dental insurance. None of
the Company's employees are covered by a collective bargaining agreement. LSI
has never experienced any work stoppages or slowdowns and considers its
relationship with its employees to be good.
22
<PAGE> 24
FACILITIES
The Company's facilities are as follows:
<TABLE>
<CAPTION>
DESCRIPTION SQ. FT. LOCATION STATUS
- ---------------------------------------------------------- ------- ----------------- ------
<S> <C> <C> <C>
LSI Corporate Headquarters, and lighting fixture and
graphics manufacturing.................................. 225,000 Cincinnati, OH owned
LSI pole manufacturing and dry powder-coat painting....... 131,000 Cincinnati, OH owned
LSI Metal Fabrication and LSI Images manufacturing and dry
powder-coat painting.................................... 96,000 Independence, KY owned
SGI office, screen printing, manufacturing, and structural
graphics manufacturing.................................. 221,000 Houston, TX leased
Greenlee office and manufacturing......................... 33,000 Dallas, TX leased
-------
Total................................................ 706,000
</TABLE>
LSI considers these facilities adequate for its current level of operations
and does not anticipate any difficulty in locating additional facilities, if
required. The Company has sufficient property contiguous to its current owned
facilities to expand such facilities if required. The Company's equipment
consists primarily of metal-working, metal-treatment, painting and screen
printing equipment.
23
<PAGE> 25
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
directors and executive officers of the Company as of December 14, 1995:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert J. Ready....................... 55 President and Chairman of the Board
James P. Sferra....................... 56 Executive Vice
President - Manufacturing and Director
Donald E. Whipple..................... 59 President, LSI Lighting Systems and
Insight Graphic Systems, Secretary
and Director
John N. Taylor, Jr. .................. 60 Director
Michael J. Burke...................... 52 Director and Assistant Secretary
Allen L. Davis........................ 53 Director
Peter F. Carey........................ 48 President, SGI Integrated Graphic
Systems, Inc.
Ronald S. Stowell..................... 45 Chief Financial Officer and Treasurer
</TABLE>
Mr. Ready is the founder of the Company and has been its President and a
Director since 1976. Mr. Ready was appointed Chairman of the Board of Directors
in February 1985. Mr. Ready is also a Director of Meridian Diagnostics, Inc.
Mr. Sferra shared in the formation of the Company. Mr. Sferra has served as
Corporate Vice President of Manufacturing from November 1989 to November 1992,
and as Executive Vice President - Manufacturing since then. Prior to that, he
served as Vice President - Manufacturing of the LSI Lighting Systems division.
Mr. Sferra has served as a Director since 1976.
Mr. Whipple shared in the formation of the Company. Mr. Whipple has served
as President of LSI Lighting Systems and Insight Graphics since November 1989
and November 1991, respectively. Prior to that, he served as Executive Vice
President of the Company. Mr. Whipple has served as Director and as Secretary
since 1976.
Mr. Taylor was elected a Director of the Company in November 1992. Mr.
Taylor is Chairman and Chief Executive Officer of Kurz-Kasch, Inc., a specialty
manufacturer of plastic-based components, precision solenoids, stators and coil
products, headquartered in Dayton, Ohio. Mr. Taylor is a Director of Robbins &
Myers, Inc.
Mr. Burke was elected a Director and Assistant Secretary of the Company in
February 1985. Mr. Burke is a Managing Partner of the Cincinnati law firm of
Keating, Muething & Klekamp, counsel to the Company, and has been associated
with Keating, Muething & Klekamp since 1968.
Mr. Davis was elected a Director of the Company in February 1985. Mr. Davis
has been the President and Chief Executive Officer, and a Director of Provident
Bancorp, Inc. and The Provident Bank, Cincinnati, Ohio since 1986 and 1984,
respectively.
Mr. Stowell has served as Chief Financial Officer since joining the Company
in December 1992 and was appointed Treasurer in November 1993. Prior to that,
and since 1985, Mr. Stowell served as Corporate Controller of Essef Corporation,
Chardon, Ohio, a manufacturer of high performance composite and engineered
plastics products.
Mr. Carey has been President of SGI Integrated Graphic Systems since
November 1993 and was the Executive Vice President and Chief Operating Officer
from October 1991 to November 1993. From 1990 to September 1991 he was Executive
Vice President of Stout Industries, a screen printer of point-of-purchase signs.
Prior to that he was Vice President of Marketing of PlastiLine, Inc., a
manufacturer of outdoor signs.
None of the officers or directors is related.
24
<PAGE> 26
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth beneficial ownership of LSI Common Shares at
December 14, 1995, and after this Offering by each Selling Shareholder and by
Directors and executive management.
<TABLE>
<CAPTION>
PRIOR TO OFFERING AFTER OFFERING
------------------------------- -------------------------------
COMMON SHARES SHARES TO COMMON SHARES
NAME BENEFICIALLY OWNED PERCENTAGE BE SOLD BENEFICIALLY OWNED PERCENTAGE
---- ------------------ ---------- --------- ------------------ ----------
<S> <C> <C> <C> <C> <C>
Robert J. Ready................... 721,032(1) 9.2% 150,000 571,032(1) 6.4%
James P. Sferra................... 493,945(2) 6.3% 250,000 243,945(2) 2.7%
Donald E. Whipple................. 436,419(3) 5.6% 250,000 186,419(3) 2.1%
John N. Taylor, Jr. .............. 361,450(4) 4.6% 50,000 311,450(4) 3.5%
Michael J. Burke.................. 31,000(5) * -- 31,000(5) *
Allen L. Davis.................... 27,812(6) * -- 27,812(6) *
Peter F. Carey.................... 29,101(7) * -- 29,101(7) *
Ronald S. Stowell................. 12,374(8) * -- 12,374(8) *
--------- ----- ------- --------- ------
All Directors and Executive
Officers as a Group (Eight
Persons)........................ 2,113,133 27.0% 700,000 1,413,133 15.8%
</TABLE>
- ---------------
(1) Includes exercisable options for 79,545 shares and 130,488 shares held in
trust for Mr. Ready's children.
(2) Includes exercisable options for 38,286 shares and 26,931 shares held by Mr.
Sferra's children.
(3) Includes exercisable options for 32,030 shares and 36,155 shares held by Mr.
Whipple's children.
(4) Includes exercisable options for 5,500 shares and indirect beneficial
ownership for Mr. Taylor of 207,900 shares.
(5) Includes exercisable options for Mr. Burke of 16,000 shares.
(6) Includes exercisable options for Mr. Davis of 16,000 shares.
(7) Includes exercisable options for Mr. Carey of 15,789 shares.
(8) Includes exercisable options for Mr. Stowell of 7,874 shares.
* Less than 1%.
DESCRIPTION OF CAPITAL STOCK
The following description is a summary and is qualified in its entirety by
the provisions of the Company's Articles of Incorporation, Code of Regulations
and the Ohio Revised Code.
COMMON SHARES
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 do not
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 declare. 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. 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 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.
25
<PAGE> 27
PREFERRED SHARES
Up to 1,000,000 shares of preferred shares may be issued from time to time
in series having such designated preferences and rights, qualifications, and
limitations as the Board of Directors may determine without any approval of
shareholders. Preferred shares could be given rights which would adversely
affect the equity of holders of Common Shares and could have preferences to
Common Shares with respect to dividend and liquidation rights. The preferred
shares could have the effect of acting as an anti-takeover device to prevent a
change of control of the Company.
PROVISIONS AFFECTING BUSINESS COMBINATIONS
LSI's Articles of Incorporation require approval by 66 2/3% of the voting
power of disinterested shareholders for any business combination between an
interested shareholder and the Company for five years after such party became an
interested shareholder. An interested shareholder is one beneficially owning 15%
or more of the voting power. Business combinations include mergers, sales of
assets and similar transactions. The Articles of Incorporation also require any
person who becomes an interested shareholder to offer to purchase all voting
securities of LSI and securities convertible into or constituting warrants or
options to purchase such securities within 25 days after achieving 15%
ownership. The price to be paid would be the higher of the highest price paid by
the interested shareholder in acquiring such beneficial ownership or the highest
trading price during the 45 day period commencing 70 days prior to the date that
such person became an interested shareholder. These provisions are not
applicable if the proposed business combination is approved prior to its
consummation by a majority of disinterested directors or if the transaction by
which a person becomes an interested shareholder is approved any time prior to
that time by a majority of disinterested directors.
The Company is also subject to Chapter 1704 of the Ohio Revised Code which
prohibits the Company from entering into transactions with persons owning 10% or
more of the outstanding voting power of the Corporation for at least three years
after such person attains such 10% ownership unless the Board of Directors has
approved the acquisitions of shares resulting in such ownership. The Company is
also subject to sec.1701.831 of the Ohio General Corporation Law requiring
shareholder approval of acquisitions by persons beyond 20%, 33 1/3% and 50% of
the voting power of the Company. Ohio Revised Code sec.1707.043 requires a
person or entity making a proposal to acquire the control of the Corporation to
repay to the Company any profits made from trade in the Company's stock within
18 months after making the control proposal.
These provisions of the Company's Articles of Incorporation and Ohio Law
would be important in any attempted takeover of the Company and could operate,
depending on how utilized by the Board of Directors, either to discourage a
hostile takeover or to enable the Board to negotiate a higher price than may be
initially proposed in any such situation.
26
<PAGE> 28
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company and the Selling Shareholders have agreed to sell to each
of the underwriters named below (the "Underwriters"), for whom Robert W. Baird
and Co. Incorporated, A.G. Edwards & Sons, Inc. and The Ohio Company are acting
as representatives (the "Representatives"), and each of the Underwriters has
severally agreed to purchase from the Company and the Selling Shareholders, the
respective number of Common Shares set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS COMMON SHARES
------------ ---------------
<S> <C>
Robert W. Baird & Co. Incorporated...........................
A.G. Edwards & Sons, Inc.....................................
The Ohio Company.............................................
---------
Total...................................................... 1,800,000
=========
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all 1,800,000 Common Shares
offered hereby if any such Common Shares are purchased. In the event of a
default by any Underwriter, the Underwriting Agreement provides that, in certain
circumstances, purchase commitments of the non-defaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
The Company and the Selling Shareholders have been advised by the
Representatives that the several Underwriters propose to offer such Common
Shares to the public at the public offering price set forth on the cover page of
this Prospectus, and to certain dealers at such prices less a concession not in
excess of $ per share. The Underwriters may allow and such dealers may
re-allow a concession not in excess of $ per share to other dealers.
The Company and the Selling Shareholders have granted to the Underwriters
an option, expiring 30 days from the date of this Prospectus, to purchase up to
270,000 additional Common Shares at the price to public less underwriting
discounts and commissions set forth on the cover page of this Prospectus. The
Underwriters may exercise such option solely to cover over-allotments, if any,
made in connection with the sale of Common Shares that the Underwriters have
agreed to purchase. To the extent the Underwriters exercise such option, each of
the Underwriters will have a firm commitment, subject to certain conditions, to
purchase a number of option shares proportionate to such Underwriter's initial
commitment.
The Company and each of its officers and directors have agreed that they
will not sell, without the consent of the Representatives, any Common Shares or
any securities convertible into Common Shares during the 180 days following the
date of this Prospectus, except for the Common Shares offered in this Offering.
The Representatives will not consent to any shortening of such periods unless,
in their judgment, the timing of the sales and the number of Common Shares sold
as a result of any said consent would not have a material adverse effect on the
market for the Common Shares. In such event, such sales would not necessarily be
preceded by a public announcement of the Company or the Representatives that
such consent has been given.
The Underwriting Agreement provides that the Company and the Selling
Shareholders will indemnify the Underwriters against certain liabilities under
the Securities Act of 1933 or contribute to payments the Underwriters may be
required to make in respect thereof.
27
<PAGE> 29
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Keating, Muething & Klekamp, Cincinnati, Ohio. Certain legal matters
in connection with this Offering will be passed upon for the Underwriters by
Taft, Stettinius & Hollister, Cincinnati, Ohio.
EXPERTS
The Consolidated Financial Statements of the Company as of June 30, 1994
and June 30, 1995, and for each of the three years in the period ended June 30,
1995 included in this Prospectus have been so included in reliance upon the
report of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in accounting and auditing.
28
<PAGE> 30
LSI INDUSTRIES INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants.................................................... F-2
Consolidated Balance Sheets at June 30, 1994, June 30, 1995 and September 30, 1995... F-3
Consolidated Income Statements for the years ended June 30, 1993, 1994 and 1995 and
the three month periods ended September 30, 1994 and 1995.......................... F-4
Consolidated Statements of Cash Flows for the years ended June 30, 1993, 1994 and
1995 and the three month periods ended September 30, 1994 and 1995................. F-5
Consolidated Statements of Shareholders' Equity for the years ended June 30, 1993,
1994 and 1995 and the three months ended September 30, 1995........................ F-6
Notes to Consolidated Financial Statements........................................... F-7
</TABLE>
F-1
<PAGE> 31
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
LSI Industries Inc.
In our opinion, the accompanying consolidated balance sheets and related
consolidated statements of income, cash flows and shareholders' equity present
fairly, in all material respects, the financial position of LSI Industries Inc.
and its subsidiaries at June 30, 1994 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1995, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Cincinnati, Ohio
August 18, 1995
F-2
<PAGE> 32
LSI INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30
------------------- SEPTEMBER 30
1994 1995 1995
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash.................................................. $ 1,614 $ 2,124 $ 1,342
Accounts receivable, less allowance for doubtful
accounts of $265, $242, and $246, respectively..... 14,376 19,273 21,661
Inventories........................................... 11,079 18,584 19,275
Refundable income taxes............................... -- 438 --
Other current assets.................................. 1,390 1,397 1,244
------- ------- -------
Total current assets............................... 28,459 41,816 43,522
Property, Plant and Equipment, at cost
Land.................................................. 2,482 2,512 2,512
Buildings............................................. 7,536 8,967 9,859
Machinery and equipment............................... 14,983 16,900 16,946
------- ------- -------
25,001 28,379 29,317
Less accumulated depreciation......................... (8,550) (8,981) (9,517)
------- ------- -------
Net property, plant and equipment..................... 16,451 19,398 19,800
Goodwill................................................ 1,377 1,339 1,330
------- ------- -------
$46,287 $62,553 $64,652
======= ======= =======
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable to banks................................ $ -- $ -- $ 1,500
Current maturities of long-term debt.................. 265 842 843
Accounts payable...................................... 7,958 10,641 11,881
Accrued expenses...................................... 9,013 12,545 10,825
------- ------- -------
Total current liabilities.......................... 17,236 24,028 25,049
Long-Term Debt.......................................... 3,335 7,257 7,060
Other Long-Term Liabilities............................. 460 380 --
Deferred Income Taxes................................... 1,275 1,435 1,455
Shareholders' Equity
Preferred shares, without par value; authorized
1,000,000 shares, none issued...................... -- -- --
Common shares, without par value; authorized
13,000,000 shares; outstanding 7,466,951, 7,554,229
and 7,613,776 shares, respectively, including the
effect of a three-for-two stock split
(see Note 6)....................................... 7,539 7,915 8,040
Retained earnings..................................... 16,442 21,538 23,048
------- ------- -------
Total shareholders' equity......................... 23,981 29,453 31,088
------- ------- -------
$46,287 $62,553 $64,652
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 33
LSI INDUSTRIES INC.
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED JUNE 30 SEPTEMBER 30
-------------------------------- -------------------
1993 1994 1995 1994 1995
------- ------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.............................. $72,563 $93,535 $119,927 $29,320 $35,882
Cost of products sold.................. 49,789 62,430 80,156 19,462 23,940
------- ------- -------- ------- -------
Gross profit......................... 22,774 31,105 39,771 9,858 11,942
Selling and administrative expenses.... 20,156 23,965 29,509 6,905 8,312
------- ------- -------- ------- -------
Operating income..................... 2,618 7,140 10,262 2,953 3,630
Interest expense....................... 503 199 459 64 143
Other (income) expense................. (481) 290 160 9 5
------- ------- -------- ------- -------
Income before income taxes........... 2,596 6,651 9,643 2,880 3,482
Income tax expense..................... 927 2,461 3,469 1,031 1,288
------- ------- -------- ------- -------
Net income........................... $ 1,669 $ 4,190 $ 6,174 $ 1,849 $ 2,194
======= ======= ======== ======= =======
Net income per share................... $ .23 $ .55 $ .79 $ .24 $ .28
Average shares outstanding............. 7,385 7,656 7,802 7,748 7,961
(see Note 6)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 34
LSI INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED JUNE 30 ENDED SEPTEMBER 30
------------------------------- -------------------
1993 1994 1995 1994 1995
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................. $ 1,669 $ 4,190 $ 6,174 $ 1,849 $ 2,194
Non-cash items included in income
Depreciation and amortization....... 1,731 1,794 2,074 457 567
Deferred income taxes............... 691 (234) 85 54 20
Loss (gain) on disposition of fixed
assets............................ -- 250 122 -- (4)
Change in
Accounts receivable................. (672) (2,744) (4,897) (3,196) (2,388)
Inventories......................... 44 (3,481) (7,505) (1,772) (691)
Refundable income taxes............. 2,228 134 (438) -- 438
Accounts payable.................... 208 2,087 2,683 2,212 1,240
Accrued expenses and other.......... (58) 5,833 3,590 (2,508) (1,895)
Net cash used by discontinued
operations
Other changes in net assets....... (1,232) (245) (70) (26) (52)
------- ------- ------- ------- -------
Net cash flows from operating
activities................... 4,609 7,584 1,818 (2,930) (571)
------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, and
equipment........................... (1,253) (4,609) (5,117) (777) (960)
Proceeds from sale of fixed assets..... -- 13 12 -- 4
------- ------- ------- ------- -------
Net cash flows from investing
activities................... (1,253) (4,596) (5,105) (777) (956)
------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in lines of
credit.............................. (1,458) (1,312) -- 375 1,500
Payment of long-term debt.............. (1,727) (3,957) (451) (29) (196)
Increase in long-term debt............. -- 3,600 4,950 2,500 --
Cash dividends paid.................... (234) (234) (1,078) (476) (684)
Exercise of stock options.............. -- 370 376 100 125
------- ------- ------- ------- -------
Net cash flows from financing
activities................... (3,419) (1,533) 3,797 2,470 745
------- ------- ------- ------- -------
Increase (decrease) in cash.............. (63) 1,455 510 (1,237) (782)
Cash at beginning of period.............. 222 159 1,614 1,614 2,124
------- ------- ------- ------- -------
Cash at end of period.................... $ 159 $ 1,614 $ 2,124 $ 377 $ 1,342
======= ======= ======= ======= =======
Supplemental cash flow information
Interest paid.......................... $ 540 $ 210 $ 438 $ 70 $ 171
Income taxes paid (refunded), net...... $(2,010) $ 204 $ 5,831 $ 2,446 $ 74
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 35
LSI INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON SHARES
--------------------
NUMBER OF RETAINED
SHARES AMOUNT EARNINGS TOTAL
--------- ------ --------- -------
<S> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1992...................... 7,367 $7,169 $11,051 $18,220
Net income.................................. -- -- 1,669 1,669
Dividend -- $.03 per share.................. -- -- (234) (234)
--------- ------ --------- -------
BALANCE AT JUNE 30, 1993...................... 7,367 7,169 12,486 19,655
Net income.................................. -- -- 4,190 4,190
Stock options exercised..................... 100 370 -- 370
Dividend -- $.03 per share.................. -- -- (234) (234)
--------- ------ --------- -------
BALANCE AT JUNE 30, 1994...................... 7,467 7,539 16,442 23,981
Net income.................................. -- -- 6,174 6,174
Stock options exercised..................... 87 376 -- 376
Dividends -- $.15 per share................. -- -- (1,078) (1,078)
--------- ------ --------- -------
BALANCE AT JUNE 30, 1995...................... 7,554 7,915 21,538 29,453
Net income (a).............................. -- -- 2,194 2,194
Stock options exercised (a)................. 60 125 -- 125
Dividends -- $.09 per share (a)............. -- -- (684) (684)
--------- ------ --------- -------
BALANCE AT SEPTEMBER 30, 1995 (a)............. 7,614 $8,040 $23,048 $31,088
========== ======= ========= =======
</TABLE>
- ---------------
(a) Unaudited information
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 36
LSI INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION:
The consolidated financial statements include the accounts of LSI
Industries Inc. and its subsidiaries, all of which are wholly owned. All
significant intercompany transactions have been eliminated.
RECLASSIFICATION:
Certain reclassifications have been made to prior year amounts in order to
be consistent with the presentation for the current year.
REVENUE RECOGNITION:
Revenue is recognized when the customer accepts title and the resultant
risks and rewards of ownership. Generally this occurs upon shipment of goods or
shortly thereafter. Amounts received from customers prior to the recognition of
revenue are accounted for as customer prepayments.
CASH:
The cash balance includes cash and cash equivalents which have maturities
of less than three months.
INVENTORIES:
Inventories are stated at the lower of cost or market. Cost is determined
on the first-in, first-out basis.
PROPERTY, PLANT AND EQUIPMENT AND RELATED DEPRECIATION:
Property, plant and equipment are stated at cost. Major additions and
betterments are capitalized while maintenance and repairs are expensed. For
financial reporting purposes, depreciation is computed on the straight-line
method over the estimated useful lives of the assets.
GOODWILL:
The excess of cost over fair value of assets acquired ("goodwill") is
amortized over a forty year period. As of June 30, 1994 and 1995, accumulated
amortization of goodwill was $210,000 and $248,000, respectively. The Company
periodically evaluates goodwill and other long-lived assets for permanent
impairment based upon anticipated cash flows. To date no impairments have been
recorded, nor are any anticipated.
EMPLOYEE BENEFIT PLANS:
The Company has a defined contribution retirement plan and a discretionary
profit sharing plan covering substantially all of its employees. The costs of
employee benefit plans are charged to expense and funded annually. Total costs
relating to continuing operations were $567,000 in 1993, $942,000 in 1994 and
$1,004,000 in 1995.
INCOME TAXES:
Deferred income taxes are provided on items reported in income in different
periods for financial reporting and tax purposes.
NET INCOME PER COMMON SHARE:
The computation of net income per common share is based on the weighted
average common shares outstanding for the period, including common share
equivalents (dilutive stock options). Dilutive stock options amounted to 18,000
shares in 1993, 236,000 shares in 1994 and 287,000 shares in 1995. See also Note
6.
F-7
<PAGE> 37
UNAUDITED INTERIM FINANCIAL INFORMATION:
The interim financial information for the three month periods ended
September 30, 1994 and 1995 and as of September 30, 1995 and subsequent thereto
are unaudited. In the opinion of management, the accompanying interim financial
information has been prepared on a basis consistent with the audited financial
statements and include all adjustments, consisting of only normal, recurring
adjustments, necessary to present fairly the Company's financial position and
results of operations for the periods then ended.
NOTE 2 -- DISCONTINUED OPERATIONS
In 1992 the Company sold the assets and operations of its U.K. subsidiary,
Duramark, to its management and reported a loss from discontinued operations.
Consideration received included cash, assumption of liabilities by management,
and rights to a percentage of future profits of the operation earned on or
before May 31, 1996 (to which no value was assigned). The maximum amount
receivable is not material, is subject to a time limit, and realizability is
believed not to be certain.
The remaining liabilities which were not assumed by the management buy-out
group of the discontinued operations, net of related taxes, have been classified
in the consolidated balance sheets as follows:
<TABLE>
<CAPTION>
JUNE 30 JUNE 30
1994 1995
------- -------
<S> <C> <C>
(in thousands)
Accrued expenses........................................... $ 396 $ 429
Other long-term liabilities................................ 460 380
------- -------
Total................................................. $ 856 $ 809
======= =======
</TABLE>
NOTE 3 -- BUSINESS SEGMENT INFORMATION
LSI operates in two business segments -- Lighting and Graphics. The
Lighting segment manufactures and sells outdoor, indoor and landscape lighting
fixtures as well as menu boards and light boxes to the petroleum/convenience
store, multi-site retail and commercial/industrial markets. The Lighting segment
includes the operations of LSI Lighting Systems, Abolite Lighting, Greenlee
Lighting, LSI Images, and LSI Metal Fabrication. The Graphics segment
manufactures and sells screen printed materials and architectural graphic
structures for the petroleum/convenience store and multi-site retail markets.
The Graphics segment includes the operations of SGI and Insight Graphics.
F-8
<PAGE> 38
The following information is provided for the following periods:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
NET SALES:
Lighting................................................... $41,768 $56,159 $ 72,782
Graphics................................................... 30,795 37,376 47,145
------- ------- --------
$72,563 $93,535 $119,927
======= ======= ========
OPERATING INCOME:
Lighting................................................... $ 1,004 $ 3,684 $ 4,937
Graphics................................................... 1,614 3,456 5,325
------- ------- --------
$ 2,618 $ 7,140 $ 10,262
======= ======= ========
IDENTIFIABLE ASSETS:
Lighting................................................... $23,465 $29,912 $ 36,433
Graphics................................................... 12,447 14,523 23,280
------- ------- --------
35,912 44,435 59,713
Corporate.................................................. 2,139 1,852 2,840
------- ------- --------
$38,051 $46,287 $ 62,553
======= ======= ========
CAPITAL EXPENDITURES:
Lighting................................................... $ 904 $ 3,747 $ 3,814
Graphics................................................... 349 862 1,303
------- ------- --------
$ 1,253 $ 4,609 $ 5,117
======= ======= ========
DEPRECIATION AND AMORTIZATION:
Lighting................................................... $ 1,103 $ 1,133 $ 1,404
Graphics................................................... 628 661 670
------- ------- --------
$ 1,731 $ 1,794 $ 2,074
======= ======= ========
</TABLE>
Operating income of the business segments includes sales less all operating
expenses including allocations of corporate expense, but excluding interest
expense. Sales between business segments are immaterial.
Identifiable assets are those assets used by each segment in its
operations, including allocations of shared assets. Corporate assets consist
primarily of cash, and refundable income taxes and, in fiscal 1993, a net
receivable related to an asset that had been held for sale.
NOTE 4 -- BALANCE SHEET DATA
<TABLE>
<CAPTION>
JUNE 30 SEPTEMBER 30
------------------- -----------
(in thousands) 1994 1995 1995
------- ------- -------
(unaudited)
<S> <C> <C> <C>
INVENTORIES:
Raw materials.................................... $ 5,926 $ 9,821 $ 10,093
Work-in-process and finished goods............... 5,153 8,763 9,182
------- ------- --------
$11,079 $18,584 $ 19,275
======= ======= ========
ACCRUED EXPENSES:
Compensation and benefits........................ $ 3,447 $ 4,070 $ 2,849
Accrued income taxes............................. $ 2,490 $ 360 $ 1,120
Customer prepayments............................. $ 593 $ 5,648 $ 4,433
</TABLE>
F-9
<PAGE> 39
NOTE 5 -- REVOLVING LINES OF CREDIT AND LONG-TERM DEBT
The Company has lines of credit with its banks in the aggregate amount of
$13,000,000, all of which is available at June 30, 1995. These revolving lines
of credit are unsecured and expire in fiscal year 1996. The Company has a
$6,700,000 term loan agreement with one of its banks and as of June 30, 1995,
$6,365,000 is outstanding. Equal quarterly principal payments, plus interest,
continue through December 2004. The term loan is secured by the Company's Ohio
real estate and selected equipment, with a total net carrying value of $11.3
million. Interest on the revolving lines of credit and the term loan is charged
based upon a 1.0 and a 1.25 percentage point increment, respectively, over the
LIBOR rate as periodically determined, or at the banks' base lending rate, at
the Company's option. Under terms of these agreements, the Company has agreed to
maintain minimum levels of profitability and net worth, and is subject to
certain maximum levels of leverage.
In February 1995 the Company completed an Industrial Revenue Development
Bond (IRB) borrowing in the amount of $1,250,000 associated with its facility in
Northern Kentucky. The term of this IRB is 15 years with semi-annual interest
payments and annual principal payments for retirement of bond principal in
increasing amounts over the term of the bonds. The IRB interest rate is
re-established semi-annually and is currently 6.15%, including a letter of
credit fee. The IRB is secured by the Company's Kentucky real estate, which has
a net carrying value of $1.2 million.
The Company has equipment loans outstanding totaling $484,000 with two
governmental agencies in Kentucky. The loans are for terms of five years at a
weighted average interest rate of 2.2% and are secured by the Company's Kentucky
equipment which has a net carrying value of $1.3 million. The Company makes
quarterly principal and interest payments of $32,000 through June 1999 and has
committed to specified job growth in its Kentucky facility.
<TABLE>
<CAPTION>
JUNE 30
-----------------
(in thousands) 1994 1995
------ ------
<S> <C> <C>
LONG-TERM DEBT:
Term loan at 7.25%............................................. $3,000 $6,365
Industrial Revenue Development Bond at 6.15%................... -- 1,250
Equipment loans (average rate of 2.2%)......................... 600 484
------ ------
3,600 8,099
Less current maturities........................................ 265 842
------ ------
$3,335 $7,257
====== ======
</TABLE>
Future maturities of long-term debt at June 30, 1995 are as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 2001 AND AFTER
----- ----- ----- ----- ----- --------------
<S> <C> <C> <C> <C> <C>
$842 $850 $858 $860 $740 $3,949
</TABLE>
NOTE 6 -- SHAREHOLDERS' EQUITY
The Company has stock option plans which cover all of its full-time
employees and has a plan covering all non-employee directors. The stock option
plan for directors and a new plan for employees were adopted by the Board of
Directors in May 1995, subject to shareholder approval in November 1995. The
options granted pursuant to these plans are granted at fair market value at date
of grant and generally become exercisable 25% per year (cumulative) beginning
one year after the date of grant at the fair market value of the Common Shares
at the date of grant. The number of shares reserved for issuance is 982,800, of
which 491,000 shares are available for future grant as of June 30, 1995. The
plan allows for the grant of both incentive stock options and non-qualified
stock options.
F-10
<PAGE> 40
<TABLE>
<CAPTION>
SHARES AVERAGE
(IN THOUSANDS) PRICE
-------------- -------
<S> <C> <C>
OPTIONS OUTSTANDING AT JUNE 30, 1992...................... 450 $3.36
Options granted......................................... 113 2.23
Options terminated...................................... (50) 3.45
------
OPTIONS OUTSTANDING AT JUNE 30, 1993...................... 513 3.13
Options granted......................................... 182 4.58
Options terminated...................................... (34) 3.37
Options exercised....................................... (107) 3.28
------
OPTIONS OUTSTANDING AT JUNE 30, 1994...................... 554 3.56
Options granted......................................... 42 9.71
Options terminated...................................... (12) 3.37
Options exercised....................................... (92) 3.37
------
OPTIONS OUTSTANDING AT JUNE 30, 1995...................... 492 $4.13
======
</TABLE>
At June 30, 1995, there were 281,000 options exercisable at an average
price of $4.22 per share.
On August 18, 1995, the Board of Directors declared a regular quarterly
dividend of $.04 per share and a special $.05 per share cash dividend to be paid
September 22, 1995 to shareholders of record on September 11, 1995. Earnings per
share and common shares outstanding for all periods reflect a three-for-two
stock split effective August 4, 1995. Annual cash dividend payments made during
fiscal years 1993, 1994 and 1995 were $.03, $.03, and $.15, respectively.
NOTE 7 -- SALES TO MAJOR CUSTOMERS
The Company made sales in both the Lighting and Graphics segments to a
major customer which exceeded 10% of consolidated net sales. Sales to Chevron
U.S.A. represented 14% of consolidated net sales in 1995 and 13% in both 1994
and 1993.
NOTE 8 -- LEASES
The Company leases certain of its facilities and equipment under operating
lease arrangements. Rental expense was $788,000 in 1993, $846,000 in 1994, and
$835,000 in 1995. Minimum annual rental commitments under non-cancelable
operating leases are: $654,000 in 1996; $605,000 in 1997; $541,000 in 1998; and
$352,000 in 1999.
F-11
<PAGE> 41
NOTE 9 -- INCOME TAXES
The following information is provided for the years ended June 30:
<TABLE>
<CAPTION>
1993 1994 1995
---- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
PROVISION (BENEFIT) FOR INCOME TAXES:
Current federal.................................................. $143 $2,582 $3,179
Current state and local.......................................... 93 113 205
Deferred......................................................... 691 (234) 85
---- ------ ------
$927 $2,461 $3,469
==== ====== ======
DEFERRED INCOME TAX COMPONENTS:
Depreciation..................................................... $112 $ (691) $ 160
Accrued and prepaid expenses..................................... 74 (21) (75)
Alternative minimum tax credit carry forward..................... -- 283 --
Restructuring charges............................................ 305 195 --
Reserve established for sale of asset............................ 200 -- --
---- ------ ------
$691 $ (234) $ 85
==== ====== ======
RECONCILIATION TO FEDERAL STATUTORY RATE:
Federal statutory tax rate....................................... 34.0% 34.0% 34.0%
State and local taxes............................................ 2.4 1.1 1.4
Goodwill and other............................................... (0.7) 1.9 .6
---- ------ ------
Effective tax rate............................................... 35.7% 37.0% 36.0%
==== ====== ======
</TABLE>
The components of deferred income tax assets and liabilities at June 30,
1994 and 1995 are as follows:
<TABLE>
<CAPTION>
1994 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Current assets (liabilities):
Reserves against current assets.................................. $ 194 $ 269
Prepaid expenses................................................. (226) (106)
Accrued expenses................................................. 493 373
------ ------
Deferred income tax asset included in Other Current Assets on the
Consolidated Balance Sheets...................................... $ 461 $ 536
====== ======
Noncurrent liabilities:
Depreciation..................................................... $1,275 $1,435
------ ------
Deferred income tax liabilities as reported on the Consolidated
Balance Sheets................................................... $1,275 $1,435
====== ======
</TABLE>
The Internal Revenue Service (IRS) has completed its audit of the Company's
1989 through 1992 federal income tax returns. In October 1994, the IRS proposed
audit adjustments which would result in a return of approximately $2 million of
income taxes (plus interest) which had been refunded to the Company with the
filing of its 1992 income tax return. The IRS has questioned the tax treatment
of the loss associated with the discontinued operations, specifically as to
whether it should receive ordinary loss or capital loss treatment. The Company
vigorously protested these adjustments and filed a final protest with the IRS
Appeals Division.
(Unaudited information):
The Company's settlement discussions with the IRS Appeals Division relating
to the proposed audit assessment were concluded in December 1995. An agreement
was reached that will re-characterize a portion
F-12
<PAGE> 42
of the 1992 loss associated with discontinued European operations as a long term
capital loss. The agreement will result in payment of approximately $1.7 million
(composed of taxes and interest), and in a charge to discontinued operations of
approximately $1.5 million to increase the Company's reserve for remaining
liabilities associated with the discontinued operations. During the quarter
ending December 31, 1995, the Company exhausted all alternatives to mitigate
this issue and will record the $1.5 million additional reserve for discontinued
operations in the second quarter of fiscal 1996.
NOTE 10 -- SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------ FISCAL
SEPT. 30 DEC. 31 MARCH 31 JUNE 30 YEAR
-------- ------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1994
Net sales............................... $23,571 $25,312 $20,273 $24,379 $ 93,535
Gross profit............................ 8,169 8,764 6,325 7,847 31,105
Net income.............................. 1,317 1,403 453 1,017 4,190
Earnings per share........................ $ .18 $ .18 $ .06 $ .13 $ .55
Range of share prices
High.................................... $ 4.50 $ 7.09 $ 7.83 $ 7.67
Low..................................... $ 3.25 $ 4.59 $ 6.33 $ 6.00
1995
Net sales............................... $29,320 $32,364 $26,920 $31,323 $119,927
Gross profit............................ 9,858 11,174 8,570 10,169 39,771
Net income.............................. 1,849 2,159 749 1,417 6,174
Earnings per share........................ $ .24 $ .28 $ .10 $ .18 $ .79(a)
Range of share prices
High.................................... $ 8.33 $ 8.00 $ 9.67 $12.92
Low..................................... $ 6.67 $ 6.67 $ 7.33 $ 9.33
</TABLE>
- ---------------
(a) The total of the earnings per share for each of the four quarters does not
equal the total earnings per share for the full year because the
calculations are based on the average shares outstanding during each of the
individual periods.
F-13
<PAGE> 43
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 44
[INSERT PHOTOS]
The inside back cover depicts pictures of the Company's products including
pictures of the exterior lighting of restaurants, site lighting at a shopping
center and exterior lighting at an entertainment theme park.
<PAGE> 45
===============================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED IN CONNECTION
WITH THE OFFER MADE BY THIS PROSPECTUS TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY SELLING SHAREHOLDERS OR BY ANY OF THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................... 4
Risk Factors.......................... 6
The Company........................... 7
Use of Proceeds....................... 8
Capitalization........................ 8
Dividend Policy....................... 9
Price Range of Common Shares.......... 9
Selected Consolidated Financial
Information......................... 10
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 11
Business.............................. 15
Executive Officers and Directors...... 24
Principal and Selling Shareholders.... 25
Description of Capital Stock.......... 25
Underwriting.......................... 27
Legal Matters......................... 28
Experts............................... 28
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
================================================================================
1,800,000 SHARES
COMMON SHARES
-------------------------
P R O S P E C T U S
-------------------------
ROBERT W. BAIRD & CO.
INCORPORATED
A.G. EDWARDS & SONS, INC.
THE OHIO COMPANY
, 1996
================================================================================
<PAGE> 46
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with the offering
described in this Registration Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee*.............. $9,854.00
National Association of Securities Dealers, Inc. filing fee*...... 3,357.50
Accounting fees and expenses...................................... **
Legal fees and expenses........................................... **
Blue Sky fees and expenses........................................ **
Printing and engraving expenses................................... **
Marketing expenses................................................ **
Miscellaneous..................................................... **
---------
TOTAL................................................... $ **
========
</TABLE>
- ---------------
* Actual; other expenses are estimated.
** To be completed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Ohio Revised Code, Section 1701.13(E), allows indemnification by the
Registrant to any person made or threatened to be made a party to any
proceedings, other than a proceeding by or in the right of the Registrant, by
reason of the fact that he is or was a director, officer, employee or agent of
the Registrant, against expenses, including judgment and fines, if he acted in
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the Registrant and, with respect to criminal actions, in which
he had no reasonable cause to believe that his conduct was unlawful. Similar
provisions apply to actions brought by or in the right of the Registrant, except
that no indemnification shall be made in such cases when the person shall have
been adjudged to be liable for negligence or misconduct to the Registrant unless
deemed otherwise by the court. Indemnification is to be made by a majority vote
of a quorum of disinterested directors or the written opinion of independent
counsel or by the shareholders or by the court. The Registrant's Code of
Regulations extends such indemnification.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C> <C>
1 -- Form of Proposed Underwriting Agreement
3.1 -- Articles of Incorporation, as amended
3.2 -- Code of Regulations
5 -- Opinion of Keating, Muething & Klekamp as to legality of the Common Shares
23.1 -- Consent of Independent Accountants
23.2 -- Consent of Keating, Muething & Klekamp (contained on Exhibit 5)
24 -- Powers of Attorney (contained on the signature page)
</TABLE>
II-1
<PAGE> 47
ITEM 17. UNDERTAKINGS.
(a) 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
Securities Act of 1933 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
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(b) The Registrant hereby undertakes that, 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 Exchange Act
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) 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.
(c) The 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
the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act of 1933 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-2
<PAGE> 48
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has fully caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Cincinnati, State of Ohio, as of the 14th day of
December, 1995.
LSI INDUSTRIES INC.
By: Robert J. Ready
--------------------------------
Robert J. Ready
Chairman of the Board
and President
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. The persons whose names are marked an
asterisk (*) below hereby designate Ronald S. Stowell or Michael J. Burke to
sign all amendments, including post effective amendments to this Registration
Statement.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
*Robert J. Ready Chairman of the Board December 14, 1995
- ------------------------------------- and President (Principal
Robert J. Ready Executive Officer)
*Ronald S. Stowell Chief Financial Officer December 14, 1995
- ------------------------------------- and Treasurer (Principal Financial
Ronald S. Stowell Officer and Principal Accounting
Officer)
*Michael J. Burke Assistant Secretary and Director December 14, 1995
- -------------------------------------
Michael J. Burke
*Allen L. Davis Director December 14, 1995
- -------------------------------------
Allen L. Davis
*James P. Sferra Executive Vice President -- December 14, 1995
- ------------------------------------- Manufacturing, and Director
James P. Sferra
*John N. Taylor, Jr. Director December 14, 1995
- -------------------------------------
John N. Taylor, Jr.
*Donald E. Whipple President LSI Lighting Systems, December 14, 1995
- ------------------------------------- Secretary, and Director
Donald E. Whipple
</TABLE>
II-3
<PAGE> 1
TS&H Draft 12/14/95
LSI INDUSTRIES INC.
1,800,000 Common Shares*
UNDERWRITING AGREEMENT
___________________, 199__
ROBERT W. BAIRD & CO. INCORPORATED
A.G. EDWARDS & SONS, INC.
THE OHIO COMPANY
As Representatives of the Several Underwriters
Identified in Schedule II Annexed Hereto
c/o Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Ladies and Gentlemen:
SECTION 1. INTRODUCTORY. LSI Industries Inc., an Ohio
corporation (the "Company"), and the several shareholders of the Company
identified in Schedule I annexed hereto (the "Selling Shareholders") propose to
sell 1,800,000 shares (the "Firm Shares") of common shares, without par value
(the "Common Shares"), to the several underwriters identified in Schedule II
annexed hereto (the "Underwriters"), who are acting severally and not jointly.
In addition, the Company and the Selling Shareholders have agreed to grant to
the Underwriters an option to purchase up to 270,000 additional Common Shares
(the "Optional Shares") as provided in section 6 hereof. The Firm Shares and,
to the extent such option is exercised, the Optional Shares are hereinafter
collectively referred to as the "Shares."
You, as representatives of the Underwriters (the
"Representatives"), have advised the Company and the Selling Shareholders that
the Underwriters propose to make a public offering of their respective portions
of the Shares as soon hereafter as in your judgment is advisable and that the
public offering price of the Shares initially will be [$_____] per share.
The Company and the Selling Shareholders hereby confirm their
respective agreements with the Underwriters and each other as follows:
__________________________________
* Plus an option to acquire up to 270,000 additional Common Shares from
the Company and the Selling Shareholders to cover over-allotments.
<PAGE> 2
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE PRINCIPAL SHAREHOLDERS. The Company and each of Robert J. Ready, James P.
Sferra, Donald E. Whipple and John N. Taylor, Jr. (together, the "Principal
Shareholders"), jointly and severally, represent and warrant to, and agree
with, the several Underwriters, and shall be deemed to represent and warrant to
the several Underwriters on each Closing Date (as hereinafter defined), that:
(a) Each of the Company and the subsidiaries of the
Company that are listed on Exhibit 21.1 of the Company's most recent
Annual Report on Form 10-K incorporated by reference into the
Registration Statement (as hereinafter defined) (individually, a
"Subsidiary" and collectively, the "Subsidiaries") has been duly
incorporated and is validly existing as a corporation and in good
standing under the laws of its jurisdiction of incorporation, with
full corporate power and authority to own, lease and operate its
properties and to conduct its business as presently conducted and
described in the Prospectus (as hereinafter defined) and the
Registration Statement; each of the Company and the Subsidiaries is
duly registered and qualified to do business as a foreign corporation
under the laws of, and is in good standing as such in, each
jurisdiction in which such registration or qualification is required,
except where the failure to so register or qualify would not have a
material adverse effect on the condition (financial or other),
business, property, net worth, results of operations or prospects of
the Company and the Subsidiaries, taken as a whole ("Material Adverse
Effect"); 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. Complete
and correct copies of the articles of incorporation and code of
regulations, as amended or restated ("Articles of Incorporation" and
"Regulations," respectively), of the Company and each of the
Subsidiaries as in effect on the date hereof have been delivered to
the Representatives, and no changes thereto will be made on or
subsequent to the date hereof and prior to each Closing Date.
(b) The Common Shares issued and outstanding immediately
prior to the issuance and sale of the Shares to be sold by the Company
hereunder as set forth in the Prospectus have been duly authorized and
validly issued, are fully paid and nonassessable and conform to the
description thereof contained in the Prospectus and the Registration
Statement. There are no preemptive, preferential or, except as
described in the Prospectus, other rights to subscribe for or purchase
any Common Shares (including the Shares), and no Common Shares have
been issued in violation of such rights. The Shares to be issued and
sold by the Company to the Underwriters have been duly authorized and,
when issued, delivered and paid for pursuant to this Agreement, will
be validly issued, fully paid and nonassessable and will conform to
the description thereof contained in the Prospectus and the
Registration Statement. The delivery of certificates for the Shares
to be issued and sold by the Company hereunder and payment therefor
pursuant to the terms of this Agreement will pass valid title to such
Shares to the Underwriters, free and clear of any lien, claim,
encumbrance or defect in title. Except as described in the
Prospectus, there are no outstanding options, warrants or other rights
of any description, contractual or otherwise, entitling any person to
be issued any class of security by the Company or any Subsidiary, and
there are no holders of Common
-2-
<PAGE> 3
Shares or other securities of the Company or any Subsidiary, or of
securities that are convertible or exchangeable into Common Shares or
other securities of the Company or any Subsidiary, that have rights to
the registration of such Common Shares or securities under the
Securities Act of 1933, as amended, and the regulations thereunder
(together, the "Act") or the securities laws or regulations of any of
the states (the "Blue Sky Laws").
(c) Except for the Subsidiaries, and as otherwise set
forth in the Prospectus, the Company has no subsidiaries and does not
own any equity interest in or control, directly or indirectly, any
other corporation, limited liability company, partnership, joint
venture, association, trust or other business organization. The
Company owns directly all of the issued and outstanding capital stock
of each Subsidiary, free and clear of any and all liens, claims,
encumbrances or security interests, and all such capital stock has
been duly authorized and validly issued and is fully paid and
nonassessable. There are no outstanding options, warrants or other
rights of any description, contractual or otherwise, entitling any
person to subscribe for or purchase any shares of capital stock of any
Subsidiary.
(d) The Company has full corporate power and authority to
enter into and perform this Agreement, and the execution and delivery
by the Company of this Agreement and the performance by the Company of
its obligations hereunder and the consummation of the transactions
described herein, have been duly authorized with respect to the
Company by all necessary corporate action and will not: (i) violate
any provisions of the Articles of Incorporation or Code of Regulations
of the Company or any Subsidiary; (ii) violate any provisions of, or
result in the breach, modification or termination of, or constitute a
default under, any provision of any agreement, lease, franchise,
license, indenture, permit, mortgage, deed of trust, evidence of
indebtedness or other instrument to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary, or
any property owned or leased by the Company or any Subsidiary, may be
bound or affected; (iii) violate any statute, ordinance, rule or
regulation applicable to the Company or any Subsidiary, or order or
decree of any court, regulatory or governmental body, arbitrator,
administrative agency or instrumentality of the United States or other
country or jurisdiction having jurisdiction over the Company or any
Subsidiary; or (iv) result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or
any Subsidiary. No consent, approval, authorization or other order of
any court, regulatory or governmental body, arbitrator, administrative
agency or instrumentality of the United States or other country or
jurisdiction is required for the execution and delivery of this
Agreement by the Company, the performance of its obligations hereunder
or the consummation of the transactions contemplated hereby, except
for compliance with the Act, the Securities Exchange Act of 1934, as
amended, and the regulations thereunder (together, the "Exchange
Act"), the Blue Sky Laws applicable to the public offering of the
Shares by the several Underwriters and the clearance of such offering
and the underwriting arrangements evidenced hereby with the National
Association of Securities Dealers, Inc. (the "NASD"). This Agreement
has been duly executed and delivered by and on behalf of the
-3-
<PAGE> 4
Company and is a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms.
(e) A registration statement on Form S-3 (Reg. No.
33-_______) with respect to the Shares, including a preliminary form
of prospectus, has been prepared by the Company in conformity with the
requirements of the Act and has been filed with the Securities and
Exchange Commission (the "Commission"). The conditions for use of
Form S-3, set forth in the General Instructions thereto, have been
satisfied. Such registration statement, as finally amended and
revised at the time such registration statement was or is declared
effective by the Commission (including the information contained in
the form of final prospectus, if any, filed with the Commission
pursuant to Rule 424(b) and Rule 430A under the Act and deemed to be
part of the registration statement if the registration statement has
been declared effective pursuant to Rule 430A(b)) and as thereafter
amended by post-effective amendment, if any, is herein referred to as
the "Registration Statement." The related final prospectus in the
form first filed with the Commission pursuant to Rule 424(b) or, if no
such filing is required, as included in the Registration Statement, or
any supplement thereto, is herein referred to as the "Prospectus."
The prospectus subject to completion in the form included in the
Registration Statement at the time of the initial filing of the
Registration Statement with the Commission, and each such prospectus
as amended from time to time until the date of the Prospectus, is
referred to herein as the "Preliminary Prospectus." Reference made
herein to each Preliminary Prospectus or the Prospectus, as amended or
supplemented, shall include all documents and information incorporated
by reference therein and shall be deemed to refer to and include any
documents filed after the date of such Preliminary Prospectus or
Prospectus, as the case may be, and so incorporated by reference,
under the Exchange Act. The Company has prepared and filed such
amendments to the Registration Statement since its initial filing with
the Commission, if any, as may have been required to the date hereof,
and will file such additional amendments thereto as may hereafter be
required. There have been delivered to the Representatives three
signed copies of the Registration Statement and each amendment
thereto, if any, including any document filed under the Exchange Act
and deemed to be incorporated by reference into the Registration
Statement, together with three copies of each exhibit filed therewith
or incorporated by reference therein, and such number of conformed
copies for each of the Underwriters of the Registration Statement and
each amendment thereto, if any (but without exhibits), and of each
Preliminary Prospectus and of the Prospectus as the Representatives
have requested.
(f) Neither the Commission nor any state securities
commission has issued any order preventing or suspending the use of
any Preliminary Prospectus, nor, to the knowledge of the Company or
the Principal Shareholders, have any proceedings for that purpose been
initiated or threatened, and each Preliminary Prospectus filed with
the Commission as part of the Registration Statement as originally
filed or as part of any amendment or supplement thereto complied when
so filed with the requirements of the Act and, as of its date, did not
include any untrue statement of a material fact or omit to state a
material fact required to be
-4-
<PAGE> 5
stated therein or necessary to make the statements therein not
misleading. As of the effective date of the Registration Statement,
and at all times subsequent thereto up to each Closing Date, the
Registration Statement and the Prospectus contained or will contain
all statements that are required to be stated therein in accordance
with the Act and conformed or will conform in all respects to the
requirements of the Act, and neither the Registration Statement nor
the Prospectus included or will include any untrue statement of a
material fact or omitted or will omit 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. Neither the Company, nor any person that controls, is
controlled by (including the Subsidiaries) or is under common control
with the Company, has distributed or will distribute prior to each
Closing Date any offering material in connection with the offering and
sale of the Shares other than a Preliminary Prospectus, the
Prospectus, the Registration Statement or other materials permitted by
the Act and provided to the Representatives.
(g) The documents that are incorporated by reference in
each Preliminary Prospectus, the Prospectus or the Registration
Statement or from which information is so incorporated by reference,
when they became effective or were filed with the Commission, as the
case may be, complied with the requirements of the Act or the Exchange
Act, as applicable, and any document so filed and incorporated by
reference subsequent to the effective date of the Registration
Statement shall, when it is filed with the Commission, comply with the
requirements of the Act and the Exchange Act, as applicable, and when
read together with the other information included in such Preliminary
Prospectus, the Prospectus or the Registration Statement, as the case
may be, do not contain an 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, in light of the circumstances under which
they were made, not misleading.
(h) To the best knowledge of the Company and Principal
Shareholders, Price Waterhouse LLP, which has expressed its opinion
with respect to the consolidated financial statements and schedules
filed with the Commission or incorporated by reference and included as
a part of each Preliminary Prospectus, the Prospectus or the
Registration Statement are independent accountants as required by the
Act.
(i) The consolidated financial statements and the related
notes thereto included or incorporated by reference in each
Preliminary Prospectus, the Prospectus and the Registration Statement
present fairly the financial position, results of operations and cash
flows of the Company as of their respective dates or for the
respective periods covered thereby, all in conformity with generally
accepted accounting principles consistently applied throughout the
periods involved. The financial statement schedules, if any, included
in the Registration Statement present fairly the information required
to be stated therein on a basis consistent with the consolidated
financial statements of the Company contained therein. The Company
had an outstanding capitalization as set forth in the Registration
Statement and under "Capitalization" in the Prospectus as of the date
indicated
-5-
<PAGE> 6
therein, and there has been no material change thereto since such date
except as disclosed in the Prospectus. The financial and statistical
information and data relating to the Company in each Preliminary
Prospectus, the Prospectus and the Registration Statement are
accurately presented and prepared on a basis consistent with the
audited consolidated financial statements and books and records of the
Company. The consolidated financial statements and schedules and the
related notes thereto included or incorporated by reference in each
Preliminary Prospectus, the Prospectus or the Registration Statement
are the only such financial statements and schedules required under
the Act to be set forth therein.
(j) Neither the Company nor any Subsidiary is, nor with
the giving of notice or passage of time or both, would be, in
violation or in breach of: (i) its respective Articles of
Incorporation or Regulations; (ii) any statute, ordinance, order, rule
or regulation applicable to the Company or such Subsidiary; (iii) any
order or decree of any court, regulatory body, arbitrator,
administrative agency or other instrumentality of the United States or
other country or jurisdiction having jurisdiction over the Company or
such Subsidiary; or (iv) any provision of any agreement, lease,
franchise, license, indenture, permit, mortgage, deed of trust,
evidence of indebtedness or other instrument to which the Company or
such Subsidiary is a party or by which any property owned or leased by
the Company or such Subsidiary is bound or affected. Neither the
Company nor any Subsidiary has received notice of any violation of any
applicable statute, ordinance, order, rule or regulation applicable to
the Company or any Subsidiary. The Company and each Subsidiary have
obtained and hold, and are in compliance with, all permits,
certificates, licenses, approvals, registrations, franchises, consents
and authorizations of governmental or regulatory authorities required
under all laws, rules and regulations in connection with their
businesses (hereinafter "permit" or "permits"), and all of such
permits are in full force and effect; and the Company and each
Subsidiary have fulfilled and performed all of their respective
obligations with respect to each such permit and no event has occurred
which would result in, or after notice or lapse of time would result
in, revocation or termination of any such permit or result in any
other impairment of the rights of the holder of such permit. Neither
the Company nor any Subsidiary is or has been (by virtue of any
action, omission to act, contract to which it is a party or other
occurrence) in violation of any applicable foreign, federal, state,
municipal or local statutes, laws, ordinances, rules, regulations or
orders (including those relating to environmental protection,
occupational safety and health and equal employment practices)
heretofore or currently in effect.
(k) There are no legal or governmental proceedings or
investigations pending or, to the knowledge of the Company or the
Principal Shareholders, threatened, to which the Company or any
Subsidiary is or may be a party or to which any property owned or
leased by the Company or any Subsidiary is or may be subject,
including, without limitation, any such proceedings that are related
to environmental or employment discrimination matters, which are
required to be described in the Registration Statement or the
Prospectus which are not so described, or which question the validity
of this Agreement or any action taken or to be taken pursuant hereto.
Except as described in the Registration Statement
-6-
<PAGE> 7
or the Prospectus, neither the Company nor any Subsidiary: (i) is in
violation of any statute, ordinance, rule or regulation, or any
decision, order or decree of any court, regulatory body, arbitrator,
administrative agency or other instrumentality of the United States or
other country or jurisdiction having jurisdiction over the Company or
such Subsidiary relating to the use, disposal or release of hazardous
or toxic substances or relating to the protection or restoration of
the environmental or human exposure to hazardous or toxic substances
(collectively, "environmental laws"); (ii) owns or operates any real
property contaminated with any substance that is subject to any
environmental laws; (iii) is liable for any off-site disposal or
contamination pursuant to any environmental laws; or (iv) is subject
to any claim relating to any environmental laws, which violation,
contamination, liability or claim could have a Material Adverse
Effect.
(l) There is no transaction, relationship, obligation,
agreement or other document required to be described in the
Registration Statement or the Prospectus or to be filed or deemed to
be filed as an exhibit to the Registration Statement by the Act, which
has not been described or filed as required. All such contracts or
agreements to which the Company or any Subsidiary is a party have been
duly authorized, executed and delivered by the Company or such
Subsidiary, constitute valid and binding agreements of the Company or
such Subsidiary, and are enforceable by and against the Company or
such Subsidiary, in accordance with the respective terms thereof.
(m) The Company or a Subsidiary has good and valid title
to all property and assets reflected as owned by the Company or such
Subsidiary in the Company's consolidated financial statements included
or incorporated by reference in the Registration Statement (or
elsewhere in the Registration Statement or the Prospectus), free and
clear of all liens, claims, mortgages, security interests or other
encumbrance of any kind or nature whatsoever except those, if any,
reflected in such financial statements (or elsewhere in the
Registration Statement or the Prospectus). All property (real and
personal) held or used by the Company or a Subsidiary under leases,
licenses, franchises or other agreements is held by the Company or
such Subsidiary under valid, subsisting, binding and enforceable
leases, franchises, licenses or other agreements.
(n) Neither the Company nor any person that controls, is
controlled by (including the Subsidiaries) or is under common control
with the Company has taken or will take, for a period of at least 180
days from the date hereof directly or indirectly, any action designed
to cause or result in, or which constituted, or which could cause or
result in, stabilization or manipulation, under the Exchange Act or
otherwise, of the price of any security of the Company to facilitate
the sale or resale of the Common Stock.
(o) Except as described in the Registration Statement or
the Prospectus, since the respective dates as of which information is
given in the Registration Statement or the Prospectus and prior to
each Closing Date: (i) neither the Company nor any Subsidiary has or
will have incurred any liability or obligation, direct or contingent,
or entered into any transaction, that is material to the
-7-
<PAGE> 8
Company, except as in the ordinary course of business; (ii) the
Company has not and will not have paid or declared any dividend or
other distribution with respect to its capital stock and neither the
Company nor any Subsidiary is or will be delinquent in the payment of
principal or interest on any outstanding debt obligation; and (iii)
there has not been and will not have been any change in the capital
stock, any material change in the indebtedness of the Company or any
Subsidiary, or any change or development involving or which could be
expected to involve, a Material Adverse Effect, whether or not arising
from transactions in the ordinary course of business.
(p) Neither the Company nor any person that controls, is
controlled by (including the Subsidiaries) or is under common control
with the Company has, directly or indirectly: (i) made any unlawful
contribution to any candidate for political office, or failed to
disclose fully any contribution in violation of law; or (ii) made any
payment to any federal, state or foreign 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 or applicable foreign
jurisdictions.
(q) The Company or a Subsidiary owns or possesses
adequate rights to use all patents, patent applications, trademarks,
service marks, trade names, trademark registrations, service mark
registrations, copyrights and licenses presently used in or necessary
for the conduct of its business or ownership of its properties, and
neither the Company nor any Subsidiary has violated or infringed upon
the rights of others, or received any notice of conflict with the
asserted rights of others, in respect thereof that could result in a
Material Adverse Effect.
(r) The Company or a Subsidiary has in place and
effective such policies of insurance, with limits of liability in such
amounts, as are normal and prudent in the ordinary course of the
business of the Company and its Subsidiaries.
(s) No labor dispute with the employees of the Company or
any Subsidiary exists or, to the knowledge of the Company and the
Principal Shareholders, is imminent, and neither the Company nor any
Subsidiary is a party to any collective bargaining agreement and, to
the knowledge of the Company and the Principal Shareholders, no union
organizational attempts have occurred or are pending. There has been
no change in the relationship of the Company or any Subsidiary with
any of its principal suppliers, manufacturers, contractors or
customers resulting in or that could result in a Material Adverse
Effect.
(t) Neither the Company nor any Subsidiary is an
"investment company", an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company", as such terms
are defined in the Investment Company Act of 1940, as amended.
(u) All federal, state and local tax returns required to
be filed by or on behalf of the Company or any Subsidiary have been
filed (or are the subject of valid extension) with the appropriate
federal, state and local authorities, and all
-8-
<PAGE> 9
such tax returns, as filed, are accurate in all material respects; all
federal, state and local taxes (including estimated tax payments)
required to be shown on all such tax returns or claimed to be due from
or with respect to the business of the Company or such Subsidiary have
been paid or reflected as a liability on the financial statements of
the Company or such Subsidiary for appropriate periods; all
deficiencies asserted as a result of any federal, state or local tax
audits have been paid or finally settled, and no issue has been raised
in any such audit which, by application of the same or similar
principles, reasonably could be expected to result in a proposed
deficiency for any other period not so audited; no state of facts
exist or has existed which would constitute grounds for the assessment
of any tax liability with respect to the periods which have not been
audited by appropriate federal, state or local authorities; there are
no outstanding agreements or waivers extending the statutory period of
limitation applicable to any federal, state or local tax return of any
period; and neither the Company nor any Subsidiary has ever been a
member of an affiliated group of corporations filing consolidated
federal income tax returns, other than a group of which the Company is
and has been the common parent.
(v) Except for the Company's [name each group health,
life, disability or other welfare plan] and its [name any contributory
or noncontributory defined contribution retirement plan and defined
benefit retirement plans] (collectively, the "Plans"), neither the
Company nor any Subsidiary is a participating employer or plan sponsor
with respect to any employee pension benefit plan as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or any employee welfare benefit plan as defined
in Section 3(1) of ERISA, including, without limitation, any
multiemployer welfare or pension plan. With respect to the Plans, the
Company is in substantial compliance with all applicable regulations,
including ERISA and the Code. With respect to each defined benefit
retirement plan, such plan does not have benefit liabilities (as
defined in Section 4001(a)(16) of ERISA) exceeding the assets of the
plan. The Company or the administrator of each of the Plans, as the
case may be, has timely filed the reports required to be filed by
ERISA and the Code in connection with the maintenance of the Plans,
and no facts, including, without limitation, any "reportable event" as
defined by ERISA and the regulations thereunder, exist in connection
with the Plans which, under applicable law, would constitute grounds
for the termination of any of the Plans by the Pension Benefit
Guaranty Corporation or for the appointment by the appropriate United
States District Court of a trustee to administer any of the Plans.
(w) The Company and each Subsidiary maintain a system of
internal accounting controls sufficient to provide reasonable
assurances that: (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of consolidated financial
statements in conformity with generally accepted accounting principles
and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorizations; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
-9-
<PAGE> 10
(x) None of the Company, any Subsidiary, any officer or
director of the Company or any Subsidiary, or any person who owns, of
record or beneficially, any class of securities issued by the Company
is: (i) an officer, director or partner of any brokerage firm, broker
or dealer that is a member of the NASD ("NASD Member"); or (ii)
directly or indirectly, a "person associated with" an NASD member or
an "affiliate" of an NASD member, as such terms are used in the NASD
Rules of Fair Practice. In addition, neither the Company nor any
Subsidiary has issued or transferred any Common Shares, warrants,
options or other securities, or any other items of value, to any of
the Underwriters or any "related person" of any Underwriter, as such
term is used in the NASD Rules of Fair Practice, except as provided in
this Agreement.
(y) The Common Shares have been registered pursuant to
Section 12(g) of the Exchange Act. The Company has prepared and filed
with the Commission a registration statement for the Common Shares
pursuant to Section 12(g) of the Exchange Act. Such registration
statement either has been declared effective by the Commission under
the Exchange Act or will be declared effective by the Commission prior
to or concurrently with the commencement of the public offering of the
Shares. The Common Stock has been approved for designation upon
notice of issuance as a Nasdaq National Market security on the Nasdaq
National Market ("Nasdaq") concurrently with the effectiveness of the
Registration Statement.
(z) Neither the Company, any Subsidiary nor any affiliate
of the Company or such Subsidiary does business with the government of
Cuba or with any person or affiliate located in Cuba within the
meaning of Section 517.075 of the Florida Statutes, and the Company
agrees to comply with such Section if, prior to the completion of the
distribution of the Shares, the Company, any Subsidiary or any
affiliate of the Company or such Subsidiary commences doing such
business.
(aa) All offers and sales of the securities of the Company
and each Subsidiary prior to the date hereof were made in compliance
with the Act and all other applicable state and federal laws or
regulations.
(bb) The Company has obtained for the benefit of the
Underwriters the agreement, enforceable by Robert W. Baird & Co.
Incorporated ("Baird"), of each of the officers and directors of the
Company that, for a period of 180 days after the date of the
Prospectus, such persons will not, without the prior written consent
of Baird, directly or indirectly, offer, sell, transfer, or pledge,
contract to sell, transfer or pledge, or cause or in any way permit to
be sold, transferred, pledged, or otherwise disposed of, any: (i)
Common Shares; (ii) rights to purchase Common Shares (including,
without limitation, Common Shares that may be deemed to be
beneficially owned by any such shareholder in accordance with the
applicable regulations of the Commission and Common Shares that may be
issued upon the exercise of a stock option, warrant or other
convertible security); or (iii) securities that are convertible or
exchangeable into Common Shares.
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<PAGE> 11
(cc) A copy of the Durable Power of Attorney and Custody
Agreement executed by each Selling Shareholder and a copy of each
Selling Shareholder's Selling Shareholder's Questionnaire has been
furnished to counsel for the Underwriters prior to the date hereof,
along with such other information as such counsel may reasonably
request in connection with their review thereof.
A certificate signed by any officer of the Company and
delivered to the Representatives or to counsel for the Underwriters shall be
deemed a representation and warranty by the Company and the Principal
Shareholders to the Underwriters as to the matters covered thereby. A
certificate delivered by the Company to its counsel for purposes of enabling
such counsel to render the opinion referred to in section 10(d) will also be
furnished to the Representatives and counsel for the Underwriters and shall be
deemed to be additional representations and warranties to the Underwriters by
the Company as to the matters covered thereby.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SELLING
SHAREHOLDERS. Each Selling Shareholder, severally and not jointly, represents
and warrants to and agrees with the several Underwriters and the Company, and
shall be deemed to represent and warrant to the several Underwriters and the
Company on each Closing Date, that:
(a) Such Selling Shareholder has duly executed a durable
power of attorney and custody agreement ("Durable Power of Attorney
and Custody Agreement") naming ________________ and
___________________, or either of them, as such Selling Shareholder's
attorney(s)-in-fact ("Attorneys-in-Fact") for the purpose of entering
into and carrying out this Agreement and naming ___________________ as
custodian ("Custodian") of the Shares of such Selling Shareholder for
the purpose of selling such Shares to the Underwriters on each Closing
Date and receiving payment therefor.
(b) All consents, approvals, authorizations and orders
necessary for the execution and delivery by such Selling Shareholder
of this Agreement and the Durable Power of Attorney and Custody
Agreement and for the sale and delivery of the Shares to be sold by
such Selling Shareholder hereunder, as set forth on Schedule I annexed
hereto, have been obtained. Such Selling Shareholder has, and at the
time of delivery thereof hereunder such Selling Shareholder will have,
good and valid title to the Shares proposed to be sold by such Selling
Shareholder hereunder, free and clear of all voting trust
arrangements, liens, encumbrances, security interests, equities,
claims and community or marital property rights, other than any
created by the Durable Power of Attorney and Custody Agreement or this
Agreement for the benefit of the Underwriters. Such Selling
Shareholder has full right, power and authority to enter into this
Agreement and the Durable Power of Attorney and Custody Agreement and
to sell, assign, transfer and deliver such Shares hereunder, free and
clear of all voting trust arrangements, liens, encumbrances, security
interests, equities, claims and community or marital property rights,
other than any created by the Durable Power of Attorney and Custody
Agreement or this Agreement for the benefit of the Underwriters. Upon
delivery of and payment for such Shares hereunder, the Underwriters
will acquire good and valid title thereto, free and clear of all
voting trust arrangements, liens,
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<PAGE> 12
encumbrances, security interests, equities, claims and community or
marital property rights.
(c) Such Selling Shareholder has not distributed and will
not distribute any Preliminary Prospectus, the Prospectus or any other
material in connection with the offering and sale of the Shares. Such
Selling Shareholder has not taken and will not take, for a period of
at least 180 days from the date hereof, directly or indirectly, any
action designed to or which could cause or result in, under the
Exchange Act or otherwise, stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the
Common Shares.
(d) The execution, delivery and performance by such
Selling Shareholder of this Agreement and the Durable Power of
Attorney and Custody Agreement will not, if applicable, result in the
violation of any provisions of the Articles of Incorporation,
Regulations or other governing documents of such Selling Shareholder,
or constitute a breach, or be in contravention, of any provision of
any agreement, franchise, license, indenture, mortgage, deed of trust
or other instrument to which such Selling Shareholder is a party or by
which such Selling Shareholder or such Selling Shareholder's property
may be bound or affected, or any statute, rule or regulation
applicable to such Selling Shareholder, or violate any order or decree
of any court, regulatory body, administrative agency or other
governmental body having jurisdiction over such Selling Shareholder or
any of such Selling Shareholder's property. 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, and performance under, this Agreement by
such Selling Shareholder or the consummation by such Selling
Shareholder of the transactions contemplated by this Agreement, except
for compliance with the Act, the Exchange Act, the Blue Sky Laws
applicable to the public offering of the Shares by the Underwriters
and the clearance of such offering with the NASD. Such Selling
Shareholder hereby represents and warrants that each Attorney-in-Fact
has been duly appointed as attorney-in-fact by such Selling
Shareholder for the purpose of entering into and carrying out this
Agreement, and the Durable Power of Attorney and Custody Agreement has
been duly executed and delivered by or on behalf of such Selling
Shareholder to the Representatives.
(e) This Agreement and the Durable Power of Attorney and
Custody Agreement are each valid and binding agreements of such
Selling Shareholder and, assuming due execution by the other parties
hereto, are enforceable in accordance with their respective terms,
except that rights to indemnity or contribution may be limited by
applicable law and except as enforceability of this Agreement may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, and by equitable
principles limiting the right to specific performance or other
equitable relief.
(f) Such Selling Shareholder has deposited in custody,
under the Durable Power of Attorney and Custody Agreement,
certificates in negotiable form for the Shares to be sold hereunder by
such Selling Shareholder as set forth opposite such
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<PAGE> 13
Selling Shareholder's name on Schedule I annexed hereto (including the
maximum number of Optional Shares set forth on Schedule I) for the
purpose of further delivery pursuant to this Agreement. Such Selling
Shareholder agrees that the Shares of such Selling Shareholder on
deposit with the Custodian are subject to the interests of the
Company, the Underwriters and the other Selling Shareholders, that the
arrangements made for such custody, and the appointment of the
Attorneys-in-Fact pursuant to the Durable Power of Attorney and
Custody Agreement, are to that extent irrevocable, and that the
obligations of such Selling Shareholder hereunder and under the
Durable Power of Attorney and Custody Agreement shall not be
terminated, except as provided in this Agreement and the Durable Power
of Attorney and Custody Agreement, by any act of such Selling
Shareholder, by operation of law, whether in the case of an individual
Selling Shareholder, by the death or incapacity of such Selling
Shareholder or, in the case of a trust or estate, by the death of the
trustee or trustees or the executor or executors or the termination of
such trust or estate, or, in the case of a partnership or corporation,
by the dissolution, winding up or other event affecting the legal life
of such entity, or by the occurrence of any other event. If any
individual Selling Shareholder, trustee or executor should die or
become incapacitated, or any such trust, estate, partnership or
corporation should be terminated, or if any other event should occur
before the delivery of the Shares hereunder, the certificates for
Shares then on deposit with the Custodian shall, to the extent such
Shares are purchased by the Underwriters, be delivered by the
Custodian in accordance with the terms and conditions of this
Agreement and the Durable Power of Attorney and Custody Agreement as
if such death, incapacity, termination or other event had not
occurred, regardless of whether or not the Custodian shall have
received notice thereof. Such Selling Shareholder represents that
each Attorney-in-Fact has been authorized by such Selling Shareholder
to execute and deliver this Agreement and the Custodian has been
authorized to receive and acknowledge receipt of the proceeds of sale
of the Shares sold by such Selling Shareholder against delivery
thereof and otherwise to act on behalf of such Selling Shareholder.
(g) Insofar as it relates to such Selling Shareholder,
each Preliminary Prospectus, as of its date, has conformed in all
material respects with the requirements of the Act 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 not misleading; and on the effective date of the Registration
Statement and at all times subsequent thereto up to each Closing Date,
(i) the Registration Statement and the Prospectus, as they relate to
such Selling Shareholder, did or will conform to the requirements of
the Act, and (ii) neither the Registration Statement nor the
Prospectus as it relates to such Selling Shareholder did or 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, in light of the circumstances under which they
were made, not misleading.
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<PAGE> 14
(h) The information contained in such Selling Shareholder's
Director and Officer Questionnaire completed in connection with the
offering of the Common Shares and delivered to the Representatives was,
as of the date of such questionnaire, and is, as of the date of this
Agreement, true and correct.
A certificate signed by or on behalf of any Selling Shareholder
as such and delivered to the Representatives or to counsel for the Underwriters
shall be deemed a representation and warranty by such Selling Shareholder to the
Underwriters as to the matters covered thereby. A certificate delivered by or on
behalf of any Selling Shareholder to counsel for the Selling Shareholders for
purposes of enabling such counsel to render the opinion referred in Section
10(e) will also be furnished to the Representatives and counsel for the
Underwriters and shall be deemed to be additional representations and warranties
to the Underwriters by such Selling Shareholder as to the matters covered
thereby.
SECTION 4. REPRESENTATION OF UNDERWRITERS. The Representatives
will act as the representatives for the several Underwriters in connection with
the public offering of the Shares, and any action under or in respect of this
Agreement taken by the Representatives will be binding upon all of the
Underwriters.
SECTION 5. INFORMATION FURNISHED BY THE UNDERWRITERS. The
information set forth in the last paragraph on the outside front cover page of
the Prospectus concerning the terms of the offering by the Underwriters, the
paragraph on the inside front cover page of the Prospectus relating to
stabilization practices and passive market making, and the concession and
reallowance amounts appearing under the caption "Underwriting" in the Prospectus
constitute all of the information 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, as such information is referred to in this
Agreement.
SECTION 6. PURCHASE, SALE AND DELIVERY OF SHARES.
(a) On the basis of the representations, warranties and
agreements herein contained, and subject to the terms and conditions
herein set forth, the Company agrees to sell to the Underwriters
identified in Schedule II annexed hereto 1,000,000 Firm Shares, and
each of the Underwriters agrees, severally and not jointly, to purchase
from the Company the number of Firm Shares as hereinafter set forth at
the price per share of $__________. The obligation of each Underwriter
to the Company shall be to purchase from the Company that number of
full Firm Shares which (as nearly as practicable in full shares as
determined by the Representatives) bears the same proportion to the
number of Firm Shares to be sold by the Company as the number of shares
set forth opposite the name of such Underwriter in Schedule II annexed
hereto bears to the total number of Firm Shares to be purchased by all
of the Underwriters under this Agreement.
(b) On the basis of the representations, warranties and
agreements herein contained, and subject to the terms and conditions
herein set forth, each Selling Shareholder agrees, severally and not
jointly, to sell to the Underwriters that
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<PAGE> 15
number of full Firm Shares set forth opposite the name of such Selling
Shareholder in Schedule I annexed hereto (a total of 800,000 shares
from all of the Selling Shareholders), and each of the Underwriters
agrees, severally and not jointly, to purchase from each Selling
Shareholder the number of Firm Shares as hereinafter set forth at the
same purchase price per share as stated in the preceding paragraph. The
obligation of each Underwriter to each Selling Shareholder shall be to
purchase from that Selling Shareholder that number of full Firm Shares
which (as nearly as practicable in full shares as determined by the
Representatives) bears the same proportion to the number of Firm Shares
to be sold by such Selling Shareholder as the number of shares set
forth opposite the name of such Underwriter in Schedule II annexed
hereto bears to the total number of Firm Shares to be purchased by all
of the Underwriters under this Agreement.
(c) Subject to the terms and conditions hereof, the
Underwriters agree that (i) they will offer the Shares to the public as
set forth in the Prospectus as soon after the Registration Statement
becomes effective as may be practicable, (ii) they will offer and sell
the Shares to the public only in those jurisdictions, and in such
amounts, where due qualification and/or registration has been effected
or an exemption from such qualification and/or registration is
available under the applicable securities or blue sky laws of such
jurisdiction, and (iii) the Shares will be offered and sold only in
those jurisdictions where broker/dealer licensing has been obtained or
where there is an exemption from such licensing; it being understood,
however, that such agreement only covers the initial sale of the Shares
by the Underwriters and not any subsequent sale of such Shares in any
trading market.
(d) On the First Closing Date (as hereinafter defined), the
Company and the Custodian on behalf of the Selling Shareholders will
deliver to the Representatives, at the offices of Robert W. Baird & Co.
Incorporated, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, or
through the facilities of The Depository Trust Company, for the
accounts of the several Underwriters, certificates representing the
Firm Shares to be sold by them against payment in Milwaukee, Wisconsin
of the purchase price therefor by certified or official bank check or
checks in New York Clearing House (next day) funds payable to the order
of the Company with respect to the Firm Shares being sold by the
Company and to the order of the Custodian with respect to the Firm
Shares being sold by the Selling Shareholders. As referred to in this
Agreement, the "First Closing Date" shall be on the third full business
day after the date of the Prospectus, at 9:00 a.m., Milwaukee,
Wisconsin time, or at such other date or time not later than ten full
business days after the date of the Prospectus as the Representatives
and the Company and the Attorneys-in-Fact (or either of them) may
agree. The certificates for the Firm Shares to be so delivered will be
in denominations and registered in such names as the Representatives
request by notice to the Company and the Attorneys-in-Fact, or either
of them, prior to the First Closing Date, and such certificates will be
made available for checking and packaging at 9:00 a.m., Milwaukee,
Wisconsin time on the first full business day preceding the First
Closing Date at a location to be designated by the Representatives.
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<PAGE> 16
(e) In addition, on the basis of the representations,
warranties and agreements herein contained, and subject to the terms
and conditions herein set forth, the Company and the Selling
Shareholders hereby agree to sell to the Underwriters, and the
Underwriters, severally and not jointly, shall have the right at any
time within thirty days after the date of the Prospectus to purchase up
to 150,000 Optional Shares from the Company and up to 120,000 Optional
Shares from the Selling Shareholders at the purchase price per share to
be paid for the Firm Shares, for use solely in covering any
over-allotments made by the Underwriters in the sale and distribution
of the Firm Shares. The option granted hereunder may be exercised upon
notice by the Representatives to the Company and the Attorneys-in-Fact,
or either of them, within thirty days after the date of the Prospectus
setting forth the aggregate number of Optional Shares to be purchased
by the Underwriters and sold by the Company and the Selling
Shareholders, the names and denominations in which the certificates for
such shares are to be registered and the date and place at which such
certificates will be delivered. Such date of delivery (the "Second
Closing Date") shall be determined by the Representatives, provided
that the Second Closing Date, which may be the same as the First
Closing Date, shall not be earlier than the First Closing Date and, if
after the First Closing Date, shall not be earlier than three nor later
than ten full business days after delivery of such notice to exercise.
The number of Optional Shares to be sold by the Company pursuant to
such notice shall equal that number of full Optional Shares which (as
nearly as practicable in full shares as determined by the
Representatives) bears the same proportion to the number of Optional
Shares to be purchased by the Underwriters as the number of Firm Shares
to be sold by the Company under this Agreement bears to the total
number of Firm Shares. The number of Optional Shares to be sold by each
Selling Shareholder pursuant to such notice shall equal that number of
full Optional Shares which (as nearly as practicable in full shares as
determined by the Representatives) bears the same proportion to the
number of Optional Shares to be purchased by the Underwriters as the
number of Firm Shares to be sold by such Selling Shareholder bears to
the total number of Firm Shares. Certificates for the Optional Shares
will be made available for checking and packaging at 9:00 a.m.,
Milwaukee, Wisconsin time, on the first full business day preceding the
Second Closing Date at a location to be designated by the
Representatives. The manner of payment for and delivery of (including
the denominations of and the names in which certificates are to be
registered) the Optional Shares shall be the same as for the Firm
Shares.
(f) The Representatives have advised the Company and the
Attorneys-in-Fact that each Underwriter has authorized the
Representatives to accept delivery of the Shares and to make payment
therefor. It is understood that the Representatives, individually and
not as representatives of the Underwriters, may (but shall not be
obligated to) make payment for any Shares to be purchased by any
Underwriter whose funds shall not have been received by the
Representatives by the First Closing Date or the Second Closing Date,
as the case may be, for the account of such Underwriter, but any such
payment shall not relieve such Underwriter from any obligation under
this Agreement. As referred
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<PAGE> 17
to in this Agreement, "Closing Date" shall mean either the First
Closing Date or the Second Closing Date.
[Note: For compliance with "T+3" closing, confirm that date of
the Prospectus is the first trading date (i.e., not pricing date if Rule 430A
pricing on the night before trading is employed).]
SECTION 7. COVENANTS OF THE COMPANY. The Company covenants and
agrees with the several Underwriters that:
(a) If the effective time of the Registration Statement is not
prior to the execution and delivery of this Agreement, the Company will
use its best efforts to cause the Registration Statement to become
effective at the earliest possible time and, upon notification from the
Commission that the Registration Statement has become effective, will
so advise the Representatives and counsel to the Underwriters promptly.
If the effective time of the Registration Statement is prior to the
execution and delivery of this Agreement and any information shall have
been omitted therefrom in reliance upon Rule 430A, the Company, at the
earliest possible time, will furnish the Representatives with a copy of
the Prospectus to be filed by the Company with the Commission to comply
with Rule 424(b) and Rule 430A under the Act and, if the
Representatives do not object to the contents thereof, will comply with
such Rules. Upon compliance with such Rules, the Company will so advise
the Representatives promptly. The Company will advise the
Representatives and counsel to the Underwriters and the
Attorneys-in-Fact promptly of the issuance by the Commission or any
state securities commission of any stop order suspending the
effectiveness of the Registration Statement or of the institution of
any proceedings for that purpose, or of any notification of the
suspension of qualification of the Shares for sale in any jurisdiction
or the initiation or threatening of any proceedings for that purpose,
and will also advise the Representatives and counsel to the
Underwriters and the Attorneys-in-Fact promptly of any request of the
Commission for amendment or supplement of the Registration Statement,
of any Preliminary Prospectus or of the Prospectus, or for additional
information, and the Company will not file any amendment or supplement
to the Registration Statement (either before or after it becomes
effective), to any Preliminary Prospectus or to the Prospectus
(including a prospectus filed pursuant to Rule 424(b)), or file any
document under the Exchange Act before the termination of the public
offering of the Shares by the Underwriters if such document would be
deemed to be incorporated by reference in the Registration Statement,
if the Representatives have not been furnished with a copy prior to
such filing (with a reasonable opportunity to review such amendment or
supplement) or if the Representatives object to such filing.
(b) If, at any time when a prospectus relating to the Shares is
required by law to be delivered in connection with sales by an
Underwriter or dealer, any event occurs as a result of which the
Prospectus would include an untrue statement of a material fact, or
would omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at
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<PAGE> 18
any time to supplement the Prospectus to comply with the Act or to file
under the Exchange Act any document which would be deemed to be
incorporated by reference in the Registration Statement to comply with
the Act or the Exchange Act, the Company promptly will advise the
Representatives and counsel to the Underwriters thereof and will
promptly prepare and file with the Commission, at its expense, an
amendment to the Registration Statement or file such document which
will correct such statement or omission or an amendment which will
effect such compliance; and, if any Underwriter is required to deliver
a prospectus after the effective date of the Registration Statement,
the Company, upon request of the Representatives, will prepare promptly
such prospectus or prospectuses as may be necessary to permit
compliance with the requirements of Section 10(a)(3) of the Act. The
Company consents to the use, in accordance with the provisions of the
Act and with the Blue Sky Laws of the jurisdictions in which the Shares
are offered by the several Underwriters and by dealers, of each
Preliminary Prospectus.
(c) Neither the Company nor any Subsidiary will, prior to the
Second Closing Date, if any, incur any liability or obligation, direct
or contingent, or enter into any material transaction, other than in
the ordinary course of business, or enter into any transaction with an
"affiliate," as defined in Rule 405 under the Act, which is required to
be described in the Prospectus pursuant to Item 404 of Regulation S-K
under the Act, except as described in the Prospectus.
(d) Neither the Company nor any Subsidiary will, prior to the
Second Closing Date, if any, acquire any of the Common Shares nor will
the Company declare or pay any dividend or make any other distribution
upon its Common Shares payable to shareholders of record on a date
prior to such earlier date, except as described in the Prospectus.
(e) The Company will make generally available to its security
holders and the Representatives an earnings statement as soon as
practicable, but in no event later than sixty days after the end of its
fiscal quarter in which the first anniversary of the effective date of
the Registration Statement occurs, covering a period of twelve
consecutive calendar 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 and Rule 158 promulgated
thereunder.
(f) During such period as a prospectus is required by law to be
delivered in connection with sales by an Underwriter or dealer, the
Company will furnish to the Representatives, at the expense of the
Company, copies of the Registration Statement, the Prospectus, any
Preliminary Prospectus and all amendments and supplements to any such
documents, including any document filed under the Exchange Act and
deemed to be incorporated by reference in the Registration Statement,
in each case as soon as available and in such quantities as the
Representatives may reasonably request.
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<PAGE> 19
(g) The Company will apply the net proceeds from the sale of
the Shares to be sold by it hereunder for the purposes set forth in the
Prospectus, and will timely file Form SR, and any amendments thereto,
as required by Rule 463 under the Act.
(h) The Company will cooperate with the Representatives and
counsel to the Underwriters in qualifying or registering the Shares for
sale under the Blue Sky Laws of such jurisdictions as the
Representatives designates, and will continue such qualifications or
registrations in effect so long as reasonably requested by the
Representatives to effect the distribution of the 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. In each jurisdiction where any of the
Shares shall have been qualified as provided above, the Company will
file such reports and statements as may be required to continue such
qualification for a period of not less than one year from the date of
the Prospectus. The Company shall promptly prepare and file with the
Commission, from time to time, such reports as may be required to be
filed by the Act and the Exchange Act, and the Company shall comply in
all respects with the undertakings given by the Company in connection
with the qualification or registration of the Shares for offering and
sale under the Blue Sky Laws.
(i) During the period of three years from the date of the
Prospectus, the Company will furnish to each of the Representatives and
to each of the other Underwriters who may so request, as soon as
available, each report, statement or other document of the Company or
its Board of Directors mailed to its shareholders or filed with the
Commission, and such other information concerning the Company as the
Representatives may reasonably request.
(j) The Company shall deliver the requisite notice of issuance
to Nasdaq and shall use its reasonable best efforts to maintain the
authorization for trading of the Common Shares as a Nasdaq National
Market security, for a period of at least thirty-six months after the
date of the Prospectus.
(k) Except for the issuance and sale by the Company of Common
Shares upon exercise of presently existing outstanding stock options,
the sale of the Shares to be sold by the Company pursuant to this
Agreement, and the grant of employee stock options pursuant to the
Company's [list Stock Option Plans,] a copy of each of which is filed
as an exhibit to the Registration Statement, and provided that none of
such options shall be exercisable during the 180-day period herein
described, the Company shall not, for a period of 180 days after the
date of the Prospectus, without the prior written consent of Baird,
directly or indirectly, offer, sell or otherwise dispose of, contract
to sell or otherwise dispose of, or cause or in any way permit to be
sold or otherwise disposed of, any: (i) Common Shares; (ii) rights to
purchase Common Shares; or (iii) securities that are convertible or
exchangeable into Common Shares.
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<PAGE> 20
(l) The Company will maintain a transfer agent and, if required
by law or the rules of the Nasdaq National Market or any national
securities exchange on which the Common Shares are listed, a registrar
(which, if permitted by applicable laws and rules, may be the same
entity as the transfer agent) for its Common Shares.
(m) If at any time when a prospectus relating to the Shares is
required to be delivered under the Act, any rumor, publication or event
relating to of affecting the Company shall occur as a result of which,
in the REASONABLE opinion of Baird, the market price of the Common
Shares has been or is likely to be materially affected (regardless of
whether such rumor, publication or event necessitates a supplement to
the Prospectus), the Company will, after written notice from Baird
advising the Company of any of the matters set forth above, promptly
consult with Baird concerning the advisability and substance of, and,
if the Company and Baird determine that it is appropriate, disseminate,
a press release or other public statement responding to or commenting
on, such rumor, publication or event.
(n) If the sale to the Underwriters of the Shares is not
consummated for any reason other than termination of this Agreement
pursuant to section 13 hereof, without limiting any other rights the
Underwriters may have, the Company agrees to reimburse the Underwriters
upon demand for all out-of-pocket expenses (including reasonable fees
and expenses of counsel for the Underwriters), that shall have been
incurred by the Underwriters in connection with the proposed purchase
and sale of the Shares, and the provisions of sections 9 and 12 hereof
shall at all times be effective and apply.
(o) The Company will comply or cause to be complied with the
conditions to the obligations of the Underwriters in section 10 hereof.
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<PAGE> 21
SECTION 8. COVENANTS OF THE SELLING SHAREHOLDERS. Each Selling
Shareholder, severally and not jointly, covenants and agrees with the several
Underwriters and the Company as follows:
(a) If the effective time of the Registration Statement is not
prior to the execution and delivery of this Agreement, such Selling
Shareholder will cooperate to the extent necessary to cause the
Registration Statement to become effective at the earliest possible
time; and such Selling Shareholder will do and perform all things to be
done and performed by such Selling Shareholder prior to each Closing
Date, pursuant to this Agreement or the Durable Power of Attorney and
Custody Agreement.
(b) Such Selling Shareholder agrees to deliver to the Custodian
on or prior to the First Closing Date a properly completed and executed
United States Treasury Department Form W-9 (or other applicable
substitute form or statement specified by Treasury Department
regulations in lieu thereof).
(c) Such Selling Shareholder will pay all federal and other
taxes, if any, on the transfer or sale of the Shares being sold by such
Selling Shareholder to the Underwriters.
(d) For a period of 180 days after the date of the Prospectus,
such Selling Shareholder will not, without the prior written consent of
Baird, directly or indirectly, offer, sell, transfer, or pledge,
contract to sell, transfer or pledge or cause or in any way permit to
be sold, transferred, pledged or otherwise disposed of any: (i) Common
Shares; (ii) rights to purchase Common Shares (including, without
limitation, Common Shares that may be deemed to be beneficially owned
by such Selling Shareholder in accordance with the rules and
regulations of the Commission and Common Shares that may be issued upon
exercise of a stock option, warrant or other convertible security); or
(iii) securities that are convertible or exchangeable into Common
Shares.
(e) Such Selling Shareholder will furnish any documents,
instruments or other information which the Representatives may
reasonably request in connection with the sale and transfer of the
Shares to the Underwriters.
SECTION 9. PAYMENT OF EXPENSES. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective, or
if this Agreement is terminated for any reason, the Company will pay the costs,
fees and expenses incurred in connection with the public offering of the Shares.
Such costs, fees and expenses to be paid by the Company include, without
limitation:
(a) All costs, fees and expenses (excluding the expenses
incurred by the Underwriters and the legal fees and disbursements of
counsel for the Underwriters, but including such fees and disbursements
described in subsection (b) of this section 9) incurred in connection
with the performance of the Company's obligations hereunder, including
without limiting the generality of the foregoing: the registration fees
related to the filing of the Registration Statement with the
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Commission; the fees and expenses related to the quotation of the
Shares on Nasdaq or other national securities exchange; the fees and
expenses of the Company's counsel, accountants, transfer agent and
registrar; the costs and expenses incurred in connection with the
preparation, printing, shipping and delivery of the Registration
Statement, each Preliminary Prospectus and the Prospectus (including
all exhibits and financial statements) and all agreements and
supplements provided for herein, this Agreement and the Preliminary and
Supplemental Blue Sky Memoranda and the Durable Power of Attorney and
Custody Agreement, including, without limitation, shipping expenses via
overnight delivery and/or courier service to comply with applicable
prospectus delivery requirements; and the costs and expenses associated
with the production of materials related to, and travel expenses
incurred by the management of the Company in connection with, the
various meetings to be held between the Company's management and
prospective investors.
(b) All registration fees and expenses, including reasonable
legal fees and disbursements of counsel for the Underwriters incurred
in connection with qualifying or registering all or any part of the
Shares for offer and sale under the Blue Sky Laws and the clearing of
the public offering and the underwriting arrangements evidenced hereby
with the NASD, which legal fees shall not exceed $10,000.
(c) All fees and expenses related to printing of the
certificates for the Shares, and all transfer taxes, if any, with
respect to the sale and delivery of the Shares.
SECTION 10. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS.
The obligations of the several Underwriters under this Agreement shall be
subject to the accuracy of the representations and warranties on the part of the
Company, the Principal Shareholders and the Selling Shareholders herein set
forth as of the date hereof and as of each Closing Date, to the accuracy of the
statements of the Company's officers, the Selling Shareholders and the
Attorneys-in-Fact on behalf of the Selling Shareholders made pursuant to the
provisions hereof, to the performance by the Company and the Selling
Shareholders of their respective obligations hereunder, and to the following
additional conditions, unless waived in writing by the Representatives:
(a) The Registration Statement shall have been declared
effective by the Commission not later than _____ p.m., Washington, D.
C. time, prior to the date on the date of this Agreement, or such later
time as shall have been consented to by the Representatives, which
consent shall be deemed to have been given if the Registration
Statement shall have been declared effective on or before the date and
time requested in the acceleration request submitted on behalf of the
Representatives pursuant to Rule 461 under the Act; all filings
required by Rules 424(b) and 430A under the Act shall have been timely
made; no stop order suspending the effectiveness of the Registration
Statement shall have been issued by the Commission or any state
securities commission nor, to the knowledge of the Company or the
Principal Shareholders, shall any proceedings for that purpose have
been initiated or threatened; and any request of the Commission or any
state
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<PAGE> 23
securities commission for inclusion of additional information in the
Registration Statement, or otherwise, shall have been complied with to the
satisfaction of the Representatives. [Note: Date and time of effectiveness of
Registration Statement may vary depending on use or nonuse of Rule 430A.]
(b) Since the dates as of which information is given in the
Registration Statement:
(i) there shall not have occurred any change or development
involving, or which could be expected to involve, a Material Adverse
Effect, whether or not arising from transactions in the ordinary course
of business; and
(ii) the Company shall not have sustained any loss or
interference from any labor dispute, strike, fire, flood, windstorm,
accident or other calamity (whether or not insured) or from any court or
governmental action, order or decree,
the effect of which on the Company, in any such case described in clause (i) or
(ii) above, is in the opinion of the Representatives so material and adverse as
to make it impracticable or inadvisable to proceed with the public offering or
the delivery of the Shares on the terms and in the manner contemplated in the
Registration Statement and the Prospectus.
(c) The Representatives shall not have advised the Company that the
Registration Statement or the Prospectus contains an untrue statement of fact
that, in the opinion of the Representatives or counsel for the Underwriters, is
material, or omits to state a fact that, in the opinion of the Representatives
or such counsel, is material and is required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(d) The Representatives shall have received an opinion of Keating,
Muething & Klekamp, counsel for the Company, addressed to the Representatives,
as the representatives of the Underwriters, and dated the First Closing Date or
the Second Closing Date, as the case may be, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority
to own, lease and operate its properties and conduct its business as
presently conducted and as described in the Prospectus and the
Registration Statement; the Company is duly registered and qualified to
do business as a foreign corporation under the laws of, and is in good
standing as such in, each jurisdiction in which such registration or
qualification is required, except where the failure to so register or
qualify would not have a Material Adverse Effect;
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<PAGE> 24
(ii) The authorized capital stock of the Company
consists of 30,000,000 Common Shares, without par value, and
1,000,000 Preferred Shares, without par value, and all such
stock conforms as to legal matters to the descriptions thereof
in the Prospectus and the Registration Statement;
(iii) The issued and outstanding shares of capital
stock of the Company immediately prior to the issuance and sale
of the Shares to be sold by the Company hereunder have been
duly authorized and validly issued, are fully paid and
nonassessable, and there are no preemptive, preferential or,
except as described in the Prospectus, other rights to
subscribe for or purchase any shares of capital stock of the
Company, and to such counsel's knowledge, no shares of capital
stock of the Company have been issued in violation of such
rights;
(iv) Except for the Subsidiaries, the Company has no
subsidiaries, and the Company does not own any equity interest
in or control, directly or indirectly, any other corporation,
limited liability company, partnership, joint venture,
association, trust or other business organization except as
described in the Prospectus and the Registration Statement;
each Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
its jurisdiction of incorporation, with full corporate power
and authority to own, lease and operate its properties and to
conduct its business as presently conducted and as described in
the Prospectus and the Registration Statement; each Subsidiary
is duly registered or qualified to do business as a foreign
corporation under the laws of, and is in good standing as such
in, each jurisdiction in which such registration or
qualification is required, except where the failure to so
register or qualify would not have a Material Adverse Effect;
the issued and outstanding shares of the capital stock of each
Subsidiary have been duly authorized and validly issued, are
fully paid and nonassessable and there are no preemptive,
preferential or, to such counsel's knowledge, other rights to
subscribe for or purchase any shares of capital stock of any
Subsidiary, and to such counsel's knowledge, no shares of
capital stock of any Subsidiary have been issued in violation
of such rights; the Company owns directly and, to such
counsel's knowledge, beneficially, all of the issued and
outstanding capital stock of each Subsidiary, free and clear of
any and all liens, claims, encumbrances and security interests;
(v) The certificates for the Shares to be delivered
hereunder are in due and proper form and conform to the
requirements of applicable law; and when duly countersigned by
the Company's transfer agent, and delivered to the
Representatives or upon the order of the Representatives
against payment of the agreed consideration therefor in
accordance with the provisions of this Agreement, the Shares to
be sold by the Company represented thereby will be duly
authorized and validly issued, fully paid and nonassessable,
and free of any preemptive, preferential or other rights to
subscribe for or purchase Common Shares;
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<PAGE> 25
(vi) The Registration Statement has become effective
under the Act, and to such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been
initiated or are threatened under the Act or any Blue Sky Laws;
the Registration Statement and the Prospectus and any amendment
or supplement thereto, including any document incorporated by
reference in the Registration Statement, (except for the
financial statements and other statistical or financial data
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; the conditions for use of Form S-3,
set forth in the General Instructions thereto, have been
satisfied; no facts have come to the attention of such counsel
which lead it to believe that either the Registration Statement
or the Prospectus or any amendment or supplement thereto,
including any document incorporated by reference in the
Registration Statement, contains any untrue statement of a
material fact or omitted or will omit to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus, as of
the First Closing Date or the Second Closing Date, as the case
may be, contained any untrue statement of a material fact or
omitted or will omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were
made (except for the financial statements and other financial
data included therein as to which such counsel need express no
opinion); to such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened, including,
without limitation, any such proceedings that are related to
environmental or employment discrimination matters, required to
be described in the Registration Statement or the Prospectus
which are not so described or which question the validity of
this Agreement or any action taken or to be taken pursuant
thereto, nor is there any transaction, relationship, agreement,
contract or other document of a character required to be
described in the Registration Statement or the Prospectus, or
required to be filed under the Exchange Act if upon such filing
they would be incorporated, in whole or in part, by reference
therein, or to be filed as an exhibit to or incorporated by
reference in the Registration Statement by the Act, which is
not described, filed or incorporated by reference as required;
(vii) The Company has full corporate power and
authority to enter into and perform this Agreement; the
performance of the Company's obligations hereunder and the
consummation of the transactions described herein have been
duly authorized by the Company by all necessary corporate
action and this Agreement has been duly executed and delivered
by and on behalf of the Company, and is a legal, valid and
binding agreement of the Company enforceable against the
Company in accordance with its terms, except that rights to
indemnity or contribution may be limited by applicable law and
except as enforceability of this Agreement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar
laws
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<PAGE> 26
affecting creditors' rights generally, and by equitable
principles limiting the right to specific performance or other
equitable relief; no consent, approval, authorization or other
order or decree of any court, regulatory or governmental body,
arbitrator, administrative agency or other instrumentality of
the United States or other country or jurisdiction having
jurisdiction over the Company 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 Exchange Act, applicable Blue Sky
Laws (as to which such counsel need not express any opinion)
and the clearance of the underwriting arrangements by the
NASD);
(viii) The execution, delivery and performance of this
Agreement by the Company will not: (A) violate any provisions
of the Articles of Incorporation or Code of Regulations of the
Company or any Subsidiary; (B) violate any provisions of, or
result in the breach, modification or termination of, or
constitute a default under, any agreement, lease, franchise,
license, indenture, permit, mortgage, deed of trust, other
evidence of indebtedness or other instrument known to such
counsel to which the Company or any Subsidiary is a party or by
which the Company or such Subsidiary, or any of their
respective owned or leased property is bound, and which is
filed or incorporated by reference as an exhibit to the
Registration Statement; or (C) violate any statute, ordinance,
order, rule, decree or regulation of any court, regulatory or
governmental body, arbitrator, administrative agency or other
instrumentality of the United States or other country or
jurisdiction having jurisdiction over the Company or any
Subsidiary (assuming compliance with all applicable federal and
state securities laws);
(ix) To such counsel's knowledge, except as described
in the Prospectus, there are no holders of Common Shares or
other securities of the Company, or securities that are
convertible or exchangeable into Common Shares or other
securities of the Company, that have rights to the registration
of such securities under the Act or any Blue Sky Laws;
(x) The Common Shares have been designated for
inclusion as a National Market security on the Nasdaq National
Market and are registered under the Exchange Act;
(xi) Neither the Company nor any Subsidiary is, nor
with the giving of notice or passage of time or both would be,
in violation of its respective Articles of Incorporation or
Code of Regulations or, to such counsel's knowledge, in default
in any material respect in the performance of any agreement,
lease, franchise, license, permit, mortgage, deed of trust,
evidence of indebtedness or other instrument, or any other
document that is filed as an exhibit to or incorporated by
reference in the Registration Statement, to which the Company
or any Subsidiary is subject or bound;
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<PAGE> 27
(xii) Neither the Company nor any Subsidiary is an
"investment company", an "affiliated person" of, or "promoter"
or "principal underwriter" for, an "investment company", as
such terms are defined in the Investment Company Act of 1940,
as amended, and, upon its receipt of any proceeds from the sale
of the Shares, the Company will not become or be deemed to be
an "investment company" thereunder;
(xiii) The description or incorporation by reference
in the Registration Statement and the Prospectus of statutes,
law, regulations, legal and governmental proceedings, and
contracts and other legal documents described or incorporated
by reference therein fairly and correctly present, in all
material respects, the information required to be included
therein by the Act; and
(xiv) All offers and sales by the Company of its
capital stock before the date hereof were at all relevant times
duly registered under or exempt from the registration
requirements of the Act, and were duly registered under or the
subject of an available exemption from the registration
requirements of any applicable Blue Sky Laws.
In rendering such opinion, counsel for the Company may rely, to the
extent counsel deems such reliance proper, as to matters of fact upon
certificates of officers of the Company and of governmental officials, and
copies of all such certificates shall be furnished to the Representatives and
for the Underwriters on or before each Closing Date.
(e) The Representatives shall have received an opinion from
______________, counsel for the Selling Shareholders, dated the First
Closing Date or the Second Closing Date, as the case may be, to the
effect that:
(i) Each of this Agreement and the Durable Power of
Attorney and Custody Agreement has been duly authorized,
executed and delivered by or on behalf of each Selling
Shareholder and such agreement constitutes the valid and
binding agreement of such Selling Shareholder, enforceable in
accordance with its respective terms, except that rights to
indemnity or contribution thereunder may be limited by
applicable law and except as enforceability of such agreement
may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws generally affecting the rights of
creditors and by equitable principles limiting the right to
specific performance or other equitable relief;
(ii) The execution and delivery of this Agreement and
the Durable Power of Attorney and Custody Agreement and the
consummation of the transactions herein and therein
contemplated will not, to such counsel's knowledge, constitute
a breach, or be in contravention, of any provision of any
agreement, franchise, license, indenture, mortgage, deed of
trust or other instrument to which such Selling Shareholder is
a party or by which such Selling Shareholder or such Selling
Shareholder's property may be
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<PAGE> 28
bound or affected, or any statute, rule or regulation
applicable to such Selling Shareholder, or violate any order or
decree of any court, regulatory or governmental body,
administrative body or instrumentality of the United States or
other jurisdiction having jurisdiction over such Selling
Shareholder or any of such Selling Shareholder's property,
which violation would reasonably be expected to have a material
adverse effect on the condition (financial or otherwise),
business, properties, net worth or results of operations of
such Selling Shareholder;
(iii) Such Selling Shareholder has full legal right,
power and authority, and has secured any consent, approval,
authorization and order required to enter into and perform this
Agreement and the Durable Power of Attorney and Custody
Agreement and to sell, assign, transfer and deliver title to
the Shares to be sold by such Selling Shareholder as provided
herein; and upon delivery to the Underwriters or upon the order
of the Representatives against payment of the agreed
consideration therefor in accordance with the provisions of
this Agreement, to such counsel's knowledge, the Underwriters
will acquire good and marketable title to the Shares to be sold
hereunder by such Selling Shareholder, free and clear of all
voting trust arrangements, liens, encumbrances, security
interests, equities, claims and community or marital property
rights; and
(iv) To such counsel's knowledge, the information
concerning the Selling Shareholders contained in the Prospectus
under the caption "Principal and Selling Shareholders" complies
in all material respects with the Act.
In rendering such opinion, counsel for the Selling Shareholders may
rely, to the extent counsel deems such reliance proper, as to matters of fact
upon certificates of the Selling Shareholders, and copies of all such
certificates shall be furnished to the Representatives and counsel for the
Underwriters on or before each Closing Date.
(f) The Representatives shall have received an opinion 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 issuance and sale of the Shares by the Company, the
Registration Statement and other related matters as the Representatives
may require, and the Company shall have furnished to such counsel such
documents and shall have exhibited to them such papers and records as
they request for the purpose of enabling them to pass upon such
matters.
(g) The Representatives shall have received on each Closing
Date, a certificate of Robert J. Ready, Chairman of the Board and
President, and Ronald S. Stowell, Chief Financial Officer and
Treasurer, of the Company, to the effect that:
(i) The representations and warranties of the Company
and the Principal Shareholders set forth in section 2 hereof
are true and correct as of the date of this Agreement and as of
the date of such certificate, and the
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<PAGE> 29
Company has complied with all the agreements and satisfied all
the conditions to be performed or satisfied by it at or prior
to the date of such certificate;
(ii) The Commission has not issued an order
preventing or suspending the use of the Prospectus or any
Preliminary Prospectus or any amendment or supplement thereto;
no stop order suspending the effectiveness of the Registration
Statement has been issued; and to the knowledge of the
respective signatories, no proceedings for that purpose have
been initiated or are pending or contemplated under the Act or
under the Blue Sky Laws of any jurisdiction;
(iii) The Company and each such individual signing
such certificate has carefully examined the Registration
Statement and the Prospectus, and any amendment or supplement
thereto, including any documents filed under the Exchange Act
and deemed to be incorporated by reference in the Registration
Statement, and such documents contain all statements required
to be stated therein, and do not include 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, in light of the circumstances under which they were
made, not misleading, and since the date on which the
Registration Statement was initially filed, no event has
occurred that was required to be set forth in an amended or
supplemented prospectus or in an amendment to the Registration
Statement that has not been so set forth, and there has been no
document required to be filed under the Exchange Act that upon
such filing would be deemed to be incorporated by reference in
the Registration Statement that has not been so filed; and
(iv) Since the date on which the Registration
Statement was initially filed with the Commission, there shall
not have occurred any change or development involving, or which
could be expected to involve, a Material Adverse Effect,
whether or not arising from transactions in the ordinary course
of business, except as disclosed in the Prospectus and the
Registration Statement as heretofore amended or (but only if
the Representatives expressly consent thereto in writing) as
disclosed in an amendment or supplement thereto filed with the
Commission and delivered to the Representatives after the
execution of this Agreement; since such date and except as so
disclosed or in the ordinary course of business, the Company
has not incurred any liability or obligation, direct or
indirect, or entered into any transaction which is material to
the Company; since such date and except as so disclosed, there
has not been any change in the outstanding capital stock of the
Company, or any change that is material to the Company in the
short-term debt or long-term debt of the Company; since such
date and except as so disclosed, the Company has not acquired
any of the Common Shares or other capital stock of the Company
nor has the Company declared or paid any dividend, or made any
other distribution, upon its outstanding Common Shares payable
to shareholders of record on a date prior to such Closing Date;
since such date and except as so
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<PAGE> 30
disclosed, the Company has not incurred any material contingent
obligations, and no material litigation is pending or
threatened against the Company; and, since such date and except
as so disclosed, the Company has not sustained any material
loss or interference from any strike, fire, flood, windstorm,
accident or other calamity (whether or not insured) or from any
court or governmental action, order or decree.
The delivery of the certificate provided for in this subsection
(g) shall be and constitute a representation and warranty of the
Company as to the facts required in the immediately foregoing clauses
(i), (ii), (iii) and (iv) to be set forth in said certificate.
(h) The Representatives shall have received a certificate from
each Selling Shareholder (which may be signed by such Selling
Shareholder's Attorneys-in-Fact, or either of them), dated the First
Closing Date or the Second Closing Date, as the case may be, to the
effect that: (i) the representations and warranties of such Selling
Shareholder in Section 3 of this Agreement are true and correct as of
the date of this Agreement and as of the date of such certificate, as
if again made on and as of such Closing Date, and such Selling
Shareholder has complied with all of the agreements and satisfied all
of the conditions to be performed or satisfied by such Selling
Shareholder at or prior to such Closing Date; and (ii) such Selling
Shareholder has no reason to believe that the Registration Statement or
any amendment thereto, including any documents filed under the Exchange
Act and deemed to be incorporated by reference in the Registration
Statement, at the time it was declared effective by the Commission
contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading, or that the Prospectus, as amended or
supplemented, including any documents filed under the Exchange Act and
deemed to be incorporated by reference in the Registration Statement,
contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(i) At the time this Agreement is executed and also on each
Closing Date, there shall be delivered to the Representatives a letter
addressed to the Representatives, as representatives of the
Underwriters, from Price Waterhouse LLP, the Company's independent
accountants, the first letter to be dated the date of this Agreement,
the second letter to be dated the First Closing Date and the third
letter (if applicable) to be dated the Second Closing Date, which shall
be in form and substance satisfactory to the Representatives and shall
contain information as of a date within five days of the date of such
letter. There shall not have been any change or decrease set forth in
any of the letters referred to in this subsection (i) which makes it
impracticable or inadvisable in the judgment of the Representatives to
proceed with the public offering or purchase of the Shares as
contemplated hereby.
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<PAGE> 31
(j) The Shares shall have been qualified or registered for sale
under the Blue Sky Laws of such jurisdictions as shall have been
specified by the Representatives, the underwriting terms and
arrangements for the offering shall have been cleared by the NASD, and
the Common Shares shall have been designated for inclusion as a Nasdaq
National Market security on the Nasdaq National Market and shall have
been registered under the Exchange Act.
(k) Such further certificates and documents as the
Representative[s] may reasonably request (including certificates of
officers of the Company).
All such opinions, certificates, letters and documents shall be
in compliance with the provisions hereof only if they are satisfactory to the
Representatives and to Taft, Stettinius & Hollister, counsel for the
Underwriters. The Company and the Selling Shareholders shall furnish the
Representatives with such manually signed or conformed copies of such opinions,
certificates, letters and documents as the Representatives may reasonably
request.
If any condition to the Underwriters' obligations hereunder to
be satisfied prior to or at either Closing Date is not so satisfied, this
Agreement at the election of the Representatives will terminate upon
notification to the Company and the Attorneys-in-Fact, or any one of them, for
the Selling Shareholders without liability on the part of any Underwriter,
including the Representatives, the Company or the Selling Shareholders except
for the provisions of section 7(n) hereof, the expenses to be paid by the
Company pursuant to section 9 hereof and except to the extent provided in
section 12 hereof.
SECTION 11. MAINTAIN EFFECTIVENESS OF REGISTRATION
STATEMENT. The Company will use its best efforts and the Selling
Shareholders will use their best efforts to prevent the issuance of any stop
order suspending the effectiveness of the Registration Statement, and, if such
stop order is issued, to obtain as soon as possible the lifting thereof.
SECTION 12. INDEMNIFICATION.
(a) The Company and each of the Principal Shareholders, jointly
and severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of the Act or
the Exchange Act, from and against any losses, claims, damages, expenses,
liabilities or actions in respect thereof ("Claims"), joint or several, to which
such Underwriter or each such controlling person may become subject under the
Act, the Exchange Act, Blue Sky Laws or other federal or state statutory laws or
regulations, at common law or otherwise (including payments made in settlement
of any litigation), insofar as such Claims arise out of or are based upon any
breach of any representation, warranty or covenant made by the Company and the
Principal Shareholders in this Agreement, or 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 in any application filed under any Blue Sky Law or other document
executed by the Company for that purpose or based upon written information
furnished by the Company and filed
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<PAGE> 32
in any state or other jurisdiction to qualify any or all of the Shares under the
securities laws thereof (any such document, application or information being
hereinafter called a "Blue Sky Application") 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. The
Company and each of the Principal Shareholders, jointly and severally, agree to
reimburse each Underwriter and each such controlling person for any reasonable
legal fees or other expenses incurred by such Underwriter or any such
controlling person in connection with investigating or defending any such Claim;
provided, however, that the Company and the Principal Shareholders will not be
liable in any such case to the extent that: any such Claim 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 supplement thereto or in any Blue Sky Application in reliance
upon and in conformity with the written information furnished to the Company
pursuant to section 5 of this Agreement. The indemnification obligations of the
Company and each of the Principal Shareholders as provided above are in addition
to and in no way limit any liabilities the Company and each of the Principal
Shareholders may otherwise have.
(b) Each of the Selling Shareholders, severally and not
jointly, agrees to indemnify and hold harmless each Underwriter and each
controlling person from and against any Claims to which such Underwriter or each
such controlling person may become subject under the Act, the Exchange Act, Blue
Sky Laws or other federal or state statutory laws or regulations, at common law
or otherwise (including payments made in settlement of any litigation), insofar
as such Claims arise out of or are based upon any breach of any representations,
warranty or covenant made by such Selling Shareholder in this Agreement.
(c) Each Underwriter, severally and not jointly, will indemnify
and hold harmless the Company, each of its directors and each of its officers
who signs the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Act or the Exchange Act and each Principal
Shareholder against any Claim to which the Company, or any such director,
officer, controlling person or Principal Shareholder may become subject under
the Act, the Exchange Act, Blue Sky Laws or other federal or state statutory
laws or regulations, at common law or otherwise (including payments made in
settlement of any litigation, if such settlement is effected with the written
consent of such Underwriter and Baird), insofar as such Claim arises out of or
is 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 in any Blue Sky
Application, or arises out of or is 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,
or in any Blue Sky Application, in reliance solely upon and in conformity with
the written information furnished by the Representatives to the Company pursuant
to section 5 of this Agreement. Each Underwriter will severally indemnify and
hold harmless the Company, each principal Shareholder and each Selling
Shareholder and shall reimburse any reasonable legal fees
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<PAGE> 33
or other expenses incurred by the Company, or any such director, officer,
controlling person, Principal Shareholder or Selling Shareholder in connection
with investigating or defending any such Claim, and from any and all Claims
solely resulting from failure of an Underwriter to deliver a Prospectus, if the
person asserting such Claim purchased Shares from such Underwriter and a copy of
the Prospectus (as then amended if the Company shall have furnished any
amendments thereto) was not sent or given by or on behalf of such Underwriter to
such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended) would have cured the defect giving rise to such
Claim. The indemnification obligations of each Underwriter as provided above are
in addition to any liabilities any such Underwriter may otherwise have.
Notwithstanding the provisions of this section, no Underwriter shall be required
to indemnify or reimburse the Company, or any officer, director, controlling
person or Principal Shareholder in an aggregate amount in excess of the total
price at which the Shares purchased by any such Underwriter hereunder were
offered to the public, less the amount of any damages such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
(d) Each Selling Shareholder, severally and not jointly, agrees
to indemnify and hold harmless the Company, each of its directors and each of
its officers who signs the Registration Statement, and each person, if any,
controlling the Company within the meaning of the Act or the Exchange Act to the
same extent as the foregoing indemnity from the Company to each Underwriter set
forth in subsection (a) of this section. In case any Claim shall be brought or
asserted against the Company, its directors, such officers or any such
controlling person, in respect of which indemnity may be sought against any
Selling Shareholder, such Selling Shareholder shall have the rights and duties
given to the Company, and the Company, such directors or officers and any such
controlling person shall have the rights and duties given to the Underwriters by
subsection (a) of this section.
(e) Promptly after receipt by an indemnified party under this
section of notice of the commencement of any action in respect of a Claim, 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 an indemnifying party from any liability it may have to
any indemnified party under this section or otherwise. In case any such action
is brought against any indemnified party, and such indemnified party notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in and, to the extent that he, she or 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 any indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to the
indemnified party and/or other indemnified parties which are different from or
additional to those available to any 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.
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<PAGE> 34
(f) Upon receipt of notice from the indemnifying party to such
indemnified party of the indemnifying party's election to assume the defense of
such action and upon approval by the indemnified party of counsel selected by
the indemnifying party, the indemnifying party will not be liable to such
indemnified party under this section for any legal fees or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof, unless:
(i) the indemnified party shall have employed separate
counsel in connection with the assumption of legal defenses in
accordance with the proviso to the last sentence of subsection (e) of
this section;
(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 the indemnified
party's notice to the indemnifying party of commencement of the action;
or
(iii) the indemnifying party has authorized the employment of
counsel at the expense of the indemnifying party.
(g) If the indemnification provided for in this section is
unavailable to an indemnified party under subsection (a), (b), (c) or (d) hereof
in respect of any Claim referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall, subject to the limitations
hereinafter set forth, contribute to the amount paid or payable by such
indemnified party as a result of such Claim:
(i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, each Principal Shareholder
and the Underwriters from the offering of the 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, each Principal Shareholder
and the Underwriters in connection with the statements or omissions
which resulted in such Claim, as well as any other relevant equitable
considerations.
The relative benefits received by each of the Company, each
Principal Shareholder and the Underwriters shall be deemed to be in such
proportion so that the Underwriters are responsible for that portion represented
by the percentage that the amount of the underwriting discounts and commissions
per share appearing on the cover page of the Prospectus bears to the public
offering price per share appearing thereon, and the Company (including its
officers and directors and controlling persons), and the Principal Shareholders,
are responsible for the remaining portion. The relative fault of the Company,
each Principal 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
relates to information supplied by the Company, such Principal Shareholder or
the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct
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<PAGE> 35
or prevent such statement or omission. The amount paid or payable by a party as
a result of the Claims referred to above shall be deemed to include, subject to
the limitations set forth in subsections (e) and (f) of this section, any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
(h) The Company, the Principal Shareholders and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this section were determined by pro rata or per capita allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method or allocation which does not take into account the equitable
considerations referred to in subsection (f) of this section. Notwithstanding
the other provisions of this section, unless guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act), no
Underwriter shall be required to contribute any amount that is greater than the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. 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 are several in proportion to their
respective underwriting commitments and not joint.
(i) The indemnifying party shall not be liable for any
settlement of any claim affected without its written consent.
SECTION 13. DEFAULT OF UNDERWRITERS. It shall be a
condition to the obligations of each Underwriter to purchase the Shares in the
manner as described herein, that, except as hereinafter provided in this
section, each of the Underwriters shall purchase and pay for all the Shares
agreed to be purchased by such Underwriter hereunder upon tender to the
Representatives of all such Shares in accordance with the terms hereof. If any
Underwriter or Underwriters default in their obligations to purchase Shares
hereunder on either the First Closing Date or the Second Closing Date and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed to purchase does not exceed ten percent (10%) of the total
number of Shares which the Underwriters are obligated to purchase on such
Closing Date, the Representatives may make arrangements for the purchase of such
Shares by other persons, including any of the Underwriters, but if no such
arrangements are made by such Closing Date the nondefaulting Underwriters shall
be obligated severally, in proportion to their respective commitments hereunder,
to purchase the Shares which such defaulting Underwriters agreed but failed to
purchase on such Closing Date. If any Underwriter or Underwriters so default and
the aggregate number of Shares with respect to which such default or defaults
occur is greater than ten percent (10%) of the total number of Shares which the
Underwriters are obligated to purchase on such Closing Date, and arrangements
satisfactory to the Representatives for the purchase of such Shares by other
persons are not made within thirty-six hours after such default, this Agreement
will terminate without liability on the part of any nondefaulting Underwriter,
the Company and any Principal Shareholder except for the expenses to be paid by
the Company pursuant to section 9 hereof and except to the extent provided in
section 12 hereof.
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<PAGE> 36
In the event that Shares to which a default relates are to be
purchased by the nondefaulting Underwriters or by another party or parties, the
Representatives shall have the right to postpone the First Closing Date or the
Second Closing Date, as the case may be, for not more than 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. 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 14. EFFECTIVE DATE. This Agreement shall become
effective upon the execution and delivery of this Agreement by the parties
hereto. Such execution and delivery shall include an executed copy of this
Agreement sent by telecopier, facsimile transmission or other means of
transmitting written documents.
SECTION 15. TERMINATION. Without limiting the right to
terminate this Agreement pursuant to any other provision hereof, this Agreement
may be terminated by the Representatives prior to or on the First Closing Date
and the over-allotment option from the Company and the Selling Shareholders
referred to in section 6 hereof, if exercised, may be cancelled by the
Representatives at any time prior to or on the Second Closing Date, if in the
judgment of the Representatives, payment for and delivery of the Shares is
rendered impracticable or inadvisable because:
(a) additional 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 the American
Stock Exchange, or trading in securities generally shall have been
suspended or materially limited on either such exchange or on the
Nasdaq National Market or a general banking moratorium shall have been
established by either federal or state authorities in New York, Ohio or
Wisconsin;
(b) any 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 which is not
reflected in the Registration Statement but should be reflected therein
to make the statements or information contained therein not misleading
in any material respect; or
(c) an outbreak or escalation of hostilities or other national
or international calamity or any substantial change in political,
financial or economic conditions shall have occurred or shall have
accelerated to such extent, in the judgment of the Representatives, as
to have a material adverse effect on the financial markets of the
United States, or to make it impracticable or inadvisable to proceed
with completion of the sale of and payment for the Shares as provided
in this Agreement.
Any termination pursuant to this Section shall be without
liability on the part of any Underwriter to the Company and any Principal
Shareholder, or on the part of the Company and any Principal Shareholder to any
Underwriter, except for expenses to be
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<PAGE> 37
paid by the Company pursuant to section 9 hereof or reimbursed by the Company
pursuant to section 7(n) hereof and except as to indemnification to the extent
provided in section 12 hereof.
SECTION 16. REPRESENTATIONS AND INDEMNITIES TO SURVIVE
DELIVERY. The respective indemnities, agreements, representations,
warranties, covenants and other statements of the Company, of its officers or
directors, of the Principal Shareholders, of the Selling Shareholders, and of
the several 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, Principal Shareholder, Selling Shareholder or the
Company or any of its or their partners, officers, directors or any controlling
person, as the case may be, and will survive delivery of and payment for the
Shares sold hereunder.
SECTION 17. NOTICES. All communications hereunder will
be in writing and, if sent to the Representatives, will be mailed, delivered,
telecopied (with receipt confirmed) or telegraphed and confirmed to Robert W.
Baird & Co. Incorporated at 777 East Wisconsin Avenue, Milwaukee, Wisconsin
53202, Attention: Peter S. Kies, with a copy to Timothy E. Hoberg, Esq., Taft,
Stettinius & Hollister, 425 Walnut Street, 1800 Star Bank Center, Cincinnati,
Ohio 45202 and if sent to the Company, will be mailed, delivered, telecopied
(with receipt confirmed) or telegraphed and confirmed to the Company at 10000
Alliance Road, Cincinnati, Ohio 45242, Attention: President, with a copy to
Keating, Muething & Klekamp, 1800 Provident Tower, One East Fourth Street,
Cincinnati, Ohio 45202, Attention: Gary P. Kreider, Esq.; and, if sent to the
Selling Shareholders, will be mailed, delivered, telecopied (with receipt
confirmed) or telegraphed and confirmed to the Attorneys-in-Fact, or either of
them, in care of the Company, with copies to
______________________________________________________; and, if sent to the
Principal Shareholders, will be mailed, delivered, telecopied (with receipt
confirmed) or telegraphed and confirmed to each such Principal Shareholder c/o
the Company, with copies to _________________________________________________.
SECTION 18. SUCCESSORS. This Agreement will inure to
the benefit of and be binding upon the parties hereto and their respective
successors, personal representatives and assigns, and to the benefit of the
officers and directors and controlling persons referred to in section 12 hereof
and no other person will have any right or obligation hereunder. The term
"successors" shall not include any purchaser of the Shares as such from any of
the Underwriters merely by reason of such purchase.
SECTION 19. PARTIAL UNENFORCEABILITY. If any section,
paragraph, clause or provision of this Agreement is for any reason determined to
be invalid or unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph clause or provision hereof.
SECTION 20. APPLICABLE LAW; COUNTERPARTS. This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of Wisconsin without reference to conflict of law principles
thereunder. This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument, and shall be effective when at
least one counterpart hereof shall have been executed by or on behalf of each
party hereto.
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<PAGE> 38
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, each of the
Principal Shareholders, each of the Selling Shareholders and the several
Underwriters, including the Representatives, all in accordance with its terms.
Very truly yours,
LSI INDUSTRIES INC.
By:
--------------------------------------------
Robert J. Ready, Chairman of the Board
and President
THE PRINCIPAL SHAREHOLDERS:
-----------------------------------------------
Robert J. Ready
-----------------------------------------------
James P. Sferra
-----------------------------------------------
Donald E. Whipple
-----------------------------------------------
John N. Taylor, Jr.
THE SELLING SHAREHOLDERS:
-----------------------------------------------
Robert J. Ready
-----------------------------------------------
James P. Sferra
-----------------------------------------------
Donald E. Whipple
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<PAGE> 39
-----------------------------------------------
John N. Taylor, Jr.
The foregoing Underwriting
Agreement is hereby confirmed
and accepted as of the date
first above written.
ROBERT W. BAIRD & CO. INCORPORATED
A.G. EDWARDS & SONS, INC.
THE OHIO COMPANY
By: ROBERT W. BAIRD & CO. INCORPORATED
Acting as Representatives of the several
Underwriters (including themselves) identified
in Schedule II annexed hereto.
By:
---------------------------------------
Authorized Representative
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<PAGE> 40
LSI INDUSTRIES INC.
Schedule I
----------
<TABLE>
<CAPTION>
Number of Firm Number of Optional
Shares Shares
------ ------
<S> <C> <C>
The Company 1,100,000 165,000
The Selling Shareholders:
Robert J. Ready --------- -------
James P. Sferra --------- -------
Donald E. Whipple --------- -------
John N. Taylor, Jr. --------- -------
Total . . . . . . . . . . . . . . . . . . . . . . 1,800,000 270,000
========= =======
</TABLE>
<PAGE> 41
LSI INDUSTRIES INC.
Schedule II
-----------
<TABLE>
<CAPTION>
Number of Firm
Shares to
Name of Underwriter be Purchased
------------------- ------------
<S> <C>
Robert W. Baird & Co. Incorporated . . . . . . . . . . . . . . . . .
A.G. Edwards & Sons, Inc. . . . . . . . . . . . . . . . . . . . . . .
The Ohio Company . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 42
LSI INDUSTRIES INC.
Schedule III
<TABLE>
<CAPTION>
Number of Common
Name of Shareholder Shares
------------------- ------
<S> <C>
</TABLE>
<PAGE> 1
ARTICLES OF INCORPORATION
OF
LSI INDUSTRIES INC.
FIRST. The name of the Corporation shall be LSI Industries Inc.
SECOND. The place in Ohio where its principal office is to be located
is 10000 Alliance Road, Cincinnati, Hamilton County, Ohio 45242.
THIRD. The nature of the business and the purposes to be conducted
and promoted by the Corporation is to engage in designing, manufacturing and
supplying of electrical lighting systems and graphic products and to do any
other lawful act for which corporations may be formed under Sections 1701.01 to
1701.98, inclusive, of the Ohio Revised Code.
FOURTH. The maximum number of shares which the Corporation is
authorized to have outstanding is:
A. 13,000,000 shares of Common Stock, without par value and
B. 1,000,000 shares of Preferred Stock, without par value.
The holders of the Preferred Stock shall be entitled to receive
dividends out of any funds of the Corporation at the time legally available for
dividends when and as declared by the Board of Directors at such rate as shall
be fixed by the Board of Directors before any sum shall be set apart or applied
to the redemption or purchase of or any dividends shall be declared or paid
upon or set apart for any class or series of Common Stock. In the event of any
liquidation, dissolution or winding up of the Corporation, the holders of
Preferred Stock shall be entitled to receive out of the assets of the
Corporation payment of an amount per share as determined by the Board of
Directors as a liquidation price (including accrued dividends, if any) before
any distribution of assets shall be made to the holders of any class or series
of Common Stock.
The Board of Directors shall have the express authority from
time-to-time to adopt amendments to these Articles of Incorporation with
respect to any unissued or treasury shares of Preferred Stock and thereby to
fix or change the division of such shares into series and the designation and
authorized number of shares of each series and to provide for each such series:
voting powers, full or limited or no voting powers; dividend rates; dates of
payment of dividends; dates from which dividends are cumulative; liquidation
<PAGE> 2
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prices; redemption rights and prices; sinking fund requirements; conversion
rights; restrictions on the issuance of shares of other series of Preferred
Stock; and such other designations, preferences and relative participating
options or other special rights and qualifications, powers, limitations or
restrictions thereon as may be determined by the Board of Directors.
FIFTH. No holder of any shares of this Corporation shall have any
pre-emptive rights to subscribe for or to purchase any shares of this
Corporation of any class whether such shares of such class be now or hereafter
authorized or to purchase or subscribe for securities convertible into or
exchangeable for shares of any class or to which shall be attached or
appertained any warrants or rights entitling the holder thereof to purchase or
subscribed for shares of any class.
SIXTH. This Corporation, through its Board of Directors, shall have
the right and power to purchase any of its outstanding shares of such price and
upon such terms as may be agreed upon between the Corporation and any selling
shareholder.
SEVENTH. BUSINESS COMBINATIONS
A. Voting Requirements for Business Combinations
In addition to any affirmative vote required by law or the Articles,
no Business Combination may be effected with an Interested Shareholder for a
period of five years following the date that such shareholder became an
Interested Shareholder, unless approved by the affirmative vote of the holders
of outstanding voting securities of the Corporation entitled to exercise
two-thirds of the combined voting power of the Corporation and by the
affirmative vote of two-thirds of the voting securities beneficially owned by
Disinterested Shareholders.
B. Fair Price Requirement
Within 25 days after a corporation, person or other entity becomes an
Interested Shareholder, such Interested Shareholder shall give written notice
to each holder of voting securities or securities convertible into or
exchangeable for voting securities, or options, warrants or rights to purchase
voting securities or securities convertible into or exchangeable for voting
securities of the Corporation stating that it is an Interested Shareholder and
that such holder may sell any of the above-mentioned securities to the
Interested Shareholder for cash at the price, as determined below. Within 25
days after a holder receives the above notice, the holder may send written
demand to the Interested Shareholder stating the number, class and identifying
number of the securities
<PAGE> 3
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to be sold to the Interested Shareholder. Within 10 days after the holder
sends written demand, the Interested Shareholder must purchase the securities
identified in the written demand. Upon expiration of the 10 day purchase
period, any holder of securities entitled to written notice under this section
may institute an action or proceeding in any court of law or equity to enforce
his or her rights under this section.
1. The price for all securities to be purchased by an
Interested Shareholder shall be the higher of (a) the highest
price paid per security by the Interested Shareholder for
acquisitions of beneficial ownership of voting securities of
the Corporations at any time plus an increment representing
any value, including, without limitation, any proportion of
any value payable for acquisition of control of the
Corporation, that may not be reflected in such price or (b)
the highest price per security of the voting securities traded
on the securities markets in which the Corporation's
securities are traded during the 45 day period commencing 30
days prior to the date such Interested Shareholder became an
Interested Shareholder.
2. For purposes of determining the price, all
convertible or exchangeable securities shall be deemed to be
converted or exchanged and all options, warrants and rights
shall be treated as being exercised. That portion of the
price equal to the exercise price for options, warrants and
rights shall be paid to the Corporation and the balance to the
holders thereof.
3. If an Interested Shareholder does not send notice or
purchase securities as required by this section, the
Corporation, at its option, may assume the obligations of the
Interested Shareholders.
4. Regardless of anything contained in this subsection,
in the event any court of law or equity declares an Interested
Shareholder's duty to purchase securities under this section
unenforceable, the Corporation shall offer to purchase such
securities for cash at the price determined by the application
of subsection 1. above.
<PAGE> 4
- 4 -
C. Definitions
For the purposes of this Article, certain terms are defined as
follows:
1. "Business Combination" means:
1.1 Any merger or consolidation of the Corporation or any
direct or indirect subsidiary, partnership, trust or other
business entity of the Corporation with or into an Interested
Shareholder or subsidiary, Affiliate or Associate of an
Interested Shareholder, or any other corporation, person or
other entity; or
1.2 Any sale, lease, exchange, mortgage, pledge, transfer
or other disposition, whether in one transaction or a series
of transactions, to or with an Interested Shareholder or
subsidiary, Affiliate or Associate of an Interested
Shareholder, of assets of the Corporation or any direct or
indirect subsidiary, partnership, trust or other business
entity of the Corporation, which assets have an aggregate
market value equal to 10% or more of either the aggregate
market value of all the assets of the Corporation determined
on a consolidated basis or the aggregate market value of all
the outstanding stock of the Corporation; or
1.3 Any sale, lease, exchange, mortgage, pledge, transfer
or other disposition, whether in one transaction or a series
of transactions, to the Corporation or any subsidiary,
partnership, trust or other business entity of the Corporation
of any assets in exchange for voting securities or securities
convertible into or exchangeable for voting securities, or
options, warrants or rights to purchase voting securities or
securities convertible into or exchangeable for voting
securities, of the Corporation or any subsidiaries of the
Corporation by an Interested Shareholder or subsidiary,
Affiliate or Associate of an Interested Shareholder; or
1.4 Any reclassification of securities of the
Corporation, recapitalization or other transaction which has
the effect, directly or indirectly, of increasing the voting
power of an Interested Shareholder or a subsidiary, Affiliate
or Associate of an Interested Shareholder; or
1.5 Any receipt by an Interested Shareholder or a
subsidiary, Affiliate or Associate of an Interested
Shareholder, except proportionately as a shareholder, of
<PAGE> 5
- 5 -
the benefit, directly or indirectly of any loans, advances,
guarantees, pledges, or other financial benefits provided by or
through the Corporation or any direct or indirect subsidiary,
partnership, trust or other business entity of the Corporation,
except proportionately as a shareholder; or
1.6 Any merger or other action by an Interested
Shareholder which results in the termination of the
Corporation's existence as a corporation formed under the Ohio
Revised Code; or
1.7 The adoption of any plan or proposal for the partial
or complete liquidation or dissolution of the Corporation
proposed by or on behalf of an Interested Shareholder.
2. "Interested Shareholder" means any corporation, person or
other entity which is the beneficial owner, directly or indirectly, of
outstanding voting securities of the Corporation representing 15% or more of
the votes then entitled to be voted in the election of the Directors of the
Corporation; provided, however, that the term "Interested Shareholder" shall
not include any corporation, person, or entity who (a) was an Interested
Shareholder as of the effective date of this Article SEVENTH or (b) acquired
said securities from a person described in (a) above by gift, inheritance or in
a transaction in which no consideration was exchanged.
Any corporation, person or other entity will be deemed to be the
beneficial owner of any voting securities:
(a) Which it owns directly, whether or not of
record; or
(b) Which it (i) has the right to acquire,
whether such right is exercisable immediately or
after the passage of time and whether or not such
right is exercisable only after specified conditions
are met, pursuant to any agreement or arrangement or
understanding or upon exercise of conversion rights,
exchange rights, warrants or options or otherwise or
(ii) has the right to vote pursuant to any agreement
or arrangement or understanding; or
(c) Which are beneficially owned, directly or
indirectly, including securities deemed to be owned
through application of clause (b) above, by a
subsidiary, "Affiliate" or "Associate"; or
<PAGE> 6
- 6 -
(d) Which are beneficially owned, directly or
indirectly, including securities deemed owned through
application of clause (b) above, by any other
corporation, person or other entity with which the
Interested Shareholder or any of its Affiliates or
Associates, has any agreement or arrangement or
understanding for the purpose of acquiring, holding,
voting or disposing of voting securities of the
Corporation.
3. An "Affiliate" or a corporation, person or other entity
"affiliated" with a specified corporation, person or other entity means a
corporation, person or other entity that directly or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common control
with the corporation, person or other entity specified. The term "Associate",
when used to indicate a relationship with any corporation, person or other
entity means (a) any corporation or organization other than the Corporation or
subsidiaries of the Corporation, of which such corporation, person or other
entity is an officer or partner or is, directly or indirectly, the beneficial
owner of Ten Percent (10%) or more of any class of voting securities, (b) any
trust or other estate in which such corporation, person or other entity has a
substantial beneficial interest or as to which such corporation, person or
other entity served as trustee or in similar fiduciary capacity and (c) any
relative or spouse of such person, or relative of such spouse, who has the same
home of such person or who was a director or officer of the corporation or
organization or any of its parents or subsidiaries.
4. "Disinterested Director" means any member of the Board of
Directors who is not an Interested Shareholder, Affiliate or Associate of an
Interested Shareholder or any of their Affiliates or Associates.
5. "Disinterested Shareholder" means the owner of voting
securities other than those beneficially owned by an Interested Shareholder.
D. Director Approval
1. The provisions of Section A of this Article shall not
be applicable if the Business Combination shall have been approved by a
majority of the Disinterested Directors prior to the consummation of such
Business Combination.
2. The provisions of Section B of this Article shall not
be applicable if the transaction or series of transactions by which a
corporation, person or other entity became an Interested
<PAGE> 7
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Shareholder shall have been approved by a majority of the Disinterested
Directors.
E. Amendments to Article SEVENTH
The affirmative vote of majority of the Disinterested Directors and
the affirmative vote of the holders of outstanding voting securities of the
Corporation entitled to exercise two-thirds of the voting power of the
Corporation and the affirmative vote of two-thirds of the voting securities
beneficially owned by Disinterested Shareholders shall be required to amend any
provisions of this Article SEVENTH.
<PAGE> 8
CERTIFICATE OF
AMENDED ARTICLES OF INCORPORATION OF
LSI INDUSTRIES INC.
Robert J. Ready, who is President and Donald E. Whipple, who is
Secretary of the above named Ohio corporation for profit with its principal
location at 10000 Alliance Road, Cincinnati, Ohio 45242, do hereby certify
that:
X a meeting of the shareholders was duly called and held on the 16th day
--- of November, 1995, 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 77% of the voting power
of the corporation,
in a writing signed by all of the shareholders who would be entitled
--- to a notice of a meeting held for that purpose,
the following resolution to amend Articles of Incorporation was adopted:
The Fourth Article of the Company's Articles of Incorporation is
hereby amended and restated as follows:
FOURTH. The maximum number of shares which the Corporation is
authorized to have outstanding is:
A. 30,000,000 shares of Common Stock, without par value and
B. 1,000,000 shares of Preferred Stock, without par value.
The holders of the Preferred Stock shall be entitled to receive
dividends out of any funds of the Corporation at the time legally
available for dividends when and as declared by the Board of Directors
at such rate as shall be fixed by the Board of Directors before any
sum shall be set apart or applied to the redemption or purchase of or
any dividends shall be declared or paid upon or set apart for any
class or series of Common Stock. In the event of any liquidation,
dissolution or winding up of the Corporation, the holders of Preferred
Stock shall be entitled to receive out of the assets of the
Corporation payment of an amount per share as determined by the Board
of Directors as a liquidation price (including accrued
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dividends, if any) before any distribution of assets shall be made to
the holders of any class or series of Common Stock.
The Board of Directors shall have the express authority from
time-to-time to adopt amendments to these Articles of Incorporation
with respect to any unissued or treasury shares of Preferred Stock and
thereby to fix or change the division of such shares into series and
the designation and authorized number of shares of each series and to
provide for each such series: voting powers, full or limited or no
voting powers; dividend rates; dates of payment of dividends; dates
from which dividends are cumulative; liquidation prices; redemption
rights and prices; sinking fund requirements; conversion rights;
restrictions on the issuance of shares of other series of Preferred
Stock; and such other designations, preferences and relative
participating options or other special rights and qualifications,
powers, limitations or restrictions thereon as may be determined by
the Board of Directors.
IN WITNESS WHEREOF, the above named offices, acting for and on behalf
of the corporation, have subscribed their names this 21st day of November,
1995.
LSI INDUSTRIES INC.
BY: /s/ Robert J. Ready
------------------------------------
Robert J. Ready
BY: /s/ Donald E. Whipple
------------------------------------
Donald E. Whipple
<PAGE> 1
CODE OF REGULATIONS
OF
LSI INDUSTRIES INC.
ARTICLE I
Fiscal Year
Unless otherwise designated by resolution of the Board of Directors,
the fiscal year of the Corporation shall commence on the 1st day of July of
each year, or be such other period as the Board of Directors may designate by
resolution.
ARTICLE II
Shareholders
SECTION 1. Annual Meetings. The Annual Meeting of the Shareholders of
this Corporation, for the election of members of the Board of Directors, the
consideration of financial statements and other reports, and the transaction of
such other business as may properly be brought before such meeting, shall be
held at such time as determined by the Board of Directors each year. Upon due
notice, there may also be considered and acted upon at an Annual Meeting any
matter which could properly be considered and acted upon at a Special Meeting
in which case and for which purpose the Annual Meeting shall also be considered
as, and shall be a Special Meeting. In the event the Annual Meeting is not
held or if Directors are not elected thereat, a Special Meeting may be called
and held for that purpose.
SECTION 2. Special Meetings. Special meetings of the Shareholders may
be held on any business day when called by the Chairman of the Board, the
President, a majority of directors, or persons holding fifty percent (50%) of
all shares outstanding and entitled to vote. Calls for special business shall
be considered at any such meeting other than that specified in the call
therefor.
SECTION 3. Place of Meetings. Any meeting of Shareholders may be held
at such place within or without the State of Ohio as may be designated in the
Notice of said meeting.
SECTION 4. Notice of Meeting and Waiver of Notice.
(a) Notice. Written notice of the time, place and
purposes of any meeting of Shareholders shall be given to each
Shareholder entitled thereto not less than seven (7)
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days nor more than sixty (60) days before the date fixed for the
meeting and as prescribed by law. Such notice shall be given either
by personal delivery or mailed to each Shareholder entitled to notice
of or to vote at such meeting. If such notice is mailed, it shall be
directed, postage prepaid, to the Shareholders at their respective
addresses as they appear upon the records of the Corporation, and
notice shall be deemed to have been given on the day so mailed. If
any meeting is adjourned to another time or place, no notice as to
such adjourned meeting need be given other than by announcement at the
meeting at which such an adjournment is taken. No business shall be
transacted at any such adjourned meeting except as might have been
lawfully transacted at the meeting at which such adjournment was
taken.
(b) Notice to Joint Owners. All notices with respect
to any shares to which persons are entitled by joint or common
ownership may be given to that one of such persons who is named first
upon the books of this Corporation, and notice so given shall be
sufficient notice to all the holders of such shares.
(c) Waiver. Notice of any meeting, however, may be
waived in writing by any Shareholder either before or after any
meeting of Shareholders, or by attendance at such meeting without
protest to the commencement thereof.
SECTION 5. Shareholders Entitled to Notice and to Vote. If a record
date shall not be fixed or the books of the Corporation shall not be closed
against transfers of shares pursuant to statutory authority, the record date
for the determination of Shareholders entitled to notice of or to vote at any
meeting of Shareholders shall be the close of business on the twentieth day
prior to the date of the meeting and only Shareholders of record at such record
date shall be entitled to notice of and to vote at such meeting. Such record
date shall continue to be the record date for all adjournments of such meeting
unless a new record date shall be fixed and notice thereof and of the date of
the adjourned meeting be given to all Shareholders entitled to notice in
accordance with the new record date so fixed.
SECTION 6. Quorum. At any meeting of Shareholders, the holders of
shares entitling them to exercise a majority of the voting power of the
Corporation, present in person or by proxy, shall constitute a quorum for such
meeting; provided, however, that no action required by law, the Articles, or
these Regulations to be authorized or taken by the holders of a designated
proportion of the shares of the Corporation may be authorized or taken by a
lesser proportion. The Shareholders present in person or by
<PAGE> 3
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proxy, whether or not a quorum be present, may adjourn the meeting from time to
time without notice other than by announcement at the meeting.
SECTION 7. Organization of Meetings.
(a) Presiding Officer. The Chairman of the Board, or
in his absence, the President, or in the absence of both of them, a
Vice President of the Corporation, shall call all meetings of the
Shareholders to order and shall act as Chairman thereof; if all are
absent, the Shareholders shall elect a Chairman.
(b) Minutes. The Secretary of the Corporation, or, in
his absence, an Assistant Secretary, or, in the absence of both, a
person appointed by the Chairman of the meeting, shall act as
Secretary of the meeting and shall keep and make a record of the
proceedings thereat.
SECTION 8. Order of Business. The order of business at all meetings
of the Shareholders, unless waived or otherwise changed by the Chairman of the
meeting or the Board of Directors, shall be as follows:
1. Call meeting to order.
2. Selection of Chairman and/or Secretary, if necessary.
3. Proof of notice of meeting and presentment of affidavit
thereof.
4. Roll call, including filing of proxies with Secretary.
5. Upon appropriate demand, appointment of inspectors of
election.
6. Reading, correction and approval of previously unapproved
minutes.
7. Reports of officers and committees.
8. If annual meeting, or meeting called for that purpose,
election of Directors.
9. Unfinished business, if adjourned meeting.
10. Consideration in sequence of all other matters set forth in
the call for and written notice of the meeting.
11. Any new business other than that set forth in the notice of
the meeting which shall have been submitted to the
Secretary of the corporation in writing at least fifteen
days prior to the date of the meeting.
12. Adjournment.
<PAGE> 4
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SECTION 9. Voting. Except as provided by statute or in the Articles,
every Shareholder entitled to vote shall be entitled to cast one vote on each
proposal submitted to the meeting for each share held of record by him on the
record date for the determination of the Shareholders entitled to vote at the
meeting. At any meeting at which a quorum is present, all questions and
business which may come before the meeting shall be determined by a majority of
votes cast, except when a greater proportion is required by law, the Articles,
or these Regulations.
SECTION 10. Proxies. A person who is entitled to attend a
Shareholders' meeting, to vote thereat, or to execute consents, waivers and
releases, may be represented at such meeting or vote thereat, and execute
consents, waivers, and releases and exercise any of his rights, by proxy or
proxies appointed by a writing signed by such person, or by his duly authorized
attorney, as provided by the laws of the State of Ohio.
SECTION 11. List of Shareholders. At any meeting of Shareholders a
list of Shareholders, alphabetically arranged, showing the number and classes
of shares held by each on the record date applicable to such meeting, shall be
produced on the request of any Shareholder.
ARTICLE III
Directors
SECTION 1. General Powers.
The authority of this Corporation shall be exercised by or under the
direction of the Board of Directors, except where the law, the Articles or
these Regulations require action to be authorized or taken by the Shareholders.
SECTION 2. Election, Number and Qualification of Directors.
(a) Election. The Directors shall be elected at the
annual meeting of the Shareholders, or if not so elected, at a special
meeting of Shareholders called for that purpose. Only persons
nominated by an officer, director or in writing by a shareholder at
least five days prior to the meeting at which directors are to be
elected shall be eligible for election.
(b) Number and Term. The Board of Directors shall be
classified with respect to the time for which they shall severally
hold office, by dividing them into two classes, to be known as classes
"A" and "B". Of the Directors first
<PAGE> 5
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chosen, Class A shall consist of four Directors, each to hold office
for two years, or until the second annual meeting of Shareholders;
Class B shall consist of three Directors, each to hold office for one
year, or until the next annual meeting of Shareholders. At each
annual meeting, the successors to the class of Directors whose term
shall expire in that year shall be elected to hold office for the term
of two years, so that the term of office of one class of Directors
shall expire in each year. The total number of Directors and the
number of Directors of each class may be fixed or changed at a meeting
of the Shareholders called for the purpose of electing Directors at
which a quorum is present, by the affirmative vote of the holders of a
majority of the shares represented at the meeting and entitled to vote
on such proposal. In addition, the total number of Directors and the
number of Directors of each class may be fixed or changed by action of
the Directors at meeting called for that purpose at which a quorum is
present by a majority vote of the Directors present at the meeting.
The Directors then in office may fill any Director's office that is
created by an increase in the number of Directors. The number of
Directors elected shall be deemed to be the number of Directors fixed
unless otherwise fixed by resolution adopted at the meeting at which
such Directors are elected.
(c) Qualifications. Directors need not be
Shareholders of the Corporation.
SECTION 3. Term of Office of Directors.
(a) Term. Each Director shall hold office until the
next annual meeting of the Shareholders and until his successor has
been elected or until his earlier resignation, removal from office, or
death. Directors shall be subject to removal as provided by statute
or by other lawful procedures and nothing herein shall be construed to
prevent the removal of any or all Directors in accordance therewith.
(b) Resignation. A resignation from the Board of
Directors shall be deemed to take effect immediately upon its being
received by any incumbent corporate officer other than an officer who
is also the resigning Director, unless some other time is specified
therein.
(c) Vacancy. In the event of any vacancy in the Board
of Directors for any cause, the remaining Directors, though less than
a majority of the whole Board, may fill any such vacancy for the
unexpired term.
<PAGE> 6
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SECTION 4. Meetings of Directors.
(a) Regular Meetings. A regular meeting of the Board
of Directors shall be held immediately following the adjournment of
the annual meeting of the Shareholders or a special meeting of the
Shareholders at which Directors are elected. The holding of such
Shareholders' meeting shall constitute notice of such Directors'
meeting and such meeting shall be held without further notice. Other
regular meetings shall be held at such other times and places as may
be fixed by the Directors.
(b) Special Meetings. Special Meetings of the Board
of Directors may be held at any time upon call of the Chairman of the
Board, the President, any Vice President, or any two Directors.
(c) Place of Meeting. Any meeting of Directors may be
held at such place within or without the State of Ohio as may be
designated in the notice of said meeting.
(d) Notice of Meeting and Waiver of Notice. Notice of
the time and place of any regular or special meeting of the Board of
Directors (other than the regular meeting of Directors following the
adjournment of the annual meeting of the Shareholders or following any
special meeting of the Shareholders at which Directors are elected)
shall be given to each Director by personal delivery, telephone, mail,
telegram or cablegram at least forty-eight hours before the meeting,
which notice need not specify the purpose of the meeting. Such
notice, however, may be waived in writing by any Director either
before or after any such meeting, or by attendance at such meeting
without protest prior to the commencement thereof.
SECTION 5. Quorum and Voting.
At any meeting of Directors, not less than one-half of the whole
authorized number of Directors is necessary to constitute a quorum for such
meeting, except that a majority of the remaining Directors in office
constitutes a quorum for filling a vacancy in the Board. At any meeting at
which a quorum is present, all acts, questions, and business which may come
before the meeting shall be determined by a majority of votes cast by the
Directors present at such meeting, unless the vote of a greater number is
required by the Articles, Regulations or By-Laws.
<PAGE> 7
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SECTION 6. Committees.
(a) Appointment. The Board of Directors may from time
to time appoint certain of its members to act as a committee or
committees in the intervals between meetings of the Board and may
delegate to such committee or committees power to be exercised under
the control and direction of the Board. Each such committee and each
member thereof shall serve at the pleasure of the Board.
(b) Executive Committee. In particular, the Board of
Directors may create from its membership and define the powers and
duties of an Executive Committee. During the intervals between
meetings of the Board of Directors, the Executive Committee shall
possess and may exercise all of the powers of the Board of Directors
in the management and control and the business of the Corporation to
the extent permitted by law. All action taken by the Executive
Committee shall be reported to the Board of Directors at its first
meeting thereafter.
(c) Committee Action. Unless otherwise provided by
the Board of Directors, a majority of the members of any committee
appointed by the Board of Directors pursuant to this Section shall
constitute a quorum at any meeting thereof and the act of a majority
of the members present at a meeting at which a quorum is present shall
be the act of such committee. Action may be taken by any such
committee without a meeting by a writing signed by all its members.
Any such committee shall prescribe its own rules for calling and
holding meetings and its method of procedure, subject to any rules
prescribed by the Board of Directors, and shall keep a written record
of all action taken by it.
SECTION 7. Action of Directors Without a Meeting.
Any action which may be taken at a meeting of Directors may be taken
without a meeting if authorized by a writing or writings signed by all the
Directors, which writing or writings shall be filed or entered upon the records
of the Corporation.
SECTION 8. Compensation of Directors.
The Board of Directors may allow compensation for attendance at
meetings or for any special services, may allow compensation to the member of
any committee, and may reimburse any Director for his expenses in connection
with attending any Board or committee meeting.
<PAGE> 8
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SECTION 9. Relationship with Corporation.
Directors shall not be barred from providing professional or other
services to the Corporation. No contract, action or transaction shall be void
or voidable with respect to the Corporation for the reason that it is between
or affects the Corporation and one or more of its Directors, or between or
affects the Corporation and any other person in which one or more of its
Directors are directors, trustees or officers or have a financial or personal
interest, or for the reason that one or more interested Directors participate
in or vote at the meeting of the Directors or committee thereof that authorizes
such contract, action or transaction, if in any such case any of the following
apply:
(a) the material facts as to the Director's
relationship or interest and as to the contract, action or transaction
are disclosed or are known to the Directors or the committee and the
Directors or committee, in good faith, reasonably justified by such
facts, authorize the contract, action or transaction by the
affirmative vote of a majority of the disinterested Directors, even
though the disinterested Directors constitute less than a quorum;
(b) the material facts as to the Director's
relationship or interest and as to the contract, action or transaction
are disclosed or are known to the shareholders entitled to vote
thereon and the contract, action or transaction is specifically
approved at a meeting of the shareholders held for such purpose by the
affirmative vote of the holders of shares entitling them to exercise a
majority of the voting power of the Corporation held by persons not
interested in the contract, action or transaction; or
(c) the contract, action or transaction is fair as to
the Corporation as of the time it is authorized or approved by the
Directors, a committee thereof or the shareholders.
SECTION 10. Attendance at Meetings of
Persons Who Are Not Directors
Unless waived by a majority of Directors in attendance, not less than
twenty-four (24) hours before any regular or special meeting of the Board of
Directors any Director who desires the presence at such meeting of not more
than one person who is not a Director shall so notify all other Directors,
request the presence of such person at the meeting, and state the reason in
writing. Such person will not be permitted to attend the
<PAGE> 9
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Directors' meeting unless a majority of the Directors in attendance vote to
admit such person to the meeting. Such vote shall constitute the first order
of business for any such meeting of the Board of Directors. Such right to
attend, whether granted by waiver or vote, may be revoked at any time during
any such meeting by the vote of a majority of the Directors in attendance.
ARTICLE IV
Officers
SECTION 1. General Provisions.
The Board of Directors shall elect a President, a Secretary and a
Treasurer, and may elect a Chairman of the Board, one or more Vice Presidents,
and such other officers and assistant officers as the Board may from
time-to-time deem necessary. The Chairman of the Board, if any, shall be a
Director, but none of the other officers need be a Director. Any two or more
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 to be executed, acknowledged or verified by two or more
officers.
SECTION 2. Powers and Duties.
All officers, as between themselves and the Corporation, shall
respectively have such authority and perform such duties as are customarily
incident to their respective offices, and as may be specified from time to time
by the Board of Directors, regardless of whether such authority and duties
are customarily incident to such office. In the absence of any officer of the
Corporation, or for any other reason the Board of Directors may deem
sufficient, the powers or duties of such officer, or any of them may be
delegated, to any other officer or to any Director. The Board of Directors may
from time to time delegate to any officer authority to appoint and remove
subordinate officers and to prescribe their authority and duties.
SECTION 3. Term of Office and Removal.
(a) Term. Each officer of the Corporation shall hold
office at the pleasure of the Board of Directors, and unless sooner
removed by the Board of Directors, until the meeting of the Board of
Directors following the date of election of Directors and until his
successor is elected and qualified.
<PAGE> 10
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(b) Removal. The Board of Directors may remove any
officer at any time with or without cause by the affirmative vote of a
majority of Directors in office.
SECTION 4. Compensation of Officers.
Unless compensation is otherwise determined by a majority of the
Directors at a regular or special meeting of the Board of Directors or unless
such determination is delegated by the Board of Directors to another officer or
officers, the President of the Corporation from time to time shall determine
the compensation to be paid to all officers and other employees for services
rendered to the Corporation.
ARTICLE V
Indemnification of Directors and Officers
SECTION 1. Right of Indemnification.
Each Director, officer and member of a committee of this Corporation,
and any person who may have served at the request of this Corporation as a
Director, trustee, officer, employee or agent of any other corporation,
partnership, joint venture, trust or other enterprise, such person's heirs,
executors and administrators, shall be indemnified by the Corporation against
all costs and expenses actually and reasonably incurred by such person
concerning, or in connection with, the defense of any claim asserted or suit or
proceeding brought against such person by reason of that person's conduct,
actions or inaction in such capacity at the time of incurring such costs or
expenses, except costs and expenses incurred in relation to matters as to which
such person shall have been willfully derelict in the performance of such
person's duty. Such costs and expenses shall include the cost of reasonable
settlements (with or without suit), judgments, attorneys' fees, costs of suit,
fines and penalties and other liabilities (other than amounts paid by any such
person to this Corporation or any subsidiary thereof). To the extent any of
the indemnification provisions set forth in this Article prove to be
ineffective for any reason in furnishing the indemnification provided or limit
in any way the indemnification available under Ohio law, each of the persons
named above shall be indemnified by the Corporation to the fullest extent
permitted by the General Corporation Law of Ohio, as the same exists or may
hereafter be amended.
<PAGE> 11
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SECTION 2. Definition of Performance.
For the purposes of this Article, a Director, officer or member of a
committee shall conclusively be deemed not to have been willfully derelict in
the performance of such person's duty as such Director, officer or member of
committee:
(a) Determination by Suit. In a matter which shall
have been the subject of a suit or proceeding in which such person was
a party which is disposed of by adjudication on the merits, unless
such person shall have been finally adjudged in such suit or
proceeding to have been willfully derelict in the performance of that
person's duty as such Director, officer or member of a committee; or
(b) Determination by Committee. In a matter not
falling within (a) above, a majority of disinterested members of the
Board of Directors or a majority of a committee of disinterested
Shareholders of the Corporation, selected as hereinafter provided,
shall determine that such person was not willfully derelict. Such
determination shall be made by the disinterested members of the Board
of Directors except where such members shall determine that such
matter should be referred to said committee of disinterested
Shareholders.
SECTION 3. Selection of Committee.
The selection of a committee of Shareholders provided above may be
made by the majority vote of the disinterested Directors or, if there be no
disinterested Director or Directors, by the chief executive officer of the
Corporation. A Director or Shareholder shall be deemed disinterested in a
matter if such person has no interest therein other than as a Director or
Shareholder of the Corporation as the case may be. The Corporation shall pay
the fees and expenses of the Shareholders or Directors, as the case may be,
incurred in connection with making a determination as above provided.
SECTION 4. Non-Committee Determination.
In the event that a Director, officer or member of a committee shall
be found by some other method not to have been willfully derelict in the
performance of such person's duty as such Director, officer or member of a
committee, then such determination as to dereliction shall not be questioned
on the ground that it was made otherwise than as provided above.
<PAGE> 12
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SECTION 5. Indemnification by Law.
The foregoing right of indemnification shall be in addition to any
rights to which any such person may otherwise be entitled as a matter of law.
SECTION 6. Miscellaneous.
The right of indemnification conferred hereby shall be extended to any
threatened action, suit or proceeding, and the failure to institute it shall be
deemed its final determination. Advances may be made by the Corporation against
costs, expenses and fees, as and upon the terms, determined by the Board of
Directors.
ARTICLE VI
Securities Held by the Corporation
SECTION 1. Transfer of Securities Owned by the Corporation.
All endorsements, assignments, transfers, stock powers, share powers
or other instruments of transfer of securities standing in the name of the
Corporation shall be executed for and in the name of the Corporation by the
President, by a Vice President, by the Secretary or by the Treasurer or by any
other person or persons as may be thereunto authorized by the Board of
Directors.
SECTION 2. Voting Securities Held by the Corporation.
The Chairman of the Board, President, and Vice President, Secretary or
Treasurer, in person or by another person thereunto authorized by the Board of
Directors, in person or by proxy or proxies appointed by him, shall have full
power and authority on behalf of the Corporation to vote, act and consent with
respect to any securities issued by other corporations which the Corporation
may own.
ARTICLE VII
Share Certificates
SECTION 1. Transfer and Registration of Certificates.
The Board of Directors shall have authority to make such rules and
regulations, not inconsistent with law, the Articles or
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these Regulations, as it deems expedient concerning the issuance, transfer and
registration of certificates for shares and the shares represented thereby and
may appoint transfer agents and registrars thereof.
SECTION 2. Substituted Certificates.
Any person claiming that a certificate for shares has been lost,
stolen or destroyed, shall make an affidavit or affirmation of that fact and,
if required, shall give the Corporation (and its registrar or registrars and
its transfer agent or agents, if any) a bond of indemnity, in such form and
with one or more sureties satisfactory to the Board, and, if required by the
Board of Directors, shall advertise the same in such manner as the Board of
Directors may require, whereupon a new certificate may be executed and
delivered of the same tenor and for the same number of shares as the one
alleged to have been lost, stolen or destroyed.
ARTICLE VIII
Consistency with Articles of Incorporation
If any provisions of these Regulations shall be inconsistent with the
Corporation's Articles of Incorporation (and as they may be amended from time
to time), the Articles of Incorporation (as so amended at the time) shall
govern.
ARTICLE IX
Section Headings
The headings contained in this Code of Regulations are for reference
purposes only and shall not be construed to be part of and/or shall not affect
in any way the meaning or interpretation of this Code of Regulations.
ARTICLE X
Amendments
This Code of Regulations of the Corporation (and as it may be amended
from time-to-time) may be amended or added to by the affirmative vote or the
written consent of the Shareholders of record entitled to exercise a majority
of the voting power on such proposal, except for an amendment to Article II,
Section
<PAGE> 14
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2(b) relating to the classification of Directors which shall require the
affirmative vote of two-thirds (2/3) of the holders of outstanding shares;
provided, however, that if an amendment or addition or adopted by written
consent without a meeting of the Shareholders, it shall be the duty of the
Secretary to enter the amendment or addition in the records of the Corporation,
and to mail a copy of such amendment or addition to each Shareholder of record
who would be entitled to vote thereon and did not participate in the adoption
thereof.
<PAGE> 1
EXHIBIT 5
FACSIMILE (513) 579-6956
December 14, 1995
Direct Dial: (513) 579-6411
LSI Industries Inc.
10000 Alliance Road
Cincinnati, Ohio 45242
Gentlemen:
We have examined the corporate records and proceedings of LSI Industries
Inc. (the "Corporation") with respect to:
1. The organization of the Corporation;
2. The legal sufficiency of all corporate proceedings of the
Corporation in connection with the creation and issuance of all of the
present outstanding and issued Common Shares of the Corporation;
3. The legal sufficiency of all corporate proceedings taken in
connection with the authorization of the issuance of 1,100,000 Common
Shares, plus up to an additional 165,000 Common Shares to cover an
over-allotment option, all to be issued in a public offering pursuant to a
Registration Statement filed with the Securities and Exchange Commission.
Based upon such examination, we are of the opinion:
1. That the Corporation is a duly organized and validly existing
corporation in good standing under the laws of the State of Ohio;
2. That the Corporation has taken all necessary and required corporate
action in connection with the proposed issuance of the aforesaid Common
Shares and that when, and if, issued, delivered and paid for, such Common
Shares will be duly authorized, validly issued, fully paid and
non-assessable Common Shares of the Corporation free of any claim of
pre-emptive rights; and
3. That the 700,000 Common Shares, plus up to an additional 105,000
Common Shares to cover an over-allotment option, which are being sold by
the selling shareholders are duly authorized, legally issued, fully paid
and non-assessable Common Shares of the Corporation free of any claim of
pre-emptive rights.
We hereby consent to be named in the Registration Statement and the
Prospectus part thereof as the attorneys who will pass upon legal matters in
connection with the aforesaid Common Shares and to the filing of this opinion as
an exhibit to the Registration Statement, and furthermore consent to all
references made to this firm in the Registration Statement.
Yours truly,
KEATING, MUETHING & KLEKAMP
BY: __________________________________
Gary P. Kreider
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-3 of our report dated August 18, 1995 relating
to the financial statements of LSI Industries Inc. which appears in such
Prospectus. We also consent to the application of such report to the Financial
Statement Schedule for the three years ended June 30, 1995 listed under Item
14(a) of LSI Industries Inc. Annual Report on Form 10-K for the year ended June
30, 1995 when such schedule is read in conjunction with the financial statements
referred to in our report. The audits referred to in such report also include
this schedule. We also consent to the references to us under the headings
"Experts" and "Selected Consolidated Financial Information" in such Prospectus.
However, it should be noted that Price Waterhouse LLP has not prepared or
certified such "Selected Consolidated Financial Information."
Price Waterhouse LLP
Cincinnati, Ohio
December 15, 1995
