<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 13, 1996
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ADVANCED LIGHTING TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
------------------------
<TABLE>
<S> <C> <C>
OHIO 3641 34-1803229
(State of (Primary Standard Industrial (I.R.S. Employer
incorporation) Classification Code Number) Identification Number)
</TABLE>
------------------------
2307 E. AURORA ROAD
SUITE ONE
TWINSBURG, OH 44087
TELEPHONE: (216) 963-6680
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
WAYNE R. HELLMAN, CHIEF EXECUTIVE OFFICER
ADVANCED LIGHTING TECHNOLOGIES, INC.
2307 E. AURORA ROAD
SUITE ONE
TWINSBURG, OH 44087
TELEPHONE: (216) 963-6680
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
The Commission is requested to send copies of all communications to:
<TABLE>
<S> <C> <C>
GERALD W. COWDEN, ESQ. JAMES S. HOGG, ESQ. JEFFREY M. STEIN, ESQ.
COWDEN, HUMPHREY & SARLSON CO., ULMER & BERNE P.L.L. KING & SPALDING
L.P.A. 1300 EAST NINTH STREET 191 PEACHTREE STREET
3500 TERMINAL TOWER SUITE 900 ATLANTA, GA 30303
CLEVELAND, OH 44113 CLEVELAND, OH 44114 (404) 572-4600
(216) 241-2880 (216) 621-8400
</TABLE>
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration
Statement becomes effective.
If any of the securities being offered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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. /X/
------------------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE FEE
- --------------------------------
Common Stock, $.001 par value... 3,795,000 Shares $17.00(2) $64,515,000(2) $22,247
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</TABLE>
(1) Includes 495,000 shares of Common Stock which the Underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457, based on the average of the high and low sales prices
of the Common Stock on the Nasdaq National Market on June 12, 1996.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DUE DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
ADVANCED LIGHTING TECHNOLOGIES, INC.
------------------------
CROSS-REFERENCE SHEET REQUIRED BY
REGULATION S-K, ITEM 501(B)
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION CAPTION IN PROSPECTUS
- ------------------------------------------------ ------------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus........................... Inside Front and Outside Back Cover
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges...... Prospectus Summary; Risk Factors
4. Use of Proceeds........................... Use of Proceeds
5. Determination of Offering Price........... Not Applicable
6. Dilution.................................. Not Applicable
7. Selling Security Holders.................. Principal and Selling Shareholders
8. Plan of Distribution...................... Front Cover Page; Underwriting
9. Description of Securities to be
Registered.............................. Description of Capital Stock
10. Interests of Named Experts and Counsel.... Legal Matters
11. Information with Respect to the
Registrant.............................. Prospectus Summary; The Company;
Background of the Company; Price Range
of Common Stock; Dividend Policy;
Capitalization; Selected Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management;
Certain Transactions; Principal and
Selling Shareholders
12. Disclosure of Commission Position
on Indemnification for Securities Act
Liabilities............................. Not Applicable
</TABLE>
<PAGE> 3
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 JUNE 13, 1996
PROSPECTUS
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3,300,000 Shares
ADVANCED LIGHTING
TECHNOLOGIES INC.
Common Stock
LOGO
- --------------------------------------------------------------------------------
Of the 3,300,000 shares of common stock, par value $.001 per share (the "Common
Stock"), offered hereby, 2,400,000 shares are being sold by Advanced Lighting
Technologies, Inc. (the "Company") and 900,000 shares are being sold by certain
selling shareholders of the Company (the "Selling Shareholders"). The Company
will not receive any of the proceeds from the sale of shares by the Selling
Shareholders. See "Principal and Selling Shareholders."
The Common Stock is included in The Nasdaq Stock Market's National Market (the
"Nasdaq National Market") under the symbol "ADLT." On June 12, 1996, the last
reported sales price for the Common Stock on the Nasdaq National Market was
$17.00 per share. See "Price Range of Common Stock."
SEE "RISK FACTORS" ON PAGES 6 TO 9 FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company(2) Shareholders
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<S> <C> <C> <C> <C>
Per Share.......................... $ $ $ $
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Total(3)........................... $ $ $ $
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</TABLE>
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(1) The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $625,000.
(3) The Company has granted the several Underwriters a 30-day over-allotment
option to purchase up to 495,000 additional shares of Common Stock on the
same terms and conditions as set forth above. If all such additional shares
are purchased by the Underwriters, the total Price to Public will be
$ , the total Underwriting Discounts and Commissions will be
$ , the total Proceeds to Company will be $ and the
total Proceeds to Selling Shareholders will be $ . See
"Underwriting."
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The shares of Common Stock are offered by the several Underwriters subject to
delivery by the Company and the Selling Shareholders and acceptance by the
Underwriters, to prior sale and to withdrawal, cancellation or modification of
the offer without notice. Delivery of the shares to the Underwriters is expected
to be made at the office of Prudential Securities Incorporated, One New York
Plaza, New York, New York, on or about , 1996.
PRUDENTIAL SECURITIES INCORPORATED RAYMOND JAMES & ASSOCIATES, INC.
, 1996
<PAGE> 4
(INSIDE FRONT COVER)
(4-COLOR PHOTOGRAPH(S))
[(5 Photographs Montage Showing Cleveland Indians) Jacobs Field surrounded by
photographs of Company products as follows: (1) lamp manufacturing equipment
(labelled "Equipment"), (2) lamps (labelled "Lamps"), (3) electronic systems
(labelled "Systems") and (4) lamp components (labelled "Components").]
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS
(IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE
WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including Combined Financial Statements and Notes thereto,
appearing elsewhere in this Prospectus. The Company was formed on May 19, 1995
and acquired ownership, primarily by merger (the "Combination"), of 17
affiliated operating corporations that were previously under common ownership
and management (the "Predecessors"). Unless the context otherwise requires, the
"Company" refers to Advanced Lighting Technologies, Inc., its subsidiaries and
the Predecessors. Except as otherwise indicated, the information contained in
this Prospectus assumes that the Underwriters' over-allotment option will not be
exercised. Industry data in this Prospectus with respect to the lighting market
is reported on a calendar year basis and includes the industrial, outdoor and
commercial, and residential sectors, but not the automotive sector. Such
industry data is derived from selected reports published by the National
Electrical Manufacturers Association ("NEMA").
THE COMPANY
Advanced Lighting Technologies, Inc. is an innovation-driven designer,
manufacturer and marketer of metal halide lighting products, including lamps
(light bulbs), lamp components and lamp production equipment. Metal halide lamps
combine superior energy efficient illumination with longer life, excellent color
rendition by providing a full color spectrum and compact size as compared with
incandescent and fluorescent lamps. The Company believes it is the only company
in the world focused primarily on metal halide lighting and, as a result, it has
developed substantial expertise in all aspects of this industry. The Company
believes that this focus enhances its responsiveness to customer demand and has
contributed to its technologically advanced product development and
manufacturing capabilities. The Company currently markets over 240 specialty and
40 commodity-type metal halide lamps, giving it the most diverse product line of
any metal halide lamp manufacturer. Net sales increased 32.0% to $40.8 million
in fiscal 1995 from $30.9 million in fiscal 1994 and increased 24.3% to $37.3
million in the nine months ended March 31, 1996 from $30.0 million in the nine
months ended March 31, 1995. The Company has experienced growth in net sales in
each of the last ten quarterly periods.
Invented approximately 30 years ago, metal halide is the newest of all
major lighting technologies and can produce the closest simulation to sunlight
of all available lighting technologies. Metal halide lighting is currently used
in commercial and industrial applications such as factories and warehouses,
outdoor site and landscape lighting, sports facilities and large retail spaces
such as superstores. In addition, due to metal halide's superior lighting
characteristics, the Company believes many opportunities exist to expand the
uses of metal halide into applications currently dominated by incandescent and
fluorescent technologies. For example, a 100 watt metal halide lamp, which is
approximately the same size as a household incandescent lamp, produces as much
light as five 100 watt incandescent lamps and as much as three 34 watt, four
foot long fluorescent lamps. While domestic sales of incandescent and
fluorescent lamps grew at a compound annual rate of approximately 4% over the
last three years, domestic metal halide lamp sales have grown at a compound
annual rate of approximately 15% over the same period, making metal halide the
fastest growing segment of the approximately $2.6 billion domestic lamp market.
In 1995, metal halide accounted for approximately 6% of domestic lamp sales. The
Company believes that new lighting technologies typically increase overall lamp
sales rather than render existing technologies obsolete. Metal halide lighting
has recently been introduced in automotive headlamp, projection television and
fiber optic applications. The Company believes that applications for metal
halide lamps will continue to increase as metal halide systems become more
widely known.
The Company's objective is to be the leading innovator, designer,
manufacturer and marketer of specialty metal halide lamps, lamp components and
lamp production equipment. The Company pursues the following operating
strategies:
- Focus on Metal Halide Technology. The Company's focus on metal halide
products has enabled it to develop unique design, manufacturing and
marketing expertise in all metal halide product lines. By supplying lamp
components and lamp production equipment to the metal halide lamp
industry, the Company also benefits from the overall expansion of metal
halide lamp sales.
3
<PAGE> 6
- Develop Innovative Products. The Company has introduced over 75% of the
new metal halide lamp types produced domestically since 1985. The
Company's new product strategy and emphasis on innovation differentiates
it from its competitors that focus primarily on high volume,
commodity-type lamps. Most of the Company's new products were developed
in response to customer demand and the Company remains the sole supplier
for many of these products.
- Continue to Strengthen OEM and Lighting Agent Relationships. The Company
frequently designs lamps to meet fixture specifications of original
equipment manufacturers ("OEMs") and their lighting agent sales force,
who, in turn, market the Company's lamps to a variety of end users. Such
cooperative relationships contribute to the Company's innovative designs
and allow it to utilize traditional distribution channels which are
dominated by the major lamp manufacturers. The Company's innovative
marketing techniques enabled it to capture approximately 29% of all new
domestic metal halide lamp sales in 1995.
- Maintain Flexible Manufacturing Through Vertical Integration. By
controlling all aspects of the production of metal halide lamps and
components, the Company is able to cost-effectively develop and
manufacture a wide variety of specialty metal halide lamps, including
lamp types manufactured in small production runs.
The Company expects to increase its net sales by expanding the market for
metal halide products. The Company's growth strategy involves introducing new
products and creating new metal halide applications, increasing sales of
existing products, increasing its presence in international markets and
penetrating the residential market. The Company introduces new products by
working with OEMs and other customers to design and develop innovative metal
halide lighting solutions. The Company also intends to increase sales of its
existing products by implementing aggressive direct marketing of its lamps to
end users. Additionally, the Company intends to participate in growing
international markets through direct sales of lamps, lamp components and lamp
production equipment and, in countries with rapidly developing metal halide
markets, through joint ventures that will purchase the Company's lamp components
and lamp production equipment. The Company has begun its introduction of metal
halide lighting systems to the residential market, which represented 45% of all
domestic lamp sales in 1995, and believes that it is the first company to
develop such products for residential use.
RECENT DEVELOPMENTS
Since the Company's initial public offering in December 1995, the Company
has continued to execute its growth strategy. The Company recently introduced
several new products, including specialty electronic metal halide lighting
controls, to complement its lamp sales and further meet the increasingly complex
specifications of OEMs and lighting agents. In May 1996, the Company introduced
its residential metal halide lighting systems at "Light Fair," the major United
States lighting trade show. The Company is currently market testing its
residential systems and expects to begin limited production in the second
quarter of fiscal 1997. Following the successful acquisition of its distributor
in the United Kingdom, the Company has continued to increase its international
marketing capabilities through the acquisition of its Canadian distributor. The
Company also has entered into an agreement to acquire its Australian
distributor. See "Business -- Growth Strategy." In addition to two existing
joint ventures, the Company has recently entered into joint venture agreements
in Abu Dhabi and Vietnam to which it expects to sell lamp production equipment
and, when lamp production commences, certain lamp components.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company................. 2,400,000 shares
Common Stock Offered by the Selling Shareholders.... 900,000 shares
Common Stock to be Outstanding after the Offering
(1)............................................... 13,167,736 shares
Use of Proceeds..................................... To fund expanded production capacity
through acquisition of machinery and
equipment, to reduce amounts outstanding
under the Company's revolving credit
facility and for general corporate
purposes, including investments in joint
ventures, acquisitions and working
capital. See "Use of Proceeds."
Nasdaq National Market Symbol....................... ADLT
</TABLE>
- ---------------
(1) Does not include 791,850 shares of Common Stock subject to options
outstanding under the Company's 1995 Incentive Award Plan (the "Incentive
Award Plan"). See "Management--Incentive Award Plan."
4
<PAGE> 7
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, MARCH 31,
------------------------------- ---------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(1):
Net sales.......................................................... $25,455 $30,938 $40,767 $30,019 $37,295
Costs and expenses:
Cost of sales.................................................... 17,033 17,253 21,899 16,280 19,957
Selling, general and administrative.............................. 5,500 8,400 11,833 8,460 10,259
Research and development......................................... 1,166 1,006 1,673 1,150 1,714
Noncash settlement of claim...................................... -- -- -- -- 2,732(2)
Reorganizing and restructuring................................... 7,152(3) 852(4) (121)(4) (395)(4) --
------- ------- ------- ------- -------
Income (loss) from operations...................................... (5,396) 3,427 5,483 4,524 2,633
Interest expense................................................... 938(5) 2,150 2,129 1,638 1,150
------- ------- ------- ------- -------
Income (loss) before income taxes and extraordinary items.......... (6,334) 1,277 3,354 2,886 1,483
Income taxes....................................................... 48 71 212 818 525(6)
------- ------- ------- ------- -------
Income (loss) before extraordinary items........................... (6,382) 1,206 3,142 2,068 958
Extraordinary gain (charge)........................................ 11,368(7) -- (253)(8) (253)(8) (135)(9)
------- ------- ------- ------- -------
Net income......................................................... $ 4,986 $ 1,206 $ 2,889 $ 1,815 $ 823
======= ======= ======= ======= =======
Income (loss) per share (10):
Before extraordinary items....................................... $ (0.96) $ 0.13 $ 0.10 $ 0.03 $ (0.04)
Extraordinary items.............................................. 1.45 -- (0.03) (0.03) (0.02)
------- ------- ------- ------- -------
Net income....................................................... $ 0.49 $ 0.13 $ 0.07 $ -- $ (0.06)
======= ======= ======= ======= =======
Shares used for computing per share amounts (10)................... 7,818 7,818 7,818 7,818 8,999
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------
ACTUAL AS ADJUSTED(11)
------- ----------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................................................ $ 2,109 $ 20,040
Working capital.................................................................................. 14,095 32,026
Total assets..................................................................................... 45,727 73,658
Total long-term debt............................................................................. 7,268 965
Total shareholders' equity....................................................................... 24,360 62,291
</TABLE>
- ---------------
(1) Does not reflect pro forma financial adjustments for the Company's
acquisition of its Canadian distributor, Spectro Electric Inc. ("Spectro").
The Company's pro forma net sales and income before extraordinary items for
fiscal 1995 and the nine months ended March 31, 1996 would have been
$47,869 and $2,707, respectively, and $41,389 and $723, respectively. See
"Pro Forma Condensed Combined Statements of Operations (Unaudited)" and
Notes thereto.
(2) On October 27, 1995, several former preferred shareholders of the Company's
largest Predecessor, whose shares were redeemed in August 1995 (prior to
the Combination), asserted a claim against certain officers of the Company.
On November 15, 1995, such officers entered into a settlement agreement
with the former preferred shareholders whereby they transferred, from their
personal holdings, an aggregate of 273,185 shares of Common Stock to the
former preferred shareholders. Since the settlement resulted in a transfer
of personal shares held by such officers, there was no dilution of the
ownership interest of shareholders of the Company. The settlement was
recorded as a noncash expense and an increase in paid-in capital in
December 1995.
(3) On July 29, 1992, the Company's largest Predecessor, though never having
missed any scheduled payments on its then existing senior debt, was unable
to refinance such senior debt and therefore voluntarily filed for
protection under Chapter 11 of the United States Bankruptcy Code. This
Predecessor emerged from such protection in July 1993. While under such
protection, the Company maintained substantially all of its relationships
with existing customers and suppliers. See "Background of the
Company -- Chapter 11 Reorganization." The one-time reorganization charge
of $7,152 in fiscal 1993 consisted of write-downs related to the disposal
of assets for exiting certain product lines, professional fees and
administrative expenses.
(4) In fiscal 1994, the Company recorded a provision of $852 for the costs,
principally inventory and equipment write-downs, in connection with exiting
its nonlamp component product line. In fiscal 1995, the disposition plan
was revised resulting in a reduction of the original estimate by $395 in
the nine months ended March 31, 1995 and $121 in fiscal 1995.
(5) While under Chapter 11 protection during fiscal 1993, the Company's largest
Predecessor was not required to accrue interest on certain outstanding
indebtedness, which, if accrued, would have increased interest expense by
approximately $507.
(6) At March 31, 1996, the Company had net operating loss tax carryforwards of
approximately $10,000, which expire in fiscal years 2006 through 2010. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(7) Upon emergence of the Company's largest Predecessor from Chapter 11
reorganization, the Company recognized an extraordinary gain in fiscal 1993
from the discharge of certain indebtedness.
(8) In fiscal 1995, the Company refinanced certain senior and subordinated
indebtedness. This refinancing resulted in an extraordinary loss on the
early extinguishment of debt of $253. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(9) In the nine months ended March 31, 1996, the Company incurred an
extraordinary loss on the early extinguishment of debt of $135. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(10) Assumes 7,817,736 shares were outstanding in all years and the nine months
ended March 31, 1995. For the nine months ended March 31, 1996, assumes
7,817,736 shares outstanding prior to December 15, 1995 and the weighted
average number of shares outstanding thereafter. Net income per share is
based upon the income attributable to common shareholders after having been
decreased by preferred stock dividends and increases in the value of
warrants aggregating $1,131 ($.14 per share) in fiscal 1993, $170 ($.02 per
share) in fiscal 1994, $2,360 ($.30 per share) in fiscal 1995, $1,786 ($.23
per share) in the nine months ended March 31, 1995 and $1,350 ($.15 per
share) in the nine months ended March 31, 1996. See Note L to "Notes to
Combined Financial Statements."
(11) As adjusted to give effect to the sale of 2,400,000 shares of Common Stock
offered by the Company hereby at the assumed public offering price of
$17.00 per share (the last reported sale price for the Common Stock on June
12, 1996), after deducting underwriting discounts and commissions and
estimated offering expenses, and the application of the net proceeds
therefrom. See "Use of Proceeds."
5
<PAGE> 8
RISK FACTORS
This Prospectus contains statements which constitute forward looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Those statements appear in a
number of places in this Prospectus and include statements regarding the intent,
belief or current expectations of the Company, its directors or its officers
with respect to, among other things: (i) potential acquisitions or joint
ventures by the Company; (ii) the use of the proceeds of this offering; (iii)
the Company's financing plans; (iv) trends affecting the Company's financial
condition or results of operations; (v) the Company's growth strategy and
operating strategy; (vi) the declaration and payment of dividends; or (vii)
litigation affecting the Company. Prospective investors are cautioned that any
such forward looking statements are not guarantees of future performance and
involve risks and uncertainties, and that actual results may differ materially
from those projected in the forward looking statements as a result of various
factors. The accompanying information contained in this Prospectus, including
without limitation the information set forth under the headings "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Business," identifies important factors that could cause such
differences.
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should carefully consider the following
risk factors, in addition to the other information set forth in this Prospectus,
in connection with an investment in the Common Stock offered hereby.
DEPENDENCE ON METAL HALIDE INDUSTRY. The Company's business activity is
focused on the metal halide lighting industry, and the Company derives
substantially all of its net sales and net income from the sale of metal halide
lamps, lamp components and lamp production equipment. Metal halide is the newest
of all commercial lighting technologies, and metal halide lamp sales represented
approximately 6% of domestic lamp sales in 1995. Fluorescent and incandescent
lamps represented approximately 88% of domestic lamp sales in 1995. The
Company's success has been attributable to the increased usage of metal halide
lighting in commercial and industrial applications and its future results are
dependent upon the further growth of metal halide lighting in these and other
sectors. There can be no assurance that metal halide products will continue to
gain market share within the overall lighting market or that better lighting
technologies will not be introduced. See "Business--Lighting Industry."
RISKS ASSOCIATED WITH MANAGEMENT OF GROWTH. The Company has experienced
significant growth in recent years, which has placed, and could continue to
place, a significant strain on its management, employees, finances and
operations. To manage growth effectively, the Company will be required to
continue to implement changes in many aspects of its business, expand its
information systems, increase the capacity and productivity of its lamp, lamp
component and lamp production equipment operations, and hire, develop, train and
manage an increasing number of management-level, production and other employees.
If management is unable to anticipate or manage growth effectively, the
Company's operating results could be materially adversely affected. See
"Business -- Growth Strategy."
COMPETITION. The Company competes with General Electric Company and its
subsidiaries ("General Electric" or "GE"), Philips Electronics N.V. ("Philips")
and Siemens A.G.'s OSRAM/Sylvania, Inc. subsidiary ("Sylvania") in the sale of
metal halide lamps and with these and a number of other firms that manufacture
and sell various other types of lamps. The Company estimates, based on published
industry data for 1995, that these three companies held approximately 85% of the
domestic market for metal halide lamps and approximately 90% of the total
domestic lamp market. Accordingly, these companies dominate the lamp industry
and exert significant influence over the channels through which all lamp
products, including those of the Company, are distributed and sold. These
companies have significantly longer operating histories, greater financial,
technical and other resources, and larger marketing and distribution
organizations than the Company. Although GE, Philips and Sylvania each have
focused their efforts on the larger incandescent and fluorescent markets, all
three companies produce metal halide lamps. These three companies have
emphasized sales of a relatively small variety of commodity-type metal halide
lamps (such as those found in certain industrial applications), which the
Company believes represent approximately 75% of total metal halide lamp sales.
There can be no assurance that these companies will not increase their efforts
with respect to metal
6
<PAGE> 9
halide lamps or expand their product lines into specialty metal halide lamps to
compete with the Company's product line. See "Business--Competition."
RELATIONSHIPS WITH GENERAL ELECTRIC AND OTHER MAJOR LAMP MANUFACTURERS. As
described above under "Competition," the Company competes with GE, Philips and
Sylvania in the sale of its products, and these three companies dominate the
manufacturing, distribution and sale of lighting products. Notwithstanding this
competition, the Company purchases a significant quantity of its raw materials
and private label lamps from GE (aggregating $6.6 million in fiscal 1995 and
$5.9 million in the nine months ended March 31, 1996) and derives significant
revenue from sales of its products to each of these three companies (aggregating
$7.9 million in fiscal 1995, of which $4.1 million was to GE, and aggregating
$7.0 million in the nine months ended March 31, 1996, of which $4.3 million was
to GE). Any significant change in the Company's relationships with these
companies, or in the manner in which these companies participate in the
manufacturing, distribution and sale of lighting products, could have a material
adverse effect on the Company. GE currently holds 535,887 shares of Common
Stock, which after completion of this offering will represent approximately 4.0%
of the issued and outstanding Common Stock of the Company. See "Business --
Lighting Industry" and "Certain Transactions -- Relationships with General
Electric Company."
DEPENDENCE UPON NEW PRODUCT INTRODUCTIONS. The Company's historical
success has been attributable, in large part, to its continuous introduction of
new products in all its product lines to meet the requirements of its customers.
The Company's future success will depend upon its continued ability to develop
and introduce innovative products, and there can be no assurance of the
Company's ability to do so. Even if a new product is developed for a particular
type of lighting fixture or application, the product may not be commercially
successful in the lighting market. In addition, competitors occasionally have
followed the Company's introduction of successful products with similar product
offerings. As a result of these and other factors, there can be no assurance
that the Company will continue to be successful in introducing new products. See
"Business -- Product Design and Development."
PROTECTION OF INTELLECTUAL PROPERTY RIGHTS. The Company relies on trade
secret, trademark and patent laws to protect its rights to certain aspects of
its products, including proprietary manufacturing processes and technologies,
product research and concepts and trademarks, all of which the Company believes
are important to the success of its products and its competitive position. There
can be no assurance that the actions taken by the Company to protect its
proprietary rights will be adequate to prevent imitation of its products,
processes or technology, that the Company's proprietary information will not
become known to competitors, that the Company can effectively protect its rights
to unpatented proprietary information or that others will not independently
develop substantially equivalent or better products that do not infringe on the
Company's intellectual property rights. No assurance can be given that others
will not assert rights in, and ownership of, the patents and other proprietary
rights of the Company.
In recent years, the Company has successfully taken legal action to enjoin
misappropriation of trade secrets by other parties. Any increase in the level of
activities involving misappropriation of the Company's trade secrets or other
intellectual property rights could require the Company to increase significantly
the resources devoted to such efforts. In addition, an adverse determination in
litigation could subject the Company to the loss of its rights to a particular
trade secret, trademark or patent, could require the Company to grant licenses
to third parties, could prevent the Company from manufacturing, selling or using
certain aspects of its products or could subject the Company to substantial
liability, any of which could have a material adverse effect on the Company's
results of operations. See "Business -- Intellectual Property."
RISKS ASSOCIATED WITH INTERNATIONAL JOINT VENTURES. The Company's
international joint ventures are subject to the risks inherent in doing business
abroad, including delays in shipments, adverse fluctuations in currency exchange
rates, increases in import duties and tariffs and changes in foreign
regulations. The Company does not intend to control any of the joint ventures in
which it will participate. In addition, the Company's joint ventures in foreign
countries will be granted rights to utilize the Company's technology. While the
Company will attempt to protect its intellectual property rights in structuring
these foreign joint ventures, the laws of many foreign countries do not protect
intellectual property rights to the same extent as the laws of the United
States. See "Business -- Growth Strategy."
7
<PAGE> 10
DEPENDENCE ON KEY PERSONNEL. The Company is highly dependent on the
continued services of Wayne R. Hellman, the Company's founder, President, Chief
Executive Officer and principal shareholder. The loss of the services of Mr.
Hellman for any reason could have a material adverse effect on the Company. The
Company maintains key man life insurance with respect to Mr. Hellman in the
amount of $3.0 million and on certain other members of senior management. In
addition, Mr. Hellman and the Company have entered into an employment agreement
providing for a term of three years. See "Management -- Employment and
Consulting Agreements."
CONTROL BY PRINCIPAL SHAREHOLDER. Upon completion of this offering, Mr.
Hellman will own, directly and indirectly, approximately 17.0% of the Company's
outstanding shares of Common Stock (16.3% if the Underwriters' over-allotment
option is exercised in full). Upon completion of this offering, Mr. Hellman
will, individually and as voting trustee under a voting trust entered into by
certain existing shareholders of the Company or through irrevocable proxies,
have the power to vote an aggregate of 39.9% of the Company's outstanding shares
of Common Stock (38.4% if the Underwriters' over-allotment option is exercised
in full). As a result, Mr. Hellman will be able to significantly influence, and
may be able effectively to control, all matters requiring shareholder approval,
including the election of directors (and thereby the affairs and management of
the Company), amendments to the Company's Articles of Incorporation, mergers,
share exchanges, the sale of all or substantially all of the Company's assets,
going private transactions and other fundamental transactions. The factors
described above, individually or in the aggregate, could adversely affect the
market price of the Common Stock. See "Principal and Selling Shareholders" and
"Description of Capital Stock."
ENVIRONMENTAL REGULATION. The Company's operations are subject to federal,
state, local and foreign laws and regulations governing, among other things,
emissions to air, discharge to waters and the generation, handling, storage,
transportation, treatment and disposal of waste and other materials as well as
laws relating to occupational health and safety. The Company believes that its
business, operations and facilities are being operated in compliance in all
material respects with applicable environmental and health and safety laws and
regulations, many of which provide for substantial fines and criminal sanctions
for violations. However, the operations of manufacturing plants entail risks in
these areas, and there can be no assurance that the Company will not incur
material costs or liabilities. In addition, potentially significant expenditures
could be required in order to comply with evolving environmental and health and
safety laws, regulations or requirements that may be adopted or imposed in the
future. See "Business -- Environmental Regulation."
CERTAIN ANTITAKEOVER PROVISIONS. Certain provisions of the Company's
Articles of Incorporation and Code of Regulations (by-laws) and Ohio law may
make a change in the control of the Company more difficult to effect, even if a
change in control were in the shareholders' interest. The Company's Articles of
Incorporation allow the Board of Directors to determine the terms of preferred
stock which may be issued by the Company without approval of the holders of the
Common Stock. The ability of the Company to issue preferred stock in such manner
could enable the Board of Directors to prevent changes in the management and
control of the Company. The Board of Directors is divided into three classes of
directors elected for staggered three-year terms. Such staggered terms may
affect the ability of the holders of the Common Stock to effect a change in
control of the Company. See "Description of Capital Stock -- Certain Provisions
of the Company's Articles of Incorporation" and " -- Certain Provisions of Ohio
Law."
POSSIBLE VOLATILITY OF STOCK PRICE. The Common Stock has been trading only
since the Company's initial public offering in December 1995. The market price
of the Common Stock could be subject to significant fluctuations in response to
variations in financial results or announcements of material events by the
Company or its competitors. Developments in the lighting industry or changes in
general conditions in the economy or the financial markets could also adversely
affect the market price of the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of this offering, the
Company will have 13,167,736 shares of Common Stock outstanding (13,662,736
shares if the Underwriters' over-allotment option is exercised in full). Of
these shares, the 3,300,000 shares offered hereby (3,795,000 shares if the
Underwriters' over-allotment option is exercised in full), the 2,900,000 shares
sold in the Company's initial public offering and approximately 182,980 "Rule
701 Shares" will be freely tradeable without restriction or further
8
<PAGE> 11
registration under the Securities Act of 1933 (the "Securities Act"), except for
those shares held by "affiliates" (as defined in the Securities Act) of the
Company. The remaining 6,784,756 shares outstanding are "Restricted Securities"
as that term is defined in Rule 144 of the Securities Act and fall into two
categories, "Rule 144 Shares" consisting of 6,734,756 shares and "Regulation S
Shares" consisting of 50,000 shares. In addition, 1,000,000 shares of Common
Stock are reserved under the Incentive Award Plan for exercises of stock options
granted by the Company, of which 791,850 shares are issuable upon the exercise
of stock options the Company has granted as of the date of this Prospectus. The
Company has registered the issuance of Common Stock in connection with the
exercise of options under the Incentive Award Plan and, consequently, when such
options become exercisable, such shares will be available for sale in the public
market without restriction, to the extent they are not held by affiliates.
The Rule 144 Shares are subject to all the limitations on resale imposed by
Rule 144. In general, under Rule 144 as currently in effect, any affiliate of
the Company or any person (or persons whose shares are aggregated in accordance
with the Rule) who has beneficially owned Restricted Securities for at least two
years would be entitled to sell within any three-month period a number of shares
that does not exceed the greater of 1.0% of the outstanding shares of Common
Stock (approximately 132,446 shares based upon the number of shares outstanding
after this offering) or the reported average weekly trading volume in the over-
the-counter market for the four weeks preceding the sale. Sales under Rule 144
are also subject to certain manner of sale restrictions and notice requirements
and to the availability of current public information concerning the Company.
Persons who have not been affiliates of the Company for at least three months
and who have held their shares for more than three years are entitled to sell
Restricted Securities without regard to the volume, manner of sale, notice and
public information requirements of Rule 144. With respect to resale of Rule 701
Shares by affiliates, all Rule 144 limitations continue to apply except the
two-year holding period.
The Regulation S Shares are subject to the resale restrictions in
Regulation S (governing foreign sales of securities) as well as contractual
restrictions. As a result, the 50,000 Regulation S Shares may not be resold
prior to February 9, 1997, except in compliance with Regulation S (foreign
sales) to a person agreeing to comparable resale restrictions, or, thereafter,
except pursuant to an applicable exemption, such as Regulation S or Rule 144.
The Selling Shareholders and certain other Company shareholders who, upon
completion of this offering, will own in the aggregate 5,927,236 shares, and the
Company have each agreed that they will not, directly or indirectly, offer,
sell, offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale, contract
of sale, pledge, grant of any option to purchase or other sale or disposition)
of any shares of Common Stock or other capital stock or any securities
convertible into, or exercisable or exchangeable for, any shares of Common Stock
or other capital stock of the Company, for a period of 180 days after the date
of this Prospectus, without the prior written consent of Prudential Securities
Incorporated, on behalf of the Underwriters, except for bona fide gifts or
transfers effected by such shareholders other than on any securities exchange or
in the over-the-counter market to donees or transferees that agree to be bound
by similar agreements.
The Company is unable to predict the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price for the Common Stock prevailing from time to time. Sales of substantial
amounts of Common Stock, or the perception that such sales could occur, could
adversely affect the market price for the Common Stock and could impair the
Company's future ability to obtain capital through offerings of equity
securities.
Following this offering, the Company may issue its Common Stock from time
to time in connection with the acquisition of stock or assets of other
companies. Such securities may be issued in transactions exempt from
registration under the Securities Act.
9
<PAGE> 12
THE COMPANY
Advanced Lighting Technologies, Inc. is an innovation-driven designer,
manufacturer and marketer of metal halide lighting products, including lamps
(light bulbs), lamp components and lamp production equipment. Metal halide lamps
combine superior energy efficient illumination with longer life, excellent color
rendition by providing a full color spectrum and compact size as compared with
incandescent and fluorescent lamps. The Company believes it is the only company
in the world focused primarily on metal halide lighting and, as a result, it has
developed substantial expertise in all aspects of this industry. The Company
believes that this focus enhances its responsiveness to customer demand and has
contributed to its technologically advanced product development and
manufacturing capabilities. The Company currently markets over 240 specialty and
40 commodity-type metal halide lamps, giving it the most diverse product line of
any metal halide lamp manufacturer. Net sales increased 32.0% to $40.8 million
in fiscal 1995 from $30.9 million in fiscal 1994 and increased 24.3% to $37.3
million in the nine months ended March 31, 1996 from $30.0 million in the nine
months ended March 31, 1995. The Company has experienced growth in net sales in
each of the last ten quarterly periods.
Invented approximately 30 years ago, metal halide is the newest of all
major lighting technologies and can produce the closest simulation to sunlight
of all available lighting technologies. Metal halide lighting is currently used
in commercial and industrial applications such as factories and warehouses,
outdoor site and landscape lighting, sports facilities and large retail spaces
such as superstores. In addition, due to metal halide's superior lighting
characteristics, the Company believes many opportunities exist to expand the
uses of metal halide into applications currently dominated by incandescent and
fluorescent technologies. For example, a 100 watt metal halide lamp, which is
approximately the same size as a household incandescent lamp, produces as much
light as five 100 watt incandescent lamps and as much as three 34 watt, four
foot long fluorescent lamps. While domestic sales of incandescent and
fluorescent lamps grew at a compound annual rate of approximately 4% over the
last three years, domestic metal halide lamp sales have grown at a compound
annual rate of approximately 15% over the same period, making metal halide the
fastest growing segment of the approximately $2.6 billion domestic lamp market.
In 1995, metal halide accounted for approximately 6% of domestic lamp sales. The
Company believes that new lighting technologies typically increase overall lamp
sales rather than render existing technologies obsolete. Metal halide lighting
has recently been introduced in automotive headlamp, projection television and
fiber optic applications. The Company believes that applications for metal
halide lamps will continue to increase as metal halide systems become more
widely known.
The Company's objective is to be the leading innovator, designer,
manufacturer and marketer of specialty metal halide lamps, lamp components and
lamp production equipment. The Company pursues the following operating
strategies:
- Focus on Metal Halide Technology. The Company's focus on metal halide
products has enabled it to develop unique design, manufacturing and
marketing expertise in all metal halide product lines. By supplying lamp
components and lamp production equipment to the metal halide lamp
industry, the Company also benefits from the overall expansion of metal
halide lamp sales.
- Develop Innovative Products. The Company has introduced over 75% of the
new metal halide lamp types produced domestically since 1985. The
Company's new product strategy and emphasis on innovation differentiates
it from its competitors that focus primarily on high volume,
commodity-type lamps. Most of the Company's new products were developed
in response to customer demand and the Company remains the sole supplier
for many of these products.
- Continue to Strengthen OEM and Lighting Agent Relationships. The Company
frequently designs lamps to meet fixture specifications of original
equipment manufacturers ("OEMs") and their lighting agent sales force,
who, in turn, market the Company's lamps to a variety of end users. Such
cooperative relationships contribute to the Company's innovative designs
and allow it to utilize traditional distribution channels which are
dominated by the major lamp manufacturers. The Company's innovative
marketing techniques enabled it to capture approximately 29% of all new
domestic metal halide lamp sales in 1995.
10
<PAGE> 13
- Maintain Flexible Manufacturing Through Vertical Integration. By
controlling all aspects of the production of metal halide lamps and
components, the Company is able to cost-effectively develop and
manufacture a wide variety of specialty metal halide lamps, including
lamp types manufactured in small production runs.
The Company expects to increase its net sales by expanding the market for
metal halide products. The Company's growth strategy involves introducing new
products and creating new metal halide applications, increasing sales of
existing products, increasing its presence in international markets and
penetrating the residential market. The Company introduces new products by
working with OEMs and other customers to design and develop innovative metal
halide lighting solutions. The Company also intends to increase sales of its
existing products by implementing aggressive direct marketing of its lamps to
end users. Additionally, the Company intends to participate in growing
international markets through direct sales of lamps, lamp components and lamp
production equipment and, in countries with rapidly developing metal halide
markets, through joint ventures that will purchase the Company's lamp components
and lamp production equipment. The Company has begun its introduction of metal
halide lighting systems to the residential market, which represented 45% of all
domestic lamp sales in 1995, and believes that it is the first company to
develop such products for residential use.
Since the Company's initial public offering in December 1995, the Company
has continued to execute its growth strategy. The Company recently introduced
several new products, including specialty electronic metal halide lighting
controls, to complement its lamp sales and further meet the increasingly complex
specifications of OEMs and lighting agents. In May 1996, the Company introduced
its residential metal halide lighting systems at "Light Fair," the major United
States lighting trade show. The Company is currently market testing its
residential systems and expects to begin limited production in the second
quarter of fiscal 1997. Following the successful acquisition of its distributor
in the United Kingdom, the Company has continued to increase its international
marketing capabilities through the acquisition of its Canadian distributor. The
Company also has entered into an agreement to acquire its Australian
distributor. See "Business -- Growth Strategy." In addition to two existing
joint ventures, the Company has recently entered into joint venture agreements
in Abu Dhabi and Vietnam to which it expects to sell lamp production equipment
and, when lamp production commences, certain lamp components.
The Company's principal executive offices are located at 2307 E. Aurora
Road, Suite One, Twinsburg, Ohio 44087 and its telephone number is (216)
963-6680.
BACKGROUND OF THE COMPANY
The Company's business was established in 1983 by Wayne R. Hellman, the
Company's current Chairman and Chief Executive Officer, and certain key
employees of the Company to focus on the design and manufacture of metal halide
lamps. Management initially acquired an entity engaged in the production of
metal halide salts that are necessary to make metal halide lamps and founded a
lamp manufacturer soon thereafter. The Company produced its first metal halide
lamp in 1985 and, over the next several years, designed, introduced and
manufactured a wide range of specialty metal halide lamps, as well as certain
commodity-type lamps. The Company continued to grow its business with specific
focus on metal halide technology. In order to support the growth of its metal
halide operations, the Company manufactured and sold non-metal halide products
such as high pressure sodium lamps. In addition, it acquired a German quartz
halogen lamp manufacturer in 1984 to gain entrance into the European lamp
market. The Company experienced significant growth between fiscal 1983 and
fiscal 1989, with metal halide products representing slightly less than half of
the Company's net sales in fiscal 1989.
CHAPTER 11 REORGANIZATION
The Company financed early operations through a combination of venture
capital financing and significant bank borrowing. In January 1989, the senior
lender to the Company's lamp manufacturing Predecessor, Venture Lighting
International, Inc., requested that it obtain alternative financing sources for
the approximately $32.0 million of bank debt such Predecessor then had
outstanding. However, this Predecessor
11
<PAGE> 14
was unable to consummate alternative financing arrangements that would have
retired the outstanding debt because of its venture capital investor's refusal
to accept the terms and values offered for its investment in this Predecessor in
two potential transactions with major lamp manufacturers. In June 1990, the
Company and the venture capital investor negotiated an exchange of the
investor's preferred equity for subordinated notes of the Company. Following
this exchange, the Company was able to reduce the $32.0 million of indebtedness
owed to its senior lender to $6.7 million by December 1990 through substantial
asset and stock sales of certain subsidiaries, including its German quartz
halogen lamp manufacturer. As a result of these sales, non-metal halide product
sales declined to approximately 17.0% of net sales in fiscal 1991.
During fiscal 1992, the Company was unsuccessful in its search for other
opportunities to refinance the remaining senior debt outstanding, which had
risen to $8.0 million at June 30, 1992 and was limited to that amount by the
Company's senior lender. As a result, the Company experienced working capital
constraints and the Company's management made a strategic decision to refocus
its manufacturing operations on the core business of specialty metal halide
lamps. The Company contracted its operations by significantly reducing the
number of product lines it manufactured, reducing its work force by
approximately 50 employees and eliminating its second manufacturing shift. The
Company's core products became specialty metal halide lamps, lamp components and
lamp production equipment, which remain its core products today. As a result of
the Company's strategy to refocus operations, the Company's net sales decreased
from $32.4 million in fiscal 1991 to $26.4 million in fiscal 1992.
At the end of fiscal 1992, the senior lender expressed its intention not to
further extend the term of the remaining bank debt. While this Predecessor was
in default of certain covenants, it had never missed a scheduled interest or
principal payment to the senior lender. Unable to obtain acceptable refinancing,
this Predecessor voluntarily filed for protection under Chapter 11 of the United
States Bankruptcy Code on July 29, 1992. This Predecessor successfully emerged
from Chapter 11 protection in July 1993. The Company's net sales declined to
$25.5 million in fiscal 1993 from $26.4 million in fiscal 1992. During fiscal
1993, the Company maintained substantially all of its relationships with
existing customers and suppliers. As part of the plan of reorganization, the
Company's management received complete ownership of this Predecessor for an
additional equity investment of $250,000. The Company's reorganization was
facilitated by financing arrangements totalling $8.0 million at market interest
rates provided by GE (the "GE Loan"), which were personally guaranteed by Mr.
Hellman. In addition, at this time, the Company issued to GE a warrant to
purchase common stock of a Predecessor (the "GE Warrant"). In connection with
the initial public offering, GE received $3.0 million in cash plus 5.0% of the
Company's outstanding Common Stock in exchange for the cancellation of the GE
Warrant and for other consideration. In addition, with a portion of the proceeds
of the initial public offering (approximately $409,000), the Company paid all
amounts remaining to be paid pursuant to the plan of reorganization.
THE COMBINATION
Since fiscal 1993, the Company has experienced strong growth in net sales
and operating income, resulting from continuing implementation of its metal
halide focus. The Company believes that this focus enhances its responsiveness
to customer demand and has contributed to its technologically advanced product
development and manufacturing capabilities. The Company was formed as an Ohio
corporation on May 19, 1995 and through the Combination acquired 17 affiliated
operating corporations that were previously under common ownership and
management, each of which is engaged in one or another aspect of the metal
halide lighting business. The Combination was effected on October 6 and 10,
1995. These Predecessors and their dates of incorporation are listed in Note A
of "Notes to Combined Financial Statements" included herein. The principal
owners of the Predecessors were Wayne R. Hellman, Louis S. Fisi, David L.
Jennings, Robert S. Roller, James F. Sarver and Juris Sulcs, all currently
executive officers or employees of the Company. In the Combination, Messrs.
Hellman, Fisi, Jennings, Roller, Sarver and Sulcs received 3,125,153 shares,
657,112 shares, 858,145 shares, 500,668 shares, 459,485 shares and 449,299
shares of Common Stock, respectively. See "Certain Transactions -- The
Combination."
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<PAGE> 15
USE OF PROCEEDS
The net proceeds to the Company from the sale of 2,400,000 shares of Common
Stock offered hereby (the "Offering"), based on an assumed offering price of
$17.00 per share of Common Stock (the last reported sales price for the Common
Stock on the Nasdaq National Market on June 12, 1996) and after deducting
underwriting discounts and commissions and estimated offering expenses are
estimated to be approximately $37.9 million (approximately $45.9 million if the
Underwriters' over-allotment option is exercised in full). The Company will not
receive any of the proceeds from the sale of shares of Common Stock by the
Selling Shareholders.
The Company intends to use the net proceeds from the Offering as follows:
(a) approximately $10.0 million for capital expenditures, consisting principally
of lamp production equipment intended to be acquired over the next 12 months;
and (b) approximately $10.0 million to reduce indebtedness expected to be
outstanding under the Company's revolving credit facility, which matures in
March 1999 and bears interest at the prime rate minus 0.5% (8.25% at June 11,
1996). The proceeds of the revolving credit facility borrowings were used to
fund working capital, to pay a portion of the purchase price for the acquisition
of Spectro, to pay the cash portion of the purchase price of the acquisition of
the Company's Australian distributor and to fund an investment in a joint
venture. See "Business--Liquidity and Capital Resources." The balance of the net
proceeds will be used for general corporate purposes, including investments in
joint ventures, acquisitions and working capital. Although the Company has from
time to time engaged in discussions with respect to possible acquisitions, it
has no present plans, intentions, understandings, commitments or agreements, nor
is it currently engaged in negotiations with respect to any acquisition which
would use any portion of proceeds of the Offering. The Company has entered into
an agreement to acquire its Australian distributor for approximately 77,000
shares of Common Stock and $100,000 cash.
Pending such uses, the net proceeds will be invested in short term,
investment-grade securities, certificates of deposit, or direct or guaranteed
obligations of the United States government.
PRICE RANGE OF COMMON STOCK
The Common Stock is included in the Nasdaq National Market under the symbol
"ADLT." The following table sets forth the range of high and low sales prices
per share of Common Stock for the periods indicated, as reported by the Nasdaq
National Market:
<TABLE>
<CAPTION>
FISCAL 1996 HIGH LOW
------- -------
<S> <C> <C>
Second Quarter (beginning December 12, 1995)...................... $10.250 $10.000
Third Quarter..................................................... 14.875 7.675
Fourth Quarter (through June 12, 1996)............................ 18.250 12.675
</TABLE>
On June 12, 1996, the last reported sales price of the Common Stock on the
Nasdaq National Market was $17.00 per share and, as of June 11, 1996, the number
of holders of record of the Common Stock was 202.
DIVIDEND POLICY
The Company does not intend to declare or pay any cash dividends for the
foreseeable future and intends to retain earnings, if any, for the future
operation and expansion of the Company's business. The Company's revolving
credit facility prohibits payment of dividends on the Common Stock without the
prior consent of the lender, which consent may not be withheld unreasonably.
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<PAGE> 16
CAPITALIZATION
The table below sets forth the capitalization of the Company at March 31,
1996 and as adjusted at that date to give effect to the sale of the 2,400,000
shares of Common Stock offered by the Company (at an assumed offering price of
$17.00 per share) and the application of the estimated net proceeds therefrom.
This table should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the Combined
Financial Statements and Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt....................................... $ 127 $ 127
======= =========
Long-term debt.......................................................... $ 7,268 $ 965
Shareholders' equity:
Common Stock, $.001 par value; 22,000,000 shares authorized;
10,767,736 shares issued and outstanding; 13,167,736 shares issued
and outstanding, as adjusted(1).................................... 11 13
Additional paid-in capital............................................ 26,080 64,009
Retained earnings (deficit)........................................... (1,731) (1,731)
------- -----------
Total shareholders' equity......................................... 24,360 62,291
------- -----------
Total capitalization............................................... $31,628 $63,256
======= =========
</TABLE>
- ---------------
(1) Does not include 791,850 shares of Common Stock subject to options
outstanding under the Incentive Award Plan. See "Management -- Incentive
Award Plan."
14
<PAGE> 17
SELECTED FINANCIAL DATA
The following table contains certain selected combined financial data and
is qualified by the more detailed Combined Financial Statements and Notes
thereto of the Company's Predecessor companies included elsewhere in this
Prospectus. The balance sheet data as of June 30, 1994 and 1995 and the income
statement data for each of the fiscal years ended June 30, 1993, 1994 and 1995
are derived from the audited Combined Financial Statements of the Company's
Predecessor companies included herein. The balance sheet data as of June 30,
1991, 1992 and 1993 and the income statement data for the fiscal years ended
June 30, 1991 and 1992 and the nine months ended March 31, 1995 have been
derived from the unaudited Combined Financial Statements of the Company's
Predecessor companies and the balance sheet data as of March 31, 1996 and the
income statement data for the nine months ended March 31, 1996 have been derived
from the unaudited consolidated financial statements of the Company, which have
been prepared by management on the same basis as the audited Combined Financial
Statements of the Company's Predecessor companies, and, in the opinion of
management, include all adjustments consisting of normal recurring accruals
which the Company considers necessary for a fair presentation of the results for
such periods. The selected financial data should be read in conjunction with the
Combined Financial Statements and Notes thereto and Management's Discussion and
Analysis of Financial Condition and Results of Operations included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, MARCH 31,
------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(1):
Net sales................................... $32,401 $26,416 $25,455 $30,938 $40,767 $30,019 $37,295
Costs and expenses:
Cost of sales............................. 21,892 16,240 17,033 17,253 21,899 16,280 19,957
Selling, general and administrative....... 10,685 6,677 5,500 8,400 11,833 8,460 10,259
Research and development.................. 1,252 1,203 1,166 1,006 1,673 1,150 1,714
Noncash settlement of claim............... -- -- -- -- -- -- 2,732(2)
Reorganizing and restructuring............ -- -- 7,152(3) 852(4) (121)(4) (395)(4) --
------- ------- ------- ------- ------- ------- ---------
Income (loss) from operations............... (1,428) 2,296 (5,396) 3,427 5,483 4,524 2,633
Interest expense............................ 1,890 1,691 938(5) 2,150 2,129 1,638 1,150
------- ------- ------- ------- ------- ------- ---------
Income (loss) before income taxes and
extraordinary items....................... (3,318) 605 (6,334) 1,277 3,354 2,886 1,483
Income taxes................................ 242 101 48 71 212 818 525(6)
------- ------- ------- ------- ------- ------- ---------
Income (loss) before extraordinary items.... (3,560) 504 (6,382) 1,206 3,142 2,068 958
Extraordinary gain (charge)................. 4,918(7) -- 11,368(8) -- (253)(9) (253)(9) (135)(10)
------- ------- ------- ------- ------- ------- ---------
Net income.................................. $ 1,358 $ 504 $ 4,986 $ 1,206 $ 2,889 $ 1,815 $ 823
======= ======= ======= ======= ======= ======= =========
Income (loss) per share (11):
Before extraordinary items................ $ (0.48) $ (0.01) $ (0.96) $ 0.13 $ 0.10 $ 0.03 $ (0.04)
Extraordinary items....................... 0.63 -- 1.45 -- (0.03) (0.03) (0.02)
------- ------- ------- ------- ------- ------- ---------
Net income (loss)......................... $ 0.15 $ (0.01) $ 0.49 $ 0.13 $ 0.07 $ -- $ (0.06)
======= ======= ======= ======= ======= ======= =========
Shares used for computing per share amounts
(11)........................................ 7,818 7,818 7,818 7,818 7,818 7,818 8,999
======= ======= ======= ======= ======= ======= =========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
------------------------------------------------------- ---------
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................... $ 379 $ 315 $ 1,095 $ 663 $ 1,030 $ 2,109
Working capital (deficit).................... (7,251) (8,448) 853 (25) (665) 14,095
Total assets................................. 26,059 27,631 23,001 23,454 28,347 45,727
Total long-term debt......................... 11,673 11,737 10,246 7,821 8,853 7,268
Total shareholders' equity (deficit)......... (4,681) (4,345) (320) 1,165 (1,035) 24,360
</TABLE>
- ---------------
(1) Does not reflect pro forma financial adjustments for the Company's
acquisition of its Canadian distributor, Spectro. The Company's pro forma
net sales and income before extraordinary items for fiscal 1995 and the
nine months ended March 31, 1996 would have been $47,869 and $2,707,
respectively, and $41,389 and $723, respectively. See "Pro Forma Condensed
Combined Statements of Operations (Unaudited)" and Notes thereto.
(2) On October 27, 1995, several former preferred shareholders of the Company's
largest Predecessor, whose shares were redeemed in August 1995 (prior to
the Combination), asserted a claim against certain officers of the Company.
On November 15, 1995, such officers entered into a settlement agreement
with the former preferred shareholders whereby they transferred, from their
personal holdings, an aggregate of 273,185 shares of Common Stock to the
former preferred shareholders. Since the settlement
15
<PAGE> 18
resulted in a transfer of personal shares held by such officers, there was
no dilution of the ownership interest of shareholders of the Company. The
settlement was recorded as a noncash expense and an increase in paid-in
capital of the Company in December 1995.
(3) On July 29, 1992, the Company's largest Predecessor, though never having
missed any scheduled payments on its then existing senior debt was unable
to refinance such senior debt, and therefore voluntarily filed for
protection under Chapter 11 of the United States Bankruptcy Code. This
Predecessor emerged from such protection in July 1993. While under such
protection, the Company maintained substantially all of its relationships
with existing customers and suppliers. See "Background of the
Company -- Chapter 11 Reorganization." The one-time reorganization charge
of $7,152 in fiscal 1993 consisted of the write-downs related to disposal
of assets for exiting certain product lines, professional fees and
administrative expense.
(4) In fiscal 1994, the Company recorded a provision of $852 for the costs,
principally inventory and equipment write-downs, in connection with exiting
its nonlamp component product line. In fiscal 1995, the disposition plan
was revised resulting in a reduction of the original estimate by $395 in
the nine months ended March 31, 1995 and $121 in fiscal 1995.
(5) While under Chapter 11 protection during fiscal 1993, the Company's largest
Predecessor was not required to accrue interest on certain outstanding
indebtedness, which, if accrued, would have increased interest expense by
approximately $507.
(6) At March 31, 1996, the Company had net operating loss tax carryforwards of
approximately $10,000, which expire in fiscal years 2006 through 2010. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(7) In fiscal 1991, the Company sold its German quartz halogen lamp operation.
(8) Upon emergence of the Company's largest Predecessor from Chapter 11
reorganization, the Company recognized an extraordinary gain in fiscal 1993
from the discharge of certain indebtedness.
(9) In fiscal 1995, the Company refinanced certain senior and subordinated
indebtedness. This refinancing resulted in an extraordinary loss on the
early extinguishment of debt of $253. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(10) In the nine months ended March 31, 1996, the Company incurred an
extraordinary loss on the early extinguishment of debt of $135. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(11) Assumes 7,817,736 shares were outstanding in all years and the nine months
ended March 31, 1995. For the nine months ended March 31, 1996, assumes
7,817,736 shares outstanding prior to December 15, 1995 and the weighted
average number of shares outstanding thereafter. Net income per share is
based upon the income attributable to common shareholders. Such income has
been decreased by preferred stock dividends and increases in the value of
warrants aggregating $1,131 ($.14 per share) in fiscal 1993, $170 ($.02 per
share) in fiscal 1994, $2,360 ($.30 per share) in fiscal 1995, $1,786 ($.23
per share) in the nine months ended March 31, 1995 and $1,350 ($.15 per
share) in the nine months ended March 31, 1996. See Note L to "Notes to
Combined Financial Statements."
16
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in connection with the Company's
Combined Financial Statements and Notes thereto included elsewhere in this
Prospectus.
GENERAL
The Company designs, manufactures and markets metal halide lighting
products, including lamps, lamp components and lamp production equipment. Metal
halide lighting is currently used in commercial and industrial applications such
as factories and warehouses, outdoor site and landscape lighting, sports
facilities and large retail spaces such as superstores. The Company currently
markets over 240 specialty and 40 commodity-type lamps, giving it the most
diverse product offering of any metal halide lamp manufacturer. The Company
believes it can design innovative specialty lamps responsive to customer needs
as a result of its strong relationships with lighting fixture OEMs and lighting
agents.
History
The Company's business was established in 1983 by Mr. Hellman and certain
key employees of the Company to focus on the design and manufacture of metal
halide lamps. Management initially acquired an entity engaged in the production
of metal halide salts that are necessary to make metal halide lamps and founded
a lamp manufacturer soon thereafter. The Company produced its first metal halide
lamp in 1985, and over the next several years designed, introduced and
manufactured a wide range of specialty metal halide lamps, as well as certain
commodity-type lamps. The Company continued to grow its business with specific
focus on metal halide technology. In order to support the growth of its metal
halide operations, the Company manufactured and sold non-metal halide products
such as high pressure sodium lamps. In addition, it acquired a German quartz
halogen lamp manufacturer in 1984 to gain entrance into the European lamp
market. The Company experienced significant growth between fiscal 1983 and
fiscal 1989, with metal halide products representing slightly less than half of
the Company's net sales in fiscal 1989.
The Company financed early operations through a combination of venture
capital financing and significant bank borrowing. In January 1989, the senior
lender to the Company's lamp manufacturing Predecessor, Venture Lighting
International, Inc., requested that it obtain alternative financing sources for
the approximately $32.0 million of bank debt such Predecessor then had
outstanding. However, this Predecessor was unable to consummate alternative
financing arrangements that would have retired the outstanding debt because of
its venture capital investor's refusal to accept the terms and values offered
for its investment in this Predecessor in two potential transactions with major
lamp manufacturers. In June 1990, the Company and the venture capital investor
negotiated an exchange of the investor's preferred equity for subordinated notes
of the Company. Following this exchange, the Company was able to reduce the
$32.0 million of indebtedness owed to its senior lender to $6.7 million by
December 1990 through substantial asset and stock sales of certain subsidiaries,
including its German quartz halogen lamp manufacturer. As a result of these
sales, non-metal halide product sales declined to approximately 17.0% of net
sales in fiscal 1991.
During fiscal 1992, the Company was unsuccessful in its search for other
opportunities to refinance the remaining senior debt outstanding, which had
risen to $8.0 million at June 30, 1992 and was limited to that amount by the
Company's senior lender. As a result, the Company experienced working capital
constraints and the Company's management made a strategic decision to refocus
its manufacturing operations on the core business of specialty metal halide
lamps. The Company contracted its operations by significantly reducing the
number of product lines it manufactured, reducing its work force by
approximately 50 employees and eliminating its second manufacturing shift. The
Company's core products became specialty metal halide lamps, lamp components and
lamp production equipment, which remain its core products today. As a result of
the Company's strategy to refocus operations, the Company's net sales decreased
from $32.4 million in fiscal 1991 to $26.4 million in fiscal 1992.
At the end of fiscal 1992, the senior lender expressed its intention not to
further extend the term of the bank debt. While this Predecessor was in default
of certain covenants, it had never missed a scheduled interest
17
<PAGE> 20
or principal payment to the senior lender. Unable to obtain acceptable
refinancing, this Predecessor voluntarily filed for protection under Chapter 11
of the United States Bankruptcy Code on July 29, 1992. This Predecessor
successfully emerged from Chapter 11 protection in July 1993. The Company's net
sales declined to $25.5 million in fiscal 1993 from $26.4 million in fiscal
1992. During fiscal 1993, the Company maintained substantially all of its
relationships with existing customers and suppliers. As part of the plan of
reorganization, the Company's management received complete ownership of this
Predecessor for an additional equity investment of $250,000. The Company's
reorganization was facilitated by the GE Loan, which was personally guaranteed
by Mr. Hellman. In addition, the Company issued to GE the GE Warrant. In
connection with the initial public offering, GE received $3.0 million in cash
plus 535,887 shares of Common Stock, which represented 5.0% of the Company's
outstanding Common Stock, in exchange for cancellation of the GE Warrant and for
other consideration.
Since fiscal 1993, the Company has experienced strong growth in net sales
and operating income, resulting from continuing implementation of its metal
halide focus. The Company believes that this focus enhances its responsiveness
to customer demand and has contributed to its technologically advanced product
development and manufacturing capabilities.
Current Operations
The Company's product categories currently consist of lamps, lamp
components and lamp production equipment. The following table sets forth the
product category contributions to the Company's net sales for the periods
indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, MARCH 31,
----------------------------- -----------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Lamps...................................... 72.9% 73.8% 68.8% 68.5% 73.2%
Lamp components............................ 22.6 23.0 23.8 23.2 21.6
Lamp production equipment.................. 4.5 3.2 7.4 8.3 5.2
===== ===== ===== ===== =====
100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
Lamp and lamp component revenue is recognized when products are shipped,
and lamp production equipment revenue is recognized under the percentage of
completion method.
To sustain the Company's new product strategy, the Company invests
substantial resources in research and development. In the last three fiscal
years, the Company spent an aggregate of $3.8 million on research and
development, representing 4.0% of aggregate net sales over that period. During
the nine months ended March 31, 1996, the Company spent $1.7 million on research
and development, representing 4.6% of net sales for that period. Such
investments have enabled the Company to introduce new lamp applications and
improve the quality of its components. The Company has spent additional amounts
for manufacturing process and efficiency enhancements, which were charged to
cost of goods sold when incurred. The Company expects to continue the increased
rate of spending on product development as a percentage of net sales in the
future to enhance its position as the leading innovator in the metal halide
industry.
18
<PAGE> 21
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of net sales, certain items
in the Company's combined income statement for the indicated periods:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE NINE MONTHS ENDED
30, MARCH 31,
------------------------- -----------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales............................... 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales......................... 66.9 55.8 53.7 54.2 53.5
Selling, general and administrative... 21.6 27.2 29.1 28.2 27.5
Research and development.............. 4.6 3.2 4.1 3.8 4.6
Noncash settlement of claim........... -- -- -- -- 7.3
Reorganizing and restructuring........ 28.1 2.8 (0.3) (1.3) --
----- ----- ----- ----- -----
Income (loss) from operations........... (21.2) 11.0 13.4 15.1 7.1
Interest expense........................ 3.7 6.9 5.2 5.5 3.1
----- ----- ----- ----- -----
Income (loss) before income taxes and
extraordinary items................... (24.9) 4.1 8.2 9.6 4.0
Income taxes............................ 0.2 0.2 0.5 2.7 1.4
Income (loss) before extraordinary
items................................. (25.1) 3.9 7.7 6.9 2.6
Extraordinary gain (charge)............. 44.7 -- (0.6) (0.8) (0.4)
----- ----- ----- ----- -----
Net income.............................. 19.6% 3.9% 7.1% 6.1% 2.2%
===== ===== ===== ===== =====
</TABLE>
NINE MONTHS ENDED MARCH 31, 1996 COMPARED WITH NINE MONTHS ENDED MARCH 31, 1995
Net Sales. Net sales increased 24.3% to $37.3 million for the nine months
ended March 31, 1996 from $30.0 million for the nine months ended March 31,
1995. This increase consisted of a $6.7 million increase in lamp sales and a
$1.1 million increase in lamp component sales offset by a $565,000 decrease in
lamp production equipment sales. Aggregate lamp and lamp component sales
increased by 28.5% in the nine months ended March 31, 1996 compared to the
comparable period for the prior year as a result of higher unit volume driven
primarily by the overall growth in the global metal halide lamp market. In the
nine months ended March 31, 1996, lamp production equipment sales declined as a
result of the timing in finalizing equipment sales contracts. An equipment sales
contract was signed in the fourth quarter of fiscal 1996 and as of May 31, 1996,
the Company had a backlog of $6.6 million of lamp production equipment orders.
Cost of Goods Sold. Cost of goods sold increased 22.6% to $20.0 million for
the nine months ended March 31, 1996 from $16.3 million for the nine months
ended March 31, 1995. As a percentage of net sales, cost of goods sold decreased
to 53.5% for the nine months ended March 31, 1996 from 54.2% in the nine months
ended March 31, 1995. This decrease is due primarily to increased manufacturing
efficiencies arising from higher production volume.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 21.3% to $10.3 million for the nine months
ended March 31, 1996 from $8.5 million for the nine months ended March 31, 1995.
Selling, general and administrative expenses as a percentage of net sales
decreased to 27.5% in the nine months ended March 31, 1996 from 28.2% in the
nine months ended March 31, 1995. This decrease primarily reflects a leveraging
of fixed administrative costs as sales levels increased.
Research and Development Expense. Research and development expenses
increased 49.0% to $1.7 million for the nine months ended March 31, 1996 from
$1.2 million for the nine months ended March 31, 1995. As a percentage of net
sales, research and development expenses increased to 4.6% for the nine months
ended March 31, 1996 from 3.8% for the nine months ended March 31, 1995. These
increases were the result of
19
<PAGE> 22
increased engineering spending to sustain the Company's commitment to: (i)
introducing and increasing the number of new lamp types, including the rollout
of the Company's new Pulse Star(TM) product line and the continuing rollout of
the new Energy Master Plus(TM) product line which are intended to replace many
first generation metal halide lamps in industrial and commercial applications;
(ii) developing new metal halide lamp components and improving the quality and
performance of existing lamp components; and (iii) developing and
commercializing specialty electronic controls for use in metal halide systems.
Noncash Settlement of Claim and Restructuring Credit. On October 27, 1995,
several former preferred shareholders of the Company's largest Predecessor,
whose shares were redeemed in August 1995 (prior to the Combination), asserted a
claim against certain officers of the Company. On November 15, 1995, such
officers entered into a settlement agreement with the former preferred
shareholders, whereby they transferred, from their personal holdings, an
aggregate of 273,185 shares of Common Stock to the former preferred
shareholders. Since the settlement resulted in a transfer of personal shares
held by such officers, there was no dilution of the ownership interest of
shareholders of the Company. The settlement was recorded as a noncash expense
and an increase in paid-in capital of the Company in December 1995.
The Company recorded a $395,000 credit to operating expenses in the nine
months ended March 31, 1995. This credit resulted from a revision of the
Company's plan of disposition for exiting its nonlamp component product line.
There was no such credit in the nine months ended March 31, 1996.
Income from Operations. As a result of the above factors, income from
operations decreased 41.8% to $2.6 million for the nine months ended March 31,
1996 from $4.5 million for the nine months ended March 31, 1995. Income from
operations as a percentage of net sales decreased to 7.1% in the nine months
ended March 31, 1996 from 15.1% in the nine months ended March 31, 1995.
Excluding the effects of (i) the noncash, nonrecurring charge for the settlement
discussed above and (ii) the nonrecurring restructuring credit recognized for
the nine months ended March 31, 1995, income from operations increased 29.9% to
$5.4 million (14.4% of net sales) for the nine months ended March 31, 1996 from
$4.1 million (13.8% of net sales) for the nine months ended March 31, 1995.
Interest Expense. Interest expense decreased 30.0% to $1.2 million for the
nine months ended March 31, 1996 from $1.6 million for the nine months ended
March 31, 1995. This decrease resulted from lower average debt outstanding and
lower noncash amortization of debt issuance costs for the nine months ended
March 31, 1996 as compared to the average debt outstanding and noncash
amortization of debt issuance cost for the nine months ended March 31, 1995.
Income Taxes. The effective income tax rate of 35% for the nine months
ended March 31, 1996 represents management's estimate of the effective income
tax rate for the year ending June 30, 1996. Income tax expense for the nine
months ended March 31, 1996 decreased 35.8% to $525,000 from $818,000 for the
nine months ended March 31, 1995. This decrease was primarily attributable to
NOLs being available to offset taxable income of the Predecessors after the
Combination in October 1995. As of March 31, 1996, the Company's available NOLs
were approximately $10.0 million and will expire in fiscal years 2006 through
2010. Because deferred taxes related to available NOLs have been offset by a
valuation allowance, as the valuation allowance reverses, the Company's
effective tax rate is expected to be less than the statutory income tax rate.
FISCAL 1995 COMPARED WITH FISCAL 1994
Net Sales. Net sales increased 32.0% to $40.8 million for fiscal 1995 from
$30.9 million for fiscal 1994. This increase consisted of a $5.2 million
increase in lamp sales, a $2.6 million increase in lamp component sales and a
$2.0 million increase in lamp production equipment sales. Lamp sales increased
primarily as a result of new product introductions and higher unit volumes. Unit
lamp sales increased even though the lamp manufacturing operations experienced
capacity constraints during the first half of fiscal 1995. The addition of a
second shift in January 1995 doubled annual production capacity from 700,000
lamps to 1.4 million lamps. Lamp component sales increased primarily as a result
of higher unit volumes driven by substantial growth in global metal halide lamp
sales. Lamp production equipment sales increased as a result of the shipment of
a complete equipment group to a lamp manufacturer in the People's Republic of
China in April 1995.
20
<PAGE> 23
Cost of Goods Sold. Cost of goods sold increased 26.6% to $21.9 million for
fiscal 1995 from $17.3 million for fiscal 1994. Cost of goods sold as a
percentage of net sales decreased to 53.7% in fiscal 1995 from 55.8% in fiscal
1994. This decrease was due primarily to increased sales of higher margin lamp
components and lamp production equipment, which increased to 23.8% and 7.4%,
respectively, of fiscal 1995 net sales from 23.0% and 3.2%, respectively, of
fiscal 1994 net sales. In addition, the Company experienced higher margins on
lamp component sales during fiscal 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 40.5% to $11.8 million for fiscal 1995 from
$8.4 million for fiscal 1994. Selling, general and administrative expenses as a
percentage of net sales increased to 29.1% in fiscal 1995 from 27.2% in fiscal
1994. This increase was due primarily to: (i) a greater percentage of
international lamp sales on which the Company pays higher commission rates; (ii)
increased spending on employee incentive programs; and (iii) non-recurring
organizational expenses associated with the Combination, which amounted to
approximately $176,000.
Research and Development Expenses. Research and development expenses
increased 70.0% to $1.7 million for fiscal 1995 from $1.0 million for fiscal
1994. Research and development expenses as a percentage of net sales increased
to 4.1% in fiscal 1995 from 3.2% in fiscal 1994. This increase was due primarily
to increased spending on new commercial and industrial lamp development and
component quality improvement. As a result of the increase in research and
development, the Company introduced more new products in fiscal 1995 than it had
in any prior year. The Company introduced the Energy Master Plus(TM) product
line in fiscal 1995 targeted at many large industrial and commercial
applications currently served by first generation metal halide lamps.
Reorganizing and Restructuring Expenses (Credit). The Company recorded a
$121,000 restructuring credit in fiscal 1995 compared to an $852,000
restructuring charge in fiscal 1994. The fiscal 1995 credit resulted from a
revision in the Company's plan of disposition for exiting its nonlamp component
product line.
Income from Operations. As a result of the above factors, income from
operations increased 61.8% to $5.5 million for fiscal 1995 from $3.4 million for
fiscal 1994. Income from operations as a percentage of net sales increased to
13.4% in fiscal 1995 from 11.0% in fiscal 1994. Excluding the effects of the
restructuring credit for fiscal 1995 and the restructuring charge for fiscal
1994, income from operations increased 25.6% to $5.4 million (13.2% of net
sales) for fiscal 1995 from $4.3 million (13.9% of net sales) for fiscal 1994.
Income Taxes. Income taxes increased to $212,000 for fiscal 1995 from
$71,000 for fiscal 1994. The difference between the effective tax rate and the
statutory tax rate is primarily attributable to the reversal of valuation
allowances due to utilization of NOLs. As of June 30, 1995, the Company had NOLs
of approximately $11.0 million available to offset future taxable income, which
expire in fiscal 2006 through fiscal 2010.
Extraordinary Charge. The Company recorded a $253,000 extraordinary charge
in fiscal 1995 representing costs associated with the early extinguishment of
debt. Such debt was extinguished in October 1994 and refinanced at a lower
interest rate.
FISCAL 1994 COMPARED WITH FISCAL 1993
Net Sales. Net sales increased 21.2% to $30.9 million for fiscal 1994 from
$25.5 million for fiscal 1993. This increase was primarily the result of a $4.3
million increase in lamp sales and a $1.4 million increase in lamp component
sales. Lamp sales increased primarily as a result of higher unit volumes
attributable to new product introductions, a significant increase in
international sales and overall industry growth. In addition, lamp component
sales benefitted from the introduction of new precision metal components.
Cost of Goods Sold. Cost of goods sold increased 1.8% to $17.3 million for
fiscal 1994 from $17.0 million for fiscal 1993. Cost of goods sold as a
percentage of net sales decreased to 55.8% in fiscal 1994 from 66.9% in fiscal
1993. This decrease resulted from: (i) lower manufacturing costs, including
lower costs of materials from suppliers; (ii) higher average selling prices
realized on a greater percentage of international lamp sales;
21
<PAGE> 24
and (iii) the absence in fiscal 1994 of approximately $0.6 million of severance
costs and inventory write-offs which had been recorded in fiscal 1993.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 52.7% to $8.4 million for fiscal 1994 from
$5.5 million for fiscal 1993. Selling, general and administrative expenses as a
percentage of net sales increased to 27.2% in fiscal 1994 from 21.6% in fiscal
1993. This increase resulted from: (i) a greater percentage of international
sales on which the Company pays higher commission rates; (ii) increased spending
on employee incentive programs; (iii) costs associated with the introduction of
direct marketing of lamps and lamp components; and (iv) unusually low levels of
selling, general and administrative expenses in fiscal 1993 during the
reorganization of the Company's lamp manufacturing Predecessor which resulted
from fewer sales promotions, lower sales commissions paid and work-force
reductions.
Research and Development Expenses. Research and development expenses
decreased 16.7% to $1.0 million for fiscal 1994 from $1.2 million for fiscal
1993. Research and development expenses as a percentage of net sales decreased
to 3.2% in fiscal 1994 from 4.6% in fiscal 1993. This decrease was primarily due
to the receipt of a royalty in fiscal 1994 of $85,000 that was offset against
research and development expenses.
Reorganizing and Restructuring Expenses (Credit). In fiscal 1994, the
Company recorded an $852,000 restructuring charge representing managements'
estimate of the costs, principally inventory and equipment write-offs,
associated with exiting its nonlamp component product line. In fiscal 1993, the
Company recorded reorganizing expenses of $7.2 million consisting of a $5.2
million charge for disposal of assets, primarily equipment related to the
manufacture of lower margin products, and $1.7 million in expenses resulting
from the reorganization of its lamp manufacturing Predecessor.
Income (Loss) from Operations. As a result of the above factors, income
from operations increased to $3.4 million for fiscal 1994 from a loss of $5.4
million for fiscal 1993. Income from operations as a percentage of net sales was
11.0% in fiscal 1994. Excluding the effects of the restructuring charge for
fiscal 1994 and the reorganizing and restructuring charge for fiscal 1993,
income from operations increased 144% to $4.3 million (13.9% of net sales) from
1.8 million (6.9% of net sales) for fiscal 1993.
Interest Expense. Interest expense increased to $2.2 million for fiscal
1994 from $938,000 for fiscal 1993. While its largest Predecessor was in
reorganization during fiscal 1993, such Predecessor was not required to pay or
accrue any interest on certain principal amounts owed.
Income Taxes. Income taxes increased to $71,000 for fiscal 1994 from
$48,000 for fiscal 1993. The difference between the effective tax rate and the
statutory tax rate is primarily attributable to the reversal of valuation
allowances due to utilization of NOLs.
Extraordinary Gain. In fiscal 1993, the Company recognized an extraordinary
gain of $11.4 million from the discharge of certain indebtedness.
22
<PAGE> 25
UNAUDITED SELECTED QUARTERLY RESULTS
The unaudited selected combined quarterly results for each of the five
quarters ended September 30, 1995 and the unaudited selected consolidated
quarterly results for each of the two quarters ended March 31, 1996 are
presented for informational purposes only and do not purport to project the
Company's results of operations for any future period. The unaudited selected
quarterly results should be read in conjunction with the historical Combined
Financial Statements of the Company and the related Notes thereto and other
financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
UNAUDITED SELECTED QUARTERLY RESULTS FOR THE THREE MONTHS ENDED
------------------------------------------------------------------------------
SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1994 1994 1995 1995 1995 1995 1996
--------- -------- --------- -------- --------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales....................... $ 9,310 $9,988 $10,721 $ 10,748 $ 11,472 $ 12,037 $13,786
Costs and expenses:
Cost of sales................. 5,000 5,507 5,773 5,619 6,130 6,422 7,404
Selling, general and
administrative............. 2,659 2,657 3,144 3,373 3,210 3,248 3,802
Research and development...... 347 399 404 523 505 540 669
Noncash settlement of claim... -- -- -- -- -- 2,732 --
Reorganizing and
restructuring.............. (243) (133) (19) 274 -- -- --
--------- -------- --------- -------- --------- -------- ---------
Income (loss) from operations... 1,547 1,558 1,419 959 1,627 (905) 1,911
Interest expense................ 544 540 554 491 534 452 164
--------- -------- --------- -------- --------- -------- ---------
Income (loss) before income
taxes and extraordinary
items......................... 1,003 1,018 865 468 1,093 (1,357) 1,747
Income taxes (benefit).......... 254 162 402 (606) 169 96 260
--------- -------- --------- -------- --------- -------- ---------
Income (loss) before
extraordinary items........... $ 749 $ 856 $ 463 $ 1,074 $ 924 $ (1,453) $ 1,487
====== ====== ======= ======= ======= ======= =======
</TABLE>
During the quarters ended March 31 and June 30, 1995, the Company recorded
charges of approximately $173,000 and $377,000, respectively, directly to cost
of sales, which are not expected to recur, in order to double its metal halide
lamp production capacity from 700,000 units to 1.4 million units annually. This
expense is associated with training additional personnel and the cost of
implementing a second production shift, including excess raw material usage and
quality control as the new shift learned the Company's production processes. The
Company believes that current production capacity will be sufficient to support
the Company's growth objectives for approximately the next five quarters.
In fiscal 1995, the nonlamp component product line disposition plan
implemented in fiscal 1994 was revised resulting in restructuring credits of
$243,000, $133,000, and $19,000 in the three months ended September 30 and
December 31, 1994 and March 31, 1995, respectively, and a charge of $274,000 for
the three months ended June 30, 1995 resulting in a net credit for fiscal 1995
of $121,000. On September 15, 1995, all remaining nonlamp component product line
assets were transferred to an affiliated company for an amount approximating net
book value.
On October 27, 1995, several former preferred shareholders of the Company's
largest Predecessor, whose shares were redeemed in August 1995 (prior to the
Combination), asserted a claim against certain officers of the Company. On
November 15, 1995, such officers entered into a settlement agreement with the
former preferred shareholders, whereby they transferred, from their personal
holdings, an aggregate of 273,185 shares of Common Stock to the former preferred
shareholders. Since the settlement resulted in a transfer of personal shares
held by such officers, there was no dilution of the ownership interest of
shareholders of the Company. The settlement was recorded as a noncash expense
and an increase in paid-in capital in December 1995.
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<PAGE> 26
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements are for capital expenditures
(primarily production equipment), working capital, research and development
expenditures and joint venture investments. These requirements have been, and
will continue to be, financed through a combination of cash flow from
operations, trade payables, borrowings under various credit facilities and the
issuance of Common Stock.
In December 1995, the Company received net proceeds of $24.0 million from
the sale of 2,900,000 shares of its Common Stock in connection with its initial
public offering.
Subsequent to its initial public offering, the Company: (i) paid off
substantially all of its outstanding borrowings (other than a mortgage on its
Urbana, Illinois facility) in the aggregate amount of $12.9 million; (ii) made
payments to holders of warrants for stock of two Predecessors in the aggregate
amount of $6.2 million; and (iii) reduced trade credit extended beyond normal
terms in the approximate aggregate amount of $3.0 million. In addition, the
Company has made two acquisitions for aggregate cash consideration of $3.3
million and has paid $300,000, the first installment of a joint venture
investment.
Net cash provided by operating activities totaled $4.5 million in fiscal
1995. Cash provided from operations for the nine months ended March 31, 1996
declined to $1.5 million from $2.2 million for the nine months ended March 31,
1995. The decline is primarily attributable to: (i) an increase in inventories
to support higher service levels and (ii) an increase in accounts receivable
arising from increased sales. Operating cash flow was primarily provided by
increases in accounts payable and in net income, excluding the effect of the
noncash settlement of a claim. The Company's working capital at March 31, 1996
was $14.1 million.
Capital expenditures totalled $1.5 million and $2.5 million during fiscal
1995, and the nine months ended March 31, 1996, respectively. Such expenditures
related primarily to production equipment purchases. Capital expenditures for
fiscal 1996 are expected to aggregate $4.0 million and will be used for
production equipment purchases for existing facilities. In addition, in fiscal
1997 the Company plans to expand its lamp manufacturing capacity through the use
of proceeds of this Offering.
On March 25, 1996, the Company entered into a Revolving Credit and Security
Agreement with BNY Financial Corporation (the "Loan Agreement"). Pursuant to the
Loan Agreement, BNY Financial Corporation ("BNY") has agreed to extend working
capital advances to the Company in aggregate amounts equal to the lesser of: (i)
$25.0 million less the current outstanding amount of advances under the Capex
Facility (defined below) (the "Maximum Revolving Loan Amount") or (ii) an amount
based on eligible receivables and inventory (the "Working Capital Facility"). At
June 10, 1996, working capital advances outstanding were $8.8 million and
additional available capacity under the Working Capital Facility was
approximately $1.1 million. After completion of the Offering and repayment of
the outstanding balances on the Working Capital Facility, available capacity
under the Working Capital Facility is expected to be approximately $9.9 million.
The unpaid principal balance of the Working Capital Facility (together with
accrued interest thereon) is payable on March 24, 1999. Advances under the
Working Capital Facility bear interest at the option of the Company at a rate
per annum equal to: (i) the higher of (a) the prime rate minus 0.5% or (b) the
Federal Funds Rate; or (ii) the average LIBOR plus 2.5%.
The Company is able to obtain advances aggregating up to $5.0 million to
permit the Company to finance permitted capital expenditures (the "Capex
Facility"), which bear interest at a rate per annum equal to the higher of (a)
the prime rate plus 0.5% or (b) the Federal Funds Rate plus 1.0%. The unpaid
principal balance of the Capex Facility (together with accrued interest thereon)
is payable on March 24, 1999. BNY has also agreed to issue letters of credit in
an aggregate amount of up to $5.0 million, at anytime, provided the outstanding
letters of credit and working capital advances do not exceed the Maximum
Revolving Loan Amount.
The Company believes that its cash balances, cash flow from operations,
available borrowings and the net proceeds to the Company of the Offering will be
sufficient to fund its operations for at least the next twelve months.
24
<PAGE> 27
BUSINESS
Advanced Lighting Technologies, Inc. is an innovation-driven designer,
manufacturer and marketer of metal halide lighting products, including lamps
(light bulbs), lamp components and lamp production equipment. Metal halide lamps
combine superior energy efficient illumination with longer life, excellent color
rendition by providing a full color spectrum and compact size as compared with
incandescent and fluorescent lamps. The Company believes it is the only company
in the world focused primarily on metal halide lighting and, as a result, it has
developed substantial expertise in all aspects of this industry. The Company
believes that this focus enhances its responsiveness to customer demand and has
contributed to its technologically advanced product development and
manufacturing capabilities. The Company currently markets over 240 specialty and
40 commodity-type metal halide lamps, giving it the most diverse product line of
any metal halide lamp manufacturer. Net sales increased 32.0% to $40.8 million
in fiscal 1995 from $30.9 million in fiscal 1994 and increased 24.3% to $37.3
million in the nine months ended March 31, 1996 from $30.0 million in the nine
months ended March 31, 1995. The Company has experienced growth in net sales in
each of the last ten quarterly periods.
Invented approximately 30 years ago, metal halide is the newest of all
major lighting technologies and can produce the closest simulation to sunlight
of all available lighting technologies. Metal halide lighting is currently used
in commercial and industrial applications such as factories and warehouses,
outdoor site and landscape lighting, sports facilities and large retail spaces
such as superstores. In addition, due to metal halide's superior lighting
characteristics, the Company believes many opportunities exist to expand the
uses of metal halide into applications currently dominated by incandescent and
fluorescent technologies. For example, a 100 watt metal halide lamp, which is
approximately the same size as a household incandescent lamp, produces as much
light as five 100 watt incandescent lamps and as much as three 34 watt, four
foot long fluorescent lamps. While domestic sales of incandescent and
fluorescent lamps grew at a compound annual rate of approximately 4% over the
last three years, domestic metal halide lamp sales have grown at a compound
annual rate of approximately 15% over the same period, making metal halide the
fastest growing segment of the approximately $2.6 billion domestic lamp market.
In 1995, metal halide accounted for approximately 6% of domestic lamp sales. The
Company believes that new lighting technologies typically increase overall lamp
sales rather than render existing technologies obsolete. Metal halide lighting
has recently been introduced in automotive headlamp, projection television and
fiber optic applications. The Company believes that applications for metal
halide lamps will continue to increase as metal halide systems become more
widely known.
The Company's objective is to be the leading innovator, designer,
manufacturer and marketer of specialty metal halide lamps, lamp components and
lamp production equipment. The Company pursues the following operating
strategies:
- Focus on Metal Halide Technology. The Company's focus on metal halide
products has enabled it to develop unique design, manufacturing and
marketing expertise in all metal halide product lines. By supplying lamp
components and lamp production equipment to the metal halide lamp
industry, the Company also benefits from the overall expansion of metal
halide lamp sales.
- Develop Innovative Products. The Company has introduced over 75% of the
new metal halide lamp types produced domestically since 1985. The
Company's new product strategy and emphasis on innovation differentiates
it from its competitors that focus primarily on high volume,
commodity-type lamps. Most of the Company's new products were developed in
response to customer demand and the Company remains the sole supplier for
many of these products.
- Continue to Strengthen OEM and Lighting Agent Relationships. The Company
frequently designs lamps to meet fixture specifications of original
equipment manufacturers ("OEMs") and their lighting agent sales force,
who, in turn, market the Company's lamps to a variety of end users. Such
cooperative relationships contribute to the Company's innovative designs
and allow it to utilize traditional distribution channels which are
dominated by the major lamp manufacturers. The Company's innovative
marketing techniques enabled it to capture approximately 29% of all new
domestic metal halide lamp sales in 1995.
25
<PAGE> 28
- Maintain Flexible Manufacturing Through Vertical Integration. By
controlling all aspects of the production of metal halide lamps and
components, the Company is able to cost-effectively develop and
manufacture a wide variety of specialty metal halide lamps, including lamp
types manufactured in small production runs.
The Company expects to increase its net sales by expanding the market for
metal halide products. The Company's growth strategy involves introducing new
products and creating new metal halide applications, increasing sales of
existing products, increasing its presence in international markets and
penetrating the residential market. The Company introduces new products by
working with OEMs and other customers to design and develop innovative metal
halide lighting solutions. The Company also intends to increase sales of its
existing products by implementing aggressive direct marketing of its lamps to
end users. Additionally, the Company intends to participate in growing
international markets through direct sales of lamps, lamp components and lamp
production equipment and, in countries with rapidly developing metal halide
markets, through joint ventures that will purchase the Company's lamp components
and lamp production equipment. The Company has begun its introduction of metal
halide lighting systems to the residential market, which represented 45% of all
domestic lamp sales in 1995, and believes that it is the first company to
develop such products for residential use.
Since the Company's initial public offering in December 1995, the Company
has continued to execute its growth strategy. The Company recently introduced
several new products, including specialty electronic metal halide lighting
controls, to complement its lamp sales and further meet the increasingly complex
specifications of OEMs and lighting agents. In May 1996, the Company introduced
its residential metal halide lighting systems at "Light Fair," the major United
States trade show. The Company is currently market testing its residential
systems and expects to begin limited production of its residential products in
the second quarter of fiscal 1997. Following the successful acquisition of its
distributor in the United Kingdom, the Company has continued to increase its
international marketing capabilities through the acquisition of its Canadian
distributor. The Company also has entered into an agreement to acquire its
Australian distributor. See "Business -- Growth Strategy." In addition to two
existing joint ventures, the Company entered into joint venture agreements in
Abu Dhabi and Vietnam to which it expects to sell lamp production equipment and,
when lamp production commences, certain lamp components.
LIGHTING TECHNOLOGY
Background
Light is radiant energy that provides the ability to see objects and events
in detail and color thereby enhancing form, providing atmosphere, enriching
color and texture, adding depth and providing enhanced safety and security. The
quantity of light generated by a light source differs, often significantly, from
the quantity that reaches the intended area. The quantity of light emitted from
a light source is measured in lumens. Lighting quality is determined by
characteristics such as color of light and color rendition. Color rendition is a
qualitative measure of how accurately a light source allows an object's actual
color to be viewed.
The lifetime cost of a lighting system is composed of the cost of the
original lamp and fixture, replacement lamps, related labor costs, and the cost
of energy to power the system. Lamps typically represent less than 20% of a
lighting system's total lifetime cost. The Company believes that the principal
lighting design considerations for industrial and commercial buildings, outdoor
space and residences are total system costs and the quality of light produced.
There are three primary types of lighting technology: incandescent,
fluorescent and high-intensity discharge ("HID"), which includes metal halide.
Each of these lighting technologies offers certain characteristics (such as
energy efficiency, color rendition, range of color, average life, lamp size and
ability to deliver substantial amounts of light to a focused area) that makes it
suited for particular applications. Choosing the appropriate lighting technology
to serve a given application involves matching the lamp's characteristics to the
end user's requirements.
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<PAGE> 29
The Older Lighting Technologies -- Incandescent and Fluorescent
Incandescent. Incandescent lamps were first introduced approximately 110
years ago, making them the oldest electric lighting technology. Incandescent
lighting is currently used in more applications than any other lighting
technology, primarily in residential and retail display applications.
Incandescent lamps have a significant installed base and, due to their design
versatility, over 1,000 different types of incandescent lamps are presently
available. As a result of the continued introduction of new incandescent
products, such as halogen, and the increase in the number of new residences,
domestic sales of incandescent lamps grew approximately 6% in 1995. Incandescent
lamps represented approximately 47% of the domestic lamp market in 1995.
Incandescent light is produced when a wire or filament is heated by the
flow of electric current through the wire or filament. Incandescent lamps
produce a yellowish light, with halogen lamps producing the least yellow light
of all incandescent lamps. Incandescent lamps offer the advantages of low
initial cost, good color rendition, versatility and the ability to deliver
substantial amounts of light to a focused area. Incandescent lamps have the
shortest life (750 to 2,000 hours) and are the least energy efficient (15 to 30
lumens per watt) of any lighting technology. Approximately 92% of the light
emitted by an incandescent lamp is infrared (heat) and ultraviolet light. As a
result of this inefficiency and their high energy requirements, a lighting
system utilizing incandescent lamps has the highest overall cost of light of any
lighting technology.
A recent development in incandescent technology is halogen lighting, which
was first introduced to the residential market in the early 1980s. Due to its
ability to produce "whiter" light than standard incandescent, the development of
low voltage systems and increased residential use, halogen lamps have been the
fastest growing product in the incandescent lighting segment, holding a 3% share
of the total domestic lamp market in 1995. The marketing of halogen lighting has
allowed halogen to transcend the image of a light source as a mere "bulb" and be
associated with a particular up-scale style, the first lamp to be so marketed.
Fluorescent. Fluorescent lamps were first introduced in 1935, and have
become the standard interior light source for office buildings, retail stores
and certain industrial applications. Today, over 400 different fluorescent lamp
types are available. In 1995, domestic sales of fluorescent lamps grew
approximately 10%. Fluorescent lamps represented approximately 41% of the
domestic lamp market in 1995.
Fluorescent lamps produce visible light when the discharge from an
electrically excited low pressure mercury vapor interacts with a phosphor powder
coating on the inside surface of the lamp. Unlike incandescent lamps,
fluorescent lamps require a ballast, which is a transformer-like device used to
regulate electrical current. Fluorescent lamps produce a white light, but one
that is often described as flat or unnatural. Fluorescent lamps offer instant
light, good color rendition, improved life and efficiency as compared to
incandescent lamps (10,000 to 20,000 hours life and 80 to 90 lumens per watt)
and moderate initial cost. Light output decreases if the ambient temperature in
the area in which it is installed declines, making fluorescent lighting
impractical for many outdoor uses. Traditional fluorescent lamps are much larger
than incandescent, making it difficult to deliver substantial amounts of light
to a focused area.
A new fluorescent technology is compact fluorescent lamps ("CFLs"). CFLs
exhibit significantly smaller bulb sizes than traditional fluorescent lamps,
increasing the number of applications for fluorescent lamps. CFLs were first
introduced to the commercial market approximately ten years ago and as energy
awareness has increased, they have penetrated the residential market. CFLs have
light outputs equivalent to incandescent lamps ranging from 15 to 100 watts.
Although CFLs cost more than standard incandescent lamps, this initial cost is
offset in most applications by energy savings and longer life.
The Newer Lighting Technology -- High-Intensity Discharge
General. An HID lamp produces light through a gaseous arc discharge. A
gaseous arc discharge is caused by electrical excitation of certain chemicals
(or "doses") in the lamp. The gases in an HID lamp are contained in an arc tube
under high pressure allowing a wide array of lighting effects to be obtained by
varying the chemical doses in the arc tube. HID lamps are not affected by
ambient temperatures. HID lamps require a
27
<PAGE> 30
ballast to regulate power, a warm-up period to reach full brightness and a
cool-down period before restart. Varieties of HID light sources include mercury,
high pressure sodium ("HPS") and metal halide.
Mercury. Mercury was the first HID lamp developed, but is used
infrequently today because it is the least efficient HID lamp. The primary use
of mercury lamps today is outdoor lighting in areas where there is a preference
for white light over the yellow light of HPS lamps. In 1995, domestic sales of
mercury lamps increased approximately 4%. Mercury HID lamps have an energy
efficiency ranging from 40 to 60 lumens per watt, and have a life of
approximately 16,000 to 24,000 hours. In 1995, mercury lamps represented
approximately 1% of the domestic lamp market.
High Pressure Sodium. HPS lamps are primarily used in roadway lighting
and, to a lesser extent, outdoor flood lighting, warehouses and factories. HPS
lamps produce a monochromatic yellow light that provides poor color rendition,
making HPS lamps a less desirable choice than metal halide lamps for most
applications. In 1995, domestic sales of HPS lamps increased 2%, primarily as a
result of increases in the amount of lighted roadway. HPS lamps have the longest
life (24,000 hours) and the highest energy efficiency (100 to 140 lumens per
watt) of any lighting technology. In 1995, HPS lamps represented approximately
5% of the domestic lamp market.
Metal Halide Lamps. Metal halide lamps were invented approximately 30
years ago. Metal halide products are currently used in commercial and industrial
applications such as factories and warehouses, large public spaces such as
convention centers and airports, outdoor site and landscape lighting, sport
facilities and large retail spaces such as superstores. Metal halide lighting
has recently been introduced in automotive headlamp, projection television and
fiber optic applications. As a result of technological improvements in wattage,
life and color consistency and the subsequent introduction of new products,
metal halide lamps have become available for a wide range of applications.
Increasing applications have stimulated market demand. Over the last three
years, metal halide lamp sales have a compound annual growth rate of 15%, and
sales increased approximately 20% in 1995, making it the fastest growing
lighting technology available.
Metal halide lamps provide excellent color rendition, exhibit long life
(10,000 to 20,000 hours) and have very high efficiency (70 to 110 lumens per
watt). Metal halide lamps typically have higher initial costs than either
incandescent or fluorescents, but these costs are more than offset in most
applications by energy savings and long life as well as by the need to install
fewer fixtures to achieve the same illumination as competing technologies.
The Company believes that the energy efficiency, long life, excellent color
rendition and compact size of metal halide lamps make them the preferable choice
for many commercial and industrial applications. Metal halide lighting can
produce the closest simulation to sunlight of all available light sources,
enhancing the sense of user comfort and well being and improving productivity. A
single metal halide lamp produces approximately five times as much light as an
incandescent lamp of the same wattage. The compact size of metal halide lamps
allows delivery of substantial amounts of light to a focused area. A 100 watt
metal halide lamp, which is approximately the same size as a household
incandescent lamp, produces as much light as five 100 watt incandescent lamps
and as much as three 34 watt, four foot long fluorescent lamps. These
characteristics offer greater options in illumination levels, lighting design
and system cost as well as significant energy savings. While the Company
believes that incandescent and fluorescent technologies will continue to be
utilized in most of their current applications, the characteristics of metal
halide lighting make it more effective for a variety of applications currently
dominated by incandescent and fluorescent lamps.
Metal halide lamps are capable of producing a wide variety of lighting
effects. The color of light produced by a metal halide lamp is dependent on the
metal halide salts contained in the arc tube. By varying the metal halide salts,
different effects may be achieved. Similarly, varying the size, shape and
wattage of the lamp make it possible to change the lighting effect and the
applications for which the lamp is used. Although these changes result in lamps
very similar in appearance, many of these lamps are very difficult to engineer.
For instance, scaling down a 400 watt lamp in size and wattage requires
significant technological changes to maintain the same level of energy
efficiency. Primarily as a result of these technological difficulties, only
approximately 15 companies worldwide manufacture metal halide lamps as compared
to thousands that
28
<PAGE> 31
manufacture incandescent lamps and hundreds that manufacture fluorescent lamps.
In 1995, metal halide lamp sales accounted for approximately 6% of domestic lamp
sales.
LIGHTING INDUSTRY
The lighting industry has three major sectors (industrial, outdoor and
commercial, and residential) and two general product lines (lamps and fixtures).
The industrial, outdoor and commercial, and residential lighting sectors
accounted for approximately 10%, 63%, and 27%, respectively, of the total
domestic lighting market in 1995. The domestic lighting market recorded fixture
sales of approximately $5.5 billion and lamp sales of approximately $2.6
billion, as measured by manufacturers' sales in 1995. The industrial, outdoor
and commercial, and residential lamp sectors accounted for approximately 11%,
44% and 45%, respectively, of the total domestic lamp market in 1995. Overall
sales of lighting products are affected by a variety of factors, including
general economic conditions, energy costs and availability, governmental
programs and regulations, new construction and renovation activity and
infrastructure expenditures.
The lamp industry is a mature market characterized by long product life
cycles. In 1995, all lamp types experienced increased sales, with incandescent
(including halogen) and fluorescent lamp sales experiencing increases of
approximately 6% and 10%, respectively. Metal halide lamps were the fastest
growing segment in 1995 with sales increasing 20%. The Company believes that new
lamp technologies typically increase overall lamp sales rather than render
existing technologies obsolete.
The lighting industry is dominated by GE, Philips and Sylvania. The Company
estimates that together these companies accounted for 65% of global lamp sales
in 1995. Although GE, Philips and Sylvania each have focused their efforts on
the larger incandescent and fluorescent markets, all three companies produce
metal halide lamps. However, these three companies have emphasized sales of a
relatively small variety of commodity-type metal halide lamps, which the Company
believes represent approximately 75% of total metal halide lamp sales. By
contrast, the Company focuses on introducing new products and applications in
the metal halide lamp industry, consisting of a wide selection of
customer-driven, specialty metal halide products.
DISTRIBUTION CHANNELS IN THE LAMP MARKETS
Commercial and Industrial Products. In commercial and industrial new
construction or renovation projects in North America, lighting requirements are
generally provided by lighting agents, who represent a full line of fixture
manufacturers. Lighting agents bid on providing the project's entire lighting
needs (which include poles, controls, fixtures and, in some cases, lamps) based
on the specifications of the architect or project lighting designer. Lighting
agents receive a commission from fixture OEMs but generally do not receive a
commission from lamp manufacturers, providing the lighting agent little
incentive to specify a particular lamp brand. If a lamp brand is not specified
by the architect, lighting designer or lighting agent, the project contractor
will purchase the lamps from a local electrical or industrial distributor. The
Company estimates that new installations accounted for approximately 45% of
metal halide lamp sales in 1995 and that the Company accounted for approximately
29% of all new metal halide lamp sales.
Replacement lamps are generally sold by local electrical and industrial
distributors. These distributors maintain an inventory of the most common lamp
types, referred to as "commodity" lamps. Due to their need to offer a wide
variety of commodity-type lamps to adequately serve end users, each distributor
tends to align itself with a full line lamp manufacturer such as GE, Philips or
Sylvania. As a result of their ability to provide a full line of lamps,
primarily incandescent and fluorescents, these three companies dominate this
distribution channel. Less common lamps are not usually stocked, but are ordered
by a distributor from a manufacturer and resold to the end user. The Company
estimates that replacement lamp sales represented approximately 55% of metal
halide lamp sales in 1995 and that the Company accounted for approximately 1% of
all replacement metal halide lamp sales.
Residential Products. Unlike the distribution of commercial lighting
products, the distribution of residential lighting fixtures is highly fragmented
with no single lamp or fixture manufacturer dominating any distribution channel.
Typically, retailers attend trade expositions and wholesale showrooms to select
products for their inventory based on perceived customer demand, style, price
and practicality. Consumers in turn
29
<PAGE> 32
purchase lighting fixtures from a variety of retailers, including designer
showrooms, lighting stores, furniture stores, general retailers and,
increasingly, do-it-yourself superstores and warehouse clubs. Replacement lamps
are purchased at a variety of retailers each of which purchase lamps directly
from a lamp manufacturer.
OPERATING STRATEGY
The Company's objective is to be the leading innovator, designer,
manufacturer and marketer of specialty metal halide lamps, lamp components and
lamp production equipment. The key elements of the Company's operating strategy
are outlined below.
Focus on Metal Halide Technology
The Company focuses primarily on designing, manufacturing and marketing
metal halide lamps, lamp components and lamp production equipment. The Company
believes that, based on the superior characteristics of metal halide lighting as
compared to other lighting technologies, there are significant opportunities to
expand the uses of metal halide lighting products. Distinct operational
knowledge is required to develop the Company's specialized metal halide products
and manufacture them in smaller, flexible production runs. The Company believes
its focus has allowed it to develop the unique design, manufacturing and
marketing expertise necessary to produce and sell such specialized products,
thereby providing the Company with significant competitive advantages.
Develop Innovative Products
The Company believes that introducing new products is critical to its
success. By developing a wide selection of metal halide products in response to
end user demands, the Company believes it has increased its visibility with its
customers and created an environment in which it can compete effectively with
the three major lamp manufacturers. As a result of its focus on new products,
the Company has developed over 75% of the approximately 200 new lamps introduced
in the domestic metal halide lamp market since 1985. Recent product innovations
include low wattage bulbs for downlighting in retail environments, more
efficient industrial lighting systems for large applications such as factories
and warehouses (for example, the Energy Master Plus(TM) and Pulse Star(TM)
product lines) and a compact 70 watt metal halide lamp for residential use.
Strengthen OEM and Lighting Agent Relationships
Traditionally, lamps are distributed by lighting distributors, which are
dominated by GE, Philips and Sylvania. As a result, the Company concentrates on
developing strong relationships with lighting fixture OEMs to develop and
manufacture lamps to meet their fixture needs and help differentiate their
products. Frequent visits and conversations with OEMs serve dual purposes,
providing the Company with valuable ideas for new products and providing OEMs
with the information necessary to market the Company's new products. Lamps
designed for a specific fixture are included with the fixture when sold by the
OEM, increasing distribution of the Company's metal halide lamps. The Company
has also entered into agreements with lighting agents to pay commissions for
selling the Company's lamps. Such commissions, unique among lamp manufacturers,
provide the agent an incentive to include the Company's metal halide lamps in
its bids on a construction or renovation project.
Maintain Flexible Manufacturing Through Vertical Integration
The Company designs, engineers, manufactures and sells its lamps as well as
lamp components, principally metal halide salts, and lamp production equipment.
The Company designs and fabricates most of its own equipment, which allows it to
continually improve its manufacturing processes. With its state-of-the-art
manufacturing equipment, the Company produces lamp components and performs
processes in-house that contribute significantly to its ability to produce
specialized metal halide lamps, including those manufactured in small production
runs. This allows the Company more readily to introduce new products in response
to customer demands and to continually improve the quality of its metal halide
lamps.
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<PAGE> 33
GROWTH STRATEGY
The Company believes that metal halide lamps represent the best lighting
technology for a wide variety of applications, many of which are not yet served
by an appropriate metal halide lamp product. The Company is continuing to
introduce more products for new applications and to expand the distribution
channels for its products. By supplying metal halide lamp components and lamp
production equipment to the metal halide lamp industry, the Company also
benefits from the overall expansion of metal halide lamp sales.
Introduce New Products and Applications
The Company believes that attractive new market opportunities exist for
metal halide technology and that the Company will be able to continue to apply
its expertise in all aspects of metal halide technology. The Company has
introduced over 75% of the approximately 200 new lamps in the domestic metal
halide lamp industry since 1985. As applications become increasingly complex,
the need to design simultaneously the lamp and the electrical controls as an
integrated system is becoming more significant. The Company recently introduced
specialty electronic metal halide lighting controls to complement its lamp sales
and further meet the needs of OEMs and lighting agents. The Company intends to
continue to develop, manufacture and market additional types of high performance
and technologically advanced lamps and lamp components. Over the last three
fiscal years, the Company has spent an aggregate of approximately $3.8 million
on research and development, representing 4.0% of aggregate net sales over that
period. During the nine months ended March 31, 1996, the Company spent $1.7
million on research and development, representing 4.6% of net sales for that
period.
Increase Sales of Existing Products
The Company plans to increase sales of existing products by strengthening
its distribution network, primarily by introducing new products. The Company's
unique products allow its OEMs and lighting agents to offer distinctive lighting
solutions and the visibility of such new products typically stimulates the
demand for the Company's existing products. The Company is presently the sole
supplier of over 140 metal halide lamp types. In addition, the Company plans to
capture a larger portion of the replacement lamp market. The Company has
developed a novel approach to direct market to end users requiring replacement
lamps. The placement of the Company's phone number on each lamp enables the end
user to order a replacement lamp directly from the Company for next day
delivery. The end user is therefore able to speak to a more knowledgeable
representative, thereby increasing the accuracy, efficiency and service to the
end user. In addition, the Company telemarkets replacement lamps in conjunction
with catalogue distributions.
Participate in Growing International Markets
International markets represent attractive opportunities for metal halide
products as developing nations continue to build infrastructure to support their
growing economies. Facilities such as train stations, airports, government
buildings, highways and factories all require substantial lighting for which
metal halide products are well suited. In addition, given the high energy
efficiency of metal halide and the high cost of energy in developing nations,
the Company believes that the international metal halide market will grow faster
than the United States market. International sales aggregated $12.0 million
(32.1% of net sales) for the nine months ended March 31, 1996, $11.7 million
(29.8% of net sales) for fiscal 1995, $7.0 million (22.6% of net sales) for
fiscal 1994 and $4.6 million (18.0% of net sales) for fiscal 1993.
The Company intends to participate in international markets in two ways.
First, the Company directly markets its metal halide lamps in countries that do
not impose restrictive tariffs, local content laws and other trade barriers. The
primary countries in which the Company directly markets its metal halide lamps
are the United Kingdom, Australia, Canada and Japan. The Company acquired its
United Kingdom distributor in fiscal 1995 which management believes has
significantly enhanced its marketing and distribution capabilities. Following
the successful acquisition of its distributor in the United Kingdom, in March
1996, the Company acquired its Canadian distributor, which it believes will
increase the Company's direct marketing and distribution capabilities in Canada.
For certain historical financial information regarding this distributor and
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<PAGE> 34
certain pro forma financial information of the Company relating to the
acquisition, see the "Audited and Unaudited Financial Statements of Spectro
Electric Inc." and "Pro Forma Condensed Combined Statements of Operations of
Advanced Lighting Technologies, Inc. and Spectro Electric Inc. (Unaudited)." The
Company has also entered into an agreement to acquire its Australian
distributor. In addition, the Company has further strengthened its relationship
with its Japanese distributor by including its chief executive officer as a
member of the Company's board of directors and participating with the
distributor in certain joint ventures. Second, in countries that impose trade
restrictions, the Company either sells lamp production equipment to or enters
into joint ventures with local lamp manufacturers which purchase the Company's
lamp production equipment. In addition to revenues generated by the sale of lamp
production equipment, the Company creates a customer for its metal halide salts
and other components. The Company has recently entered into joint venture
agreements in Abu Dhabi and Vietnam to which it expects to sell in fiscal 1996
and 1997 lamp production equipment and, when lamp production commences, certain
lamp components. The Company expects to continue increasing the number of joint
ventures in which it participates.
Penetrate the Residential Lighting Market
Metal halide lamps can be used in a wide variety of residential
applications. The Company believes that residential sales will represent a
substantial market within the next five years. This is due to the fact that
approximately 45% of all lamp sales in the $2.6 billion domestic lamp market are
for residential applications, for which metal halide lighting systems do not
currently exist. The Company, through its MICROSUN(TM) brand products, has
developed the only metal halide lamp systems for the residential market. The
Company has created a compact 70 watt metal halide lamp and electronic controls
with light output equivalent to a 300 watt halogen lamp, with significantly
higher energy efficiency. In addition, the metal halide lamp will produce less
heat and will have significantly longer life than a halogen lamp. Because metal
halide lamps cannot be used in existing incandescent or fluorescent fixtures,
the Company has designed distinctive fixtures for its metal halide lamps which
the Company introduced in May 1996 at "Light Fair," the major United States
lighting trade show. The Company will market both the fixture and the lamp to
high-end lighting stores and designer showrooms and the Company will make the
MICROSUN(TM) systems available to other OEMs for inclusion in their products on
a global basis. The Company has produced prototype products and is currently
market testing its residential systems. The Company expects to commence limited
production of MICROSUN(TM) brand products in the second quarter of fiscal 1997.
The Company's product introduction and marketing strategy is patterned after the
successful strategy employed in the introduction of halogen lamps to the
residential market in the 1980s. Halogen OEMs distinguished their product with
sleek, modern styles and allowed halogen to transcend the image of a light
source as a mere "bulb."
PRODUCTS
The Company designs, manufacturers and sells metal halide lamps, lamp
components and lamp production equipment.
The Company believes it differentiates itself from other metal halide lamp
manufacturers by offering a wider variety of lamps, many of which have been
customized to offer a specific solution to a lighting problem. Since 1985, the
Company believes that it has introduced over 75% of the approximately 200 new
lamps in the domestic metal halide lamp industry. Currently, the Company offers
over 240 specialty lamp types and 40 commodity-type lamps in 20 different watt
variations ranging from 32 watts to 2,000 watts for over 30 different
applications. In certain instances, the Company produces these products for its
competitors on a private label basis in order to capture sales through
competitors' distribution channels. The Company also sells commodity-type lamps
which it sources from other manufacturers.
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Metal halide lamps are used in a wide variety of applications and locations
in an assortment of open and closed fixtures and wall sconces, including:
<TABLE>
<S> <C> <C>
- floodlighting - sports and arena - general lighting
- architectural area lighting - industrial highbays
lighting - commercial downlighting - tunnel lighting
- general industrial - airport and railway - indirect indoor sports
lighting station lighting and office lighting
- billboard and sign - gas station canopy - parking garage lighting
lighting lighting - security lighting
- site lighting - interior downlighting - landscape lighting
- soffit lighting - decorative lighting
- hazardous location - retail store
lighting downlighting
- accent lighting and track lighting
</TABLE>
In addition to selling finished metal halide lamps, the Company produces
and sells a number of metal halide lamp components, particularly metal halide
salts. By varying the metal halide salts contained in the arc tube, different
light characteristics such as color are created. The Company produces 300 to 400
different metal halide salts that can be used in metal halide lamps. In addition
to meeting its own needs, the Company produces virtually all of the metal halide
salts used in metal halide lamps manufactured in the United States, including
those manufactured by GE, Philips and Sylvania, and a vast majority of metal
halide salts used in metal halide lamps manufactured overseas. The Company
serves all major lamp manufacturers, each of which uses different metal halide
salts. The Company vigorously guards each customers' specific formulas from
other customers, including the Company's own lamp engineers.
The Company is also a leading manufacturer and marketer of turn-key metal
halide lamp manufacturing equipment groups consisting of up to 50 different
production machines. Each equipment group costs between $1.0 million to $6.0
million and has approximately 50 work stations. In order to maintain lamp
manufacturing flexibility, the Company must continually update its lamp
manufacturing equipment, through the internal design and fabrication of
equipment. The Company uses this knowledge by selling its equipment overseas to
either an independent company or to a joint venture in which the Company owns an
interest. In connection with each equipment group sale, the Company provides
lamp designs and specifications and trains the purchaser in the production of
metal halide lamps, but typically only commodity-type lamps. In addition the
Company creates an additional customer for its lamp component products, thus
allowing the Company to realize additional sales on a recurring basis.
PRODUCT DESIGN AND DEVELOPMENT
The Company focuses on developing strong relationships with lighting
fixture OEMs and lighting agents to develop lamps that will meet their fixture
needs rather than force the fixture to meet the needs of an existing lamp. The
Company realizes higher margins on sales of specialty type lamps. Frequent
visits with OEMs and lighting agents serve dual purposes, providing the Company
with valuable input of ideas for new products and providing OEMs and lighting
agents with the information necessary to market the Company's new products
appropriately. The Company believes it is important that metal halide fixtures
are available for the widest range of applications because although architects
and lighting designers rarely designate a specific lamp brand, they typically
designate the fixture to be installed. As a result of the Company's leadership
in this industry, the Company is continually approached with potential
applications of metal halide technology. For example, the Company has designed
and developed products to retrofit certain fixtures in manufacturing plants for
a consumer products manufacturer and an auto manufacturer, in the process
replacing less efficient older metal halide technology and HPS lamps.
The Company believes that its most significant innovations include the
design of products that reduced the wattage and decreased the size of metal
halide lamps without, in either case, a loss of energy efficiency or a decrease
in life, and the design of a metal halide lamp that can utilize an installed
ballast and socket for HPS lamps and older metal halide lamps. These innovations
have made it possible for metal halide lamps to displace incandescent and
fluorescent technologies in many new applications and will enable metal halide
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<PAGE> 36
lamps to displace HPS lamps in a number of applications, particularly industrial
and warehouse uses, at a lower cost to the end user than if new fixtures and
ballast needed to be installed.
The Company continually updates its lamp component production processes and
experiments with different metal halide salt compounds to enhance their purity
and to better understand their light characteristics.
The Company is continually making improvements to its manufacturing
equipment so that it can meet the demands of its specialty product strategy. The
Company's vertical integration of manufacturing lamps, lamp components and lamp
production equipment and marketing allows quick responses to the needs of end
users. The Company analyzes the design of each piece of manufacturing equipment
using computer-aided design and manufacture to reduce costs and expedite
innovations.
MARKETING AND DISTRIBUTION
Commercial Products
The Company's innovative marketing techniques enabled it to capture
approximately 29% of all new domestic metal halide lamp sales in 1995. Since
electrical distributors typically market only commodity-type lamps, the Company
believes that its specialty products do not lend themselves to the traditional
marketing channels associated with commodity-type lamp products. As a result, in
initial distribution, the Company markets its metal halide lamps through OEMs,
who have generally been involved in the design of the lamp, and commissioned
lighting agents, who package the Company's lamps in their bids on each
construction or renovation project. Due to the fact that the Company's lamps are
produced to the specifications required to match a particular fixture or use by
an OEM, the Company's lamp will generally be included with the fixture each time
the fixture is sold.
The Company also has distributed its metal halide lamps through lighting
agents. Unlike GE, Philips and Sylvania that each have extensive local
distributor relationships, the Company has entered into agency agreements with
lighting agents who represent a full line of fixture manufacturers, under which
the agent receives a commission for selling the Company's lamps. The Company
believes it is the only major lamp manufacturer to distribute its products
through lighting agents. This relationship allows the lighting agent to package
the Company's metal halide lamps with the other products included in its bid on
a project. By bidding a more complete or unique package, the lighting agent has
a competitive advantage over less complete bids and, if selected, earns a
commission on Company lamps sold, which agents previously did not receive.
The Company intends to increase its sales of replacement lamps through
direct marketing. First, the Company places a toll-free number on each lamp that
it sells allowing an end user to call the Company, rather than an electrical
distributor, to order the replacement lamp directly from the Company. This
enables the end user to speak to a more knowledgeable representative, thereby
increasing the accuracy, efficiency and service to the end user. Talking to the
representative also allows the Company to suggest enhanced products better
suited for the end user's needs. In addition, the Company telemarkets
replacement lamps in connection with catalogue distributions. Lamps are
delivered by overnight courier to end users, thereby providing service
efficiency comparable to local electrical distributors. The Company estimates it
sold approximately 1% of all replacement metal halide lamps in 1995. Replacement
lamps are typically sold at a higher margin than lamps sold initially through
OEMs or lighting agents.
The Company markets its metal halide components to other metal halide lamp
manufacturers, primarily GE, Philips and Sylvania. The Company makes these
customers aware of its capabilities through seminars and direct marketing
materials. The Company also markets lamp components to its joint venture
partners. In addition, the Company works very closely with its customers to
manufacture components according to their specifications. Certain customer
developed components are considered proprietary to the Company's customers.
In marketing its lamp production equipment internationally, the Company
seeks out the most technically advanced lamp manufacturers in each country or
the Company is approached by foreign lamp manufacturers seeking to acquire the
technology. The Company initially sends a catalogue to these manufacturers, then
later
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<PAGE> 37
calls on these manufacturers to determine their needs. The Company develops a
customized configuration for the equipment to meet the customers' needs. The
Company believes its ability to supply a full range of lamp components provides
it an advantage in selling lamp production equipment.
Residential Products
The Company has begun preliminary marketing of metal halide technology to
the residential market in 1996. Initially, this marketing will focus on high-end
lighting stores and designer showrooms similar to the manner in which halogen
lamps penetrated the residential market in the early 1980s. The Company will use
its existing lighting agents, who typically sell both commercial and residential
products, to reach these stores. However, unlike halogen lamps, the Company
intends to pursue a strategy of branding its products under its MICROSUN(TM)
brand name thereby differentiating it from any competitors as well as
establishing brand loyalty. In the second and third quarters of fiscal 1996, the
Company gathered many focus groups where various examples of incandescent table
lamps and table lamps containing the MICROSUN(TM) metal halide lighting system
were presented to and compared by various potential customers. The responses
received by the Company were favorable, and using information obtained in the
focus group sessions, the Company designed a line of table lamps and produced a
catalogue to market these lamps. As marketing continues, the Company intends to
promote designer and consumer awareness through targeted advertising. The
Company believes that the high price point at which this product will be sold
will support this marketing approach, unlike the incandescent or fluorescent
residential lamp market. The Company has entered into preliminary discussions
with two lighting showrooms in Cleveland, Ohio to further test market the sale
of table lamps using its MICROSUN(TM) brand name. The Company expects to
commence limited commercial production of MICROSUN(TM) brand products in the
second quarter of fiscal 1997. There can be no assurances that the Company will
successfully introduce metal halide lighting into the residential market.
MANUFACTURING AND OPERATIONS
The Company's lamp manufacturing facility in Solon, Ohio operates five days
a week, 16 hours a day, with the Company's lamp manufacturing employees working
in two eight-hour shifts each day. The manufacturing of metal halide lamps
consists of three primary processes. First, the quartz arc tube is shaped,
electrodes for carrying the current are installed, the metal halide salt dose is
introduced and the arc tube is sealed. The entire process is performed at high
temperatures in carefully controlled conditions to ensure that the arc tube is
properly sealed and that no impurities enter the arc tube. Second, the arc tube
is mounted inside a pyrex bulb container and sealed. Finally, the lamp is
finished by adding a contact for the electrical outlet. Although light output of
metal halide lamps is not affected by ambient temperatures, an outer bulb is
used to prevent contact with the arc tube, which operates at extremely high
temperatures. Quartz and pyrex are used in the production of metal halide lamps
because of their durability and ability to retain shape and function at
extremely high temperatures. All of the finished lamps are inspected, tested and
then shipped in accordance with customer instructions.
The Company produces all of the metal halide salts it uses and sells at its
facility in Urbana, Illinois. The Urbana facility with 53 employees working a
single shift also produces precision metal pieces, precision metal electrode
leads, and high speed dose dispensers which are used by both the Company and
sold to other metal halide lamp manufacturers for the production of metal halide
lamps.
The Company manufactures equipment for metal halide lamp production at its
facility in Bellevue, Ohio. This equipment is used for the Company's lamp
production and is also sold to other lamp manufacturers world wide. The Company
internally manufactures many critical and proprietary parts for its lamp
production equipment. It purchases commercial components and has other parts
built to its specifications by a number of local suppliers. The Company
assembles and tests this equipment as well as trains customers in its use. The
Company supplies extensive product, quality, process, and training documentation
with the equipment.
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<PAGE> 38
RAW MATERIALS AND SUPPLIERS
The Company sources its raw materials from a variety of suppliers.
Presently, it sources all of the molds for its quartz tubing and pyrex bulbs
from GE. Although an interruption in these supplies could disrupt the Company's
operations, the Company believes that alternative sources of supply exist and
could be arranged prior to the interruption having a material adverse effect on
the Company's operations.
Most of the raw materials used in the production of metal halide salts can
be sourced from several suppliers. The Company is reliant on a single supplier
for only one raw material and expects to produce this material itself in
calendar 1996. The Company has been the dominant supplier of metal halide salts
to the metal halide lamp industry for many years. Therefore, the Company has
focused on addressing any circumstance which could jeopardize the continued
production of these vital components. Since the Company is the primary supplier
of metal halide salts to the metal halide lamp industry, any disruption in
supply would also affect each producer of the affected lamp type.
The Company purchases certain of its industrial commodity-type lamp types
from GE. This enables the Company to use its manufacturing equipment to produce
more specialty, higher margin lamp types. The Company believes that alternative
sources of these commodity-type lamp types can be arranged prior to any material
adverse effect on the Company's sales.
COMPETITION
The Company's metal halide lamps compete with other types of lighting
technology for many applications as well as with metal halide lamps produced by
other metal halide lamp manufacturers, primarily GE, Philips and Sylvania. Metal
halide technology is the newest of all lighting technologies and although the
market awareness and the uses of metal halide lamps continues to grow,
competition exists from older technologies in each metal halide application.
GE, Philips and Sylvania are the Company's principal competitors in the
production of metal halide lamps. Although GE, Philips and Sylvania have focused
their efforts on the larger incandescent and fluorescent markets, all three
companies produce metal halide lamps. These three companies have emphasized
sales of a relatively small variety of commodity-type metal halide lamps, such
as those found in certain industrial applications, which the Company believes
represent approximately 75% of the total metal halide lamp segment. There can be
no assurance that any of the Company's competitors will not expand their focus
into specialty lamps. Although the Company believes its technical and
engineering expertise in the production of specialty metal halide lamps and its
unique marketing approach give it a competitive advantage in this market, the
Company's three primary competitors have significantly longer operating
histories, greater financial, technical, and other resources and larger
marketing and distribution organizations than the Company.
The Company does not believe that the foreign lamp manufacturers to whom
the Company sells equipment compete with the Company's specialty products. Due
to the technical and engineering expertise required to produce a new type of
metal halide lamp, these purchasers have typically only produced the
commodity-type lamps types in which they have been trained by the Company.
Although there can be no assurances these purchasers will not produce specialty
lamp types to compete with the Company, these purchasers would need to
independently develop the expertise required to produce specialty metal halide
lamps.
INTELLECTUAL PROPERTY
The Company relies on trade secret, trademark and patent laws to protect
its rights to certain aspects of its products, including proprietary
manufacturing processes and technologies, product research and concepts and
trademarks, all of which the Company believes are important to the success of
its products and its competitive position. In recent years, the Company has
successfully taken legal action to enjoin misappropriation of trade secrets by
other parties. Any increase in the level of activities involving
misappropriation of the Company's trade secrets or other intellectual property
rights could require the Company to increase
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<PAGE> 39
significantly the resources devoted to such efforts. In addition, an adverse
determination in litigation could subject the Company to the loss of its rights
to a particular trade secret, trademark or patent could require the Company to
grant licenses to third parties, could prevent the Company from manufacturing,
selling or using certain aspects of its products or could subject the Company to
substantial liability, any of which could have a material adverse effect on the
Company's results of operations.
ENVIRONMENTAL REGULATION
The Company's operations are subject to federal, state, local and foreign
laws and regulations governing, among other things, emissions to air, discharge
to waters and the generation, handling, storage, transportation, treatment and
disposal of waste and other materials as well as laws relating to occupational
health and safety. The Company believes that its business, operations, and
facilities are being operated in compliance in all material respects with
applicable environmental and health and safety laws and regulations, many of
which provide for substantial fines and criminal sanctions for violations.
However, the operations of manufacturing plants entail risks in these areas, and
there can be no assurance that the Company will not incur material costs or
liabilities. In addition, potentially significant expenditures could be required
in order to comply with evolving environmental and health and safety laws,
regulations or requirements that may be adopted or imposed in the future.
In 1993, the Company entered into a consent decree with the City of Solon
Sewer District with respect to the discharge of mercury into the sewer system
from its Solon, Ohio plant operations. The Company instituted procedures to
comply with this consent decree, and the consent decree expired by its terms due
to the Company's operation within required discharge limits for the period
required by the decree. However, routine sampling of the effluent by Solon in
September 1995 revealed an instance of mercury discharge in excess of the limits
imposed by Solon. Subsequent tests conducted by the City of Solon showed mercury
discharges within required limits. The Company has implemented a plan intended
to prevent intermittently exceeding Solon's mercury standards in the future. The
Company believes the cost of continued compliance will not have a material
effect on its financial position or results of operations.
The Company believes that the overall impact of compliance with regulations
and legislation protecting the environment including the consent decree will not
have a material effect on its future financial position or results of
operations, although no assurance can be given. Capital expenditures and
operating expenses in fiscal 1994, fiscal 1995 and the nine months ended March
31, 1996 attributable to compliance with such legislation were not material.
PROPERTIES
The Company owns a 30,000 square foot component manufacturing facility in
Urbana, Illinois. This property is subject to a mortgage of approximately
$836,000 as of March 31, 1996. The Company's remaining facilities are leased,
with aggregate annual rent of approximately $1.1 million. The aggregate square
footage of such leased space is 256,000 square feet. The average number of years
remaining on these leases is approximately 4 years. The Company believes that
its facilities are adequate for its current needs and does not expect difficulty
replacing such facilities or locating additional facilities if needed.
EMPLOYEES
As of March 31, 1996, the Company had approximately 564 full-time
employees, including 453 in lamp designing, manufacturing and marketing, 56 in
component manufacturing, 35 in equipment manufacturing, and 20 in
corporate/administrative services. The Company believes that its employee
relations historically have been good. The Company's employees are not
represented by any collective bargaining organization, and the Company has never
experienced a work stoppage.
LEGAL PROCEEDINGS
The Company does not have pending any litigation that, separately, or in
the aggregate, if adversely determined, could reasonably be expected to have a
material adverse effect on the Company. The Company
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and its subsidiaries may, from time to time, be a party to litigation or
administrative proceedings which arise in the normal course of their business.
On March 1, 1996, Edmund E. Heartstedt asserted a claim in the United
States District Court for the Northern District of Ohio against Wayne R.
Hellman, Chief Executive Officer and a director of the Company, and Louis S.
Fisi, Chief Financial Officer and a director of the Company, alleging certain
misrepresentations and/or omissions were made to him in connection with: (i) the
cash-out of his interest effected by a merger of a Predecessor into the Company,
as to which Mr. Heartstedt did not exercise his statutory appraisal rights; and
(ii) the purchase by Mr. Hellman of Mr. Heartstedt's beneficial interest in a
trust controlled by Mr. Hellman. Mr. Heartstedt alleges that the representations
and/or omissions made by Mr. Fisi and others on behalf of Messrs. Hellman and
Fisi caused him direct damages which he believes exceed $900,000. The suit also
claims punitive damages in an undetermined amount believed by the Plaintiff to
exceed $2.7 million. Messrs. Hellman and Fisi have denied the allegations and
are vigorously defending the claim. The Company does not believe this litigation
could reasonably be expected to have a material adverse effect on the Company.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information with respect to each
person who is currently a director, an executive officer or key employee of the
Company.
<TABLE>
<CAPTION>
DIRECTORS
TERM
NAME AGE POSITION EXPIRES
- ---------------------------------- -------- ---------------------------------- ----------
<S> <C> <C> <C>
Wayne R. Hellman.................. 50 President, Chief Executive Officer 1998
and Chairman of the Board of
Directors
Louis S. Fisi..................... 61 Executive Vice President, Chief 1997
Financial Officer and Director
Francis H. Beam................... 60 Director 1997
Richard D. Capra.................. 63 Director 1996
Theodore A. Filson................ 61 Director 1998
Susumu Harada..................... 45 Director 1996
A Gordon Tunstall................. 52 Director 1996
Key Employees
David L. Jennings................. 47 Coordinator of Pacific Rim
Development
Robert S. Roller.................. 50 Coordinator of Market Development
Juris Sulcs....................... 52 Coordinator of Technology
Development
</TABLE>
Wayne R. Hellman has served as the chief executive and a director of the
Company since 1995, and as chief executive or other senior officer of each of
the Company's Predecessors since 1983. From 1968 to 1983 he was employed by the
lighting division of General Electric Company. While at General Electric, Mr.
Hellman served as Manager of Strategy Analysis for the Lighting Business Group;
Manager of Engineering for the Photo Lamp Department; Halarc Project Venture
Capital Manager; Manager of Quartz Halogen Engineering and Manager of Metal
Halide Engineering. As the Halarc Project Venture Capital Manager, he was given
the responsibility of developing metal halide technology.
Louis S. Fisi has served as the chief financial officer and a director of
the Company since 1995 and as chief financial officer of one or more of the
Company's Predecessors since 1985 and assisted Mr. Hellman in the founding of
the Predecessors. Mr. Fisi is a certified public accountant and from 1976 to
1985, was employed in executive and financial capacities by the Smithers
Company, an international industrial company, and from 1967 to 1976 was employed
by an international accounting and consulting firm currently known as Ernst &
Young LLP, the Company's auditors.
Francis H. Beam has served as a director of the Company since 1995. Mr.
Beam has served as President of Pepper Capital Corp., a venture capital firm
which he formed, since 1988. Mr. Beam is also a director of The Lamson &
Sessions Co., a manufacturer of thermoplastic conduit and pipe, enclosures,
wiring devices and accessories. From 1959 to 1988 he was employed by an
international accounting and consulting firm currently known as Ernst & Young
LLP, the Company's auditors. Beginning in 1967 he held various partnership
positions with that firm until his retirement in 1988 as Vice Chairman and
Regional Managing Partner.
Richard D. Capra has served as a director of the Company since 1995. Mr.
Capra has been an independent consultant to and director or officer of a number
of lighting companies since 1991. In addition, Mr. Capra served as president and
chief executive officer of Aerovox/Aero M Group from December 1994 to December
1995, and as president and chief operating officer of Crescent Electric Supply
Company from December 1993 to December 1994. Mr. Capra is also a director of ILC
Technology, Inc., a manufacturer of high intensity lamps for specialized
applications. From 1987 to 1991 he was employed by Philips Lighting
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Company as its president and chief executive officer, prior to which he served
as president of the lighting ballast manufacturing subsidiary of that company
from 1983 to 1987. From 1970 to 1983 Mr. Capra was employed as president and
chief executive officer of the electrical products group of Gould, Inc. and of
I.T.E. Imperial Corp.
Theodore A. Filson has been a director of the Company since 1995. Mr.
Filson has served as an independent consultant to the lighting industry since
1994. From 1986 to 1994 he was employed as president and chief executive officer
of Advance Transformer, Inc., the largest manufacturer of lighting system
ballasts in the world.
Susumu Harada has served as a director of the Company since January 1996.
Mr. Harada is the chief executive officer of the following Japanese companies:
Koto Electric, Koto Luminous, Koto Bunkogen, Iwaki Cristal and Wakoh. The
product lines of these companies include specialty lamps, hermetic seals for
quartz crystal and optical semiconductors and digital display lamps. In 1981,
Mr. Harada joined Koto as the Overseas and Domestic Sales and Planning Manager.
He held a number of positions with Koto before he assumed his current position
as chief executive officer in 1992. Koto Luminous is the Company's sole agent in
Japan.
A Gordon Tunstall has served as a director of the Company since June 1996.
He is the founder of, and for more than 13 years has served as President of,
Tunstall Consulting, Inc., a provider of strategic consulting and financial
planning services. Mr. Tunstall is also currently a director of Romac
International, Inc., a professional and technical placement firm; Orthodontic
Centers of America, Inc., a manager of orthodontic practices; Discount Auto
Parts, Inc., a retail chain of automotive aftermarket parts stores; and L.A. T
Sportswear, Inc., a sports apparel company.
David L. Jennings has served as the senior officer responsible for product
manufacturing and development for one or more of the Predecessors since 1983,
and assisted Mr. Hellman in the founding of the Predecessors. From 1972 to 1983
he was employed by General Electric in a managerial capacity, engaged primarily
in the marketing and engineering of metal halide and other lighting products.
Robert S. Roller has served as the senior officer responsible for product
marketing for one or more of the Predecessors since 1983, and assisted Mr.
Hellman in the founding of the Predecessors. From 1966 to 1983, he was employed
by the lighting division of General Electric in a managerial capacity, engaged
primarily in the marketing and engineering of metal halide and other lighting
products.
Juris Sulcs has served as the senior officer responsible for technology
development for one or more of the Predecessors since 1983, and assisted Mr.
Hellman in the founding of the Predecessors. From 1966 to 1983, he was employed
by the lighting division of General Electric in a managerial capacity, engaged
primarily in the technological development and quality control of metal halide
and other lighting products.
COMPOSITION OF THE BOARD OF DIRECTORS
Pursuant to the terms of the Company's Articles of Incorporation and Code
of Regulations (by-laws), the Board of Directors has the power to change the
number of directors by resolution. The number of directors is currently set at
seven members. The directors are divided into three classes. Each director in a
particular class is elected to serve a three-year term or until his or her
successor is duly elected and qualified. The classes are staggered so that their
terms expire in successive years resulting in the election of only one class of
directors each year.
COMMITTEES OF THE BOARD OF DIRECTORS
Executive Committee. The Company's Executive Committee is composed of Mr.
Hellman, Mr. Fisi and Mr. Filson. The Executive Committee is authorized to
exercise all of the powers of the Board of Directors except the powers to
declare dividends and issue shares of Common Stock or rights to acquire such
Common Stock. The Executive Committee is empowered to act during the interim
periods between meetings of the Board of Directors, where circumstances require
immediate Board of Directors' action and where time and other constraints
preclude a prompt special meeting of the entire Board of Directors.
40
<PAGE> 43
Audit Committee. The Company's Audit Committee is composed of Mr. Beam,
Mr. Capra and Mr. Filson. The Audit Committee makes recommendations concerning
the engagement of independent public accountants, reviews with the independent
public accountants the plans and results of the audit engagement, approves
professional services provided by the independent public accountants, reviews
the independence of the independent public accountants, considers the range of
audit and non audit fees and reviews the adequacy of the Company's internal
accounting controls.
Compensation Committee. The Company's Compensation Committee is composed
of Mr. Beam, Mr. Capra and Mr. Filson. The Compensation Committee determines the
compensation of the Company's executive officers.
Incentive Award Plan Committee. The Company's Incentive Award Plan
Committee is composed of Mr. Hellman and Mr. Fisi. The members of this Committee
are ineligible to receive discretionary grants of stock or stock options under
any plan of the Company during the time they serve on the Committee or for the
one-year period prior to such service. The Incentive Award Plan Committee
administers the Incentive Award Plan and will make all determinations as to
grants of stock and stock options thereunder. See "Management -- Incentive Award
Plan."
Other Committees. The Board of Directors may establish other committees as
deemed necessary or appropriate from time to time.
COMPENSATION OF DIRECTORS
All directors of the Company receive reimbursement for reasonable
out-of-pocket expenses incurred in connection with meetings of the board of
directors. In December 1995, the Company granted options to purchase 9,600
shares of Common Stock under the Incentive Award Plan to its nonemployee
directors. These options were granted at an exercise price of $10.00 per share,
none of which are currently exercisable. In January and June 1996, the Company
granted options to purchase 9,600 shares of Common Stock under the Incentive
Award Plan to its nonemployee directors that were appointed to the board of
directors during the months in which the grants were made. The January grant was
at $10.25 and the June grant was at $17.00. In June 1996, all nonemployee
directors were granted options to purchase an additional 5,400 shares at an
exercise price of $17.00 per share. Each grant was made at the market price of
the Company's Common Stock on the date of grant. Each option will vest 25% in
the first year, 35% in the second year and 40% in the third year, from the date
of grant. In addition, commencing in fiscal 1997, the nonemployee directors are
to be compensated $2,500 for each meeting of the full board attended. Such
directors will be entitled to a minimum of $10,000 if they attend 75% or more
meetings of the board and committees to which they belong. No director who is an
employee of the Company will receive separate compensation for services rendered
as a director.
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<PAGE> 44
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information with respect to all
compensation paid or earned for services rendered to the Company in all
capacities for the fiscal year ending June 30, 1995 by the Company's Executive
Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------------------------
OTHER ANNUAL
COMPENSATION($)
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY($)(1) BONUS($) (2)
- ----------------------------------------- ----------- ------------ -------- ---------------
<S> <C> <C> <C> <C>
Wayne R. Hellman......................... 1995 $324,926 $142,057 $ 116,377
President and Chief Executive Officer
Louis S. Fisi............................ 1995 196,156 48,093 78,226
Executive Vice President and Chief
Financial Officer
</TABLE>
- ---------------
(1) Mr. Hellman and Mr. Fisi are each parties to an Employment Agreement with
the Company. These Employment Agreements have an initial term expiring
October 1998. Through these Employment Agreements, Mr. Hellman and Mr. Fisi
will receive an annual base compensation of $195,000 and $165,000 per year,
respectively. In addition, Mr. Hellman and Mr. Fisi will each be entitled
to receive a bonus in amounts determined by the Compensation Committee.
These Employment Agreements provide for annual increases in annual base
compensation in amounts determined by the Compensation Committee during the
term of these Employment Agreements. Under these Employment Agreements, Mr.
Hellman and Mr. Fisi participate in Company sponsored life, health and
disability insurance coverage. Also includes compensation deferred pursuant
to the Company's 401(k) deferred compensation plan and Company matching
contributions relating thereto.
(2) Perquisites provided to the executive officers consisted primarily of split
dollar insurance coverage as well as automobile use, automobile insurance,
club dues and health insurance premiums.
INCENTIVE AWARD PLAN
The Advanced Lighting Technologies, Inc. 1995 Incentive Award Plan (the
"Incentive Award Plan") which became effective as of August 21, 1995, was
established to encourage selected employees, advisors, consultants and directors
of the Company to acquire an equity interest in the Company, to create an
increased incentive for those persons to contribute to the Company's future
success and to enhance the ability of the Company to attract and retain
qualified individuals.
The Incentive Award Plan is administered by the Incentive Award Plan
Committee, each member of which is a "disinterested" person within the meaning
of Rule 16b-3 under the Securities Exchange Act of 1934, as amended.
Subject to adjustment under certain circumstances to prevent dilution or
enlargement of the benefits or potential benefits intended to be made under the
Incentive Award Plan, the number of shares of Common Stock available for awards
under the Incentive Award Plan is 1,000,000. These shares may be issued in
connection with the grant by the Incentive Award Plan Committee as "A" Incentive
Options and/or "B" Incentive Options, as the case may be (collectively called
the "Options"). The Incentive Award Plan also provides that no "A" or "B"
Incentive Option may be exercised prior to six months after the date of its
grant and that no awards may be granted under the Incentive Award Plan after
July 31, 2005.
The Company has granted Incentive Options to purchase the Common Stock of
the Company. 217,500 outstanding "A" Incentive Options have been issued at an
exercise price equal to the initial public offering price ($10.00) of the Common
Stock and will become vested based on operating performance or at the end of
five years from the date of grant. 279,300 outstanding "B" Incentive Options
were issued at the effective date of the Company's initial public offering at an
exercise price equal to the initial public offering price ($10.00).
42
<PAGE> 45
The "B" Incentive Options will vest as follows: 25% in year one, 35% in year two
and 40% in year three, from the date of grant. An aggregate of 295,050
additional outstanding "B" Incentive Options have been granted since December
12, 1995, at market value exercise prices of $10.25 per share to $17.00 per
share. Stock Options granted under the Incentive Award Plan are required to
comply in all respects with the provisions of Section 422 of the Internal
Revenue Code of 1986, as amended, or any successor provisions thereto and any
regulations promulgated thereunder. Accordingly, the Incentive Award Plan
provides that Incentive Stock Options will only be issued to an employee of the
Company or a subsidiary, that they will not be granted to an owner of ten
percent or more of the combined voting power of the Company and that the
aggregate fair market value determined as of the date of award of shares subject
to an Incentive Stock Option granted pursuant to the Incentive Award Plan to an
employee in any calendar year shall not exceed $100,000.
The Incentive Award Plan further provides that to the extent required to
comply with Rule 16b-3, any equity security issued pursuant to the Incentive
Award Plan may not be sold for at least six months after acquisition, except in
the case of death or disability. The Incentive Award Plan may be amended,
altered, suspended, discontinued or terminated by the Company's Board of
Directors except to the extent prohibited by applicable law and as expressly
provided in an award agreement or in the Incentive Award Plan.
EMPLOYMENT AND CONSULTING AGREEMENTS
Mr. Hellman and Mr. Fisi are each parties to an Employment Agreement with
the Company. These Employment Agreements have an initial term expiring October,
1998. Through these Employment Agreements, Mr. Hellman and Mr. Fisi, will
receive an annual base compensation of $195,000 and $165,000 per year,
respectively. In addition, Mr. Hellman and Mr. Fisi will be entitled to receive
a bonus in amounts determined by the Compensation Committee. These Employment
Agreements provide for annual increases in the annual base compensation as
determined by the Compensation Committee during the term of these Employment
Agreements. Under these Employment Agreements, Mr. Hellman and Mr. Fisi
participate in Company sponsored life, health and disability insurance coverage.
In addition, Mr. Hellman and Mr. Fisi have entered into agreements not to
compete with the Company for a period of three years after termination of
employment.
The Company has also undertaken to pay Mr. Filson fees in the annual amount
of $100,000 per annum for a three-year period beginning in 1994 for consulting
services to be rendered.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Executive compensation in the past has been determined by the Company's
chief executive officer. The Compensation Committee of the Board of Directors, a
majority of whom will be independent directors, has been established. The
Company has also established an Incentive Award Plan Committee composed of Wayne
R. Hellman and Louis S. Fisi, the Chief Executive Officer and Chief Financial
Officer, respectively, of the Company, each of whom are disinterested directors
since they will not participate in awards under such plan.
CERTAIN TRANSACTIONS
RELATIONSHIPS WITH GENERAL ELECTRIC COMPANY
Since 1990, the Company has had numerous financial and other arrangements
with General Electric. These arrangements are described below.
General Electric supplies the Company with quartz tubing, glass bases and
other components for the metal halide lamps manufactured by the Company.
Although a significant supplier of such items, General Electric is not the only
available source for these items. In addition, General Electric supplies the
Company with finished lamps for resale as a part of the Company's product line.
These lamps include both commodity-type metal halide lamps which supplement the
Company's line of specialty lamps as well as incandescent and fluorescent lamps,
which are distributed to the Company's customers. The Company supplies General
Electric
43
<PAGE> 46
with both components for lamps and private label specialty metal halide lamps.
Lastly, General Electric provides unsecured trade credit terms to the Company to
finance the purchase of products from General Electric by the Company. The
Company paid General Electric a total of $6.6 million and $5.9 million for
components and finished lamps purchased from General Electric during fiscal 1995
and the nine months ended March 31, 1996, respectively, and General Electric
paid the Company a total of $4.1 million and $4.3 million for components and
finished lamps purchased from the Company during fiscal 1995 and the nine months
ended March 31, 1996, respectively.
Prior to the Company's initial public offering, GE was the senior lender to
the Company's largest Predecessor. A portion of the net proceeds of the initial
public offering of the Company were used to repay the GE Loan and other amounts
owed to General Electric, including certain trade payables.
On October 5, 1995, the Company's largest Predecessor and GE entered into
an Agreement to Repay, in which GE consented to permit this Predecessor to
participate in the Combination. See "Background of the Company -- The
Combination." Pursuant to the Agreement to Repay in exchange for repayment of
outstanding indebtedness, waivers of certain covenants contained in various
agreements between GE and the Company, the cancellation of the GE Warrant and
for other consideration, upon completion of the Company's initial public
offering GE received 535,887 shares (the "GE Shares") and a cash payment of $3.0
million. Commencing December 11, 1996 until two years from such date, General
Electric will have a right to cause Mr. Hellman to purchase half of the GE
Shares at a price equal to the average market price during the preceding 10
trading days. This obligation is secured by a pledge of shares owned by Mr.
Hellman equal to one-half of the GE Shares. For a one-year period, commencing
December 11, 1997, General Electric will have a one-time demand registration
right, at the Company's expense. During this period, Mr. Hellman will have the
option to purchase all of the GE Shares for which a notice for demand
registration has been submitted to the Company. In addition, commencing December
11, 1996, GE will have piggyback registration rights subject to certain
conditions, including the right of any underwriter to limit the shares included
in such registration or to entirely preclude such inclusion.
THE COMBINATION
In connection with the Combination, the following executive officers and
directors of the Company or their immediate family members received Common Stock
in the merger of the Predecessors into the Company in exchange for the shares of
Common Stock of the Predecessors which they had held. The following table sets
forth the number of shares of Common Stock received by these individuals in the
Combination.
<TABLE>
<CAPTION>
NUMBER OF SHARES
EXECUTIVE OFFICER, OF COMPANY
DIRECTOR OR IMMEDIATE COMMON STOCK
FAMILY MEMBER RECEIVED IN COMBINATION
------------------------------- -----------------------
<S> <C>
Wayne R. Hellman............................................... 3,125,153
Louis S. Fisi.................................................. 657,112
Theodore A. Filson (1)......................................... 15,021
Francis H. Beam................................................ 34,685
Richard D. Capra............................................... 34,685
Brian A. Hellman (2)........................................... 177,523
Lisa B. Hellman (2)............................................ 167,206
</TABLE>
- ---------------
(1) Mr. Filson's beneficial ownership is by virtue of the Filson Family Limited
Partnership, of which Mr. Filson is a general partner.
(2) Brian Hellman and Lisa Hellman are children of Mr. Hellman.
The Combination was principally effected through a series of nonmonetary
mergers or stock exchanges in which the Predecessors' shareholders received
shares of the Company, except that certain former employees received, in the
aggregate, an insignificant amount of cash for their shares.
44
<PAGE> 47
OTHER TRANSACTIONS WITH DIRECTORS AND OFFICERS
During fiscal 1995, the Company paid $831,000 to H&F Management, Inc., a
company formerly owned solely by Mr. Hellman, Mr. Fisi and Mr. Brian A. Hellman.
H&F Management, Inc. prior to the Combination, provided management services to
certain Predecessors.
On June 28, 1995, the Company loaned to Mr. Hellman $88,000 (due in June
1997), represented by Mr. Hellman's promissory note to the Company. The amount
of such indebtedness is currently $88,000, and carries an interest rate of 8.0%.
On May 10, 1995, the Company loaned to Mr. Fisi $70,000 (due in May 1997),
represented by Mr. Fisi's promissory note. The amount of such indebtedness is
currently $70,000, and carries an interest rate of 8.0%.
On August 10, 1995, a Predecessor redeemed from Mr. Hellman 193,000 shares
of such Predecessor's common stock at a total price of $146,250.
On September 15, 1995, a Predecessor transferred its nonlamp assets to H&F
Five, Inc., a company owned by Messrs. Hellman, Fisi and certain other officers
of the Company, for a demand promissory note from H&F Five, Inc. in the amount
of $200,000 bearing interest at 8.5% per annum.
In July 1994, Mr. Beam, Mr. Capra and Mr. Filson were each granted the
right to purchase 48,750 shares of common stock of a Predecessor at $1.00 per
share. Such grant further provided that if all shares were purchased pursuant to
such rights the related rightholder would be entitled to receive an additional
9,750 shares of common stock of the Predecessor. On various dates in 1994 and
1995, Mr. Beam and Mr. Capra, either directly or through trusts or partnerships
which they controlled or in which they had beneficial interests, exercised all
of such rights and received such additional shares. In addition, as to the
Filson interest, the shares were acquired by a trust for the benefit of a family
member. In addition, in April 1995, Mr. Filson received an aggregate of 6,500
shares of common stock of the Predecessor for services rendered. Further, such
directors received 15,000 shares of common stock of the Predecessor in July 1993
upon its emergence from Chapter 11 reorganization for services rendered. No
compensation expense for such shares was recorded in any period because the
amount of such expense in each period was deemed insignificant. As a result of
all of the foregoing, Mr. Beam, Mr. Capra and Mr. Filson received 34,685 shares,
34,685 shares and 15,021 shares of Common Stock, respectively, in the
Combination.
Mr. Filson, a director of the Company, is scheduled to receive consulting
fees from the Company. See "Management -- Employment and Consulting Agreements."
The Company does not intend to enter into any material transaction with
officers or directors, or their family members, without the approval of a
majority of the nonemployee directors in the future.
Mr. Harada, a director of the Company, is an executive officer, director
and a shareholder of Koto Luminous Ltd., a Japanese manufacturer and marketer of
lighting products. Koto Luminous owns 182,268 shares of the Company, which were
acquired in the Combination as a result of an investment in a Predecessor. Koto
Luminous and the Company are each 50% joint venture partners in Pacific
Lighting, Inc., a British Virgin Island holding company. The Company uses
Pacific Lighting to own and hold a number of the Company's joint venture's
investments. See "Business-Operating Strategy-Participate in Growing
International Markets." Koto Luminous is the Company's sole trading partner in
Japan and, as a result, the Company supplies Koto Luminous with components and
lamps. Koto Luminous paid the Company approximately $650,000 and $1.1 million in
fiscal 1995 and the nine months ended March 31, 1996, respectively.
On January 22, 1996 two subsidiaries of the Company each entered into a six
year Aircraft Operating Agreement with Levetz Investments, Inc. ("Levetz"), an
unrelated Ohio corporation, for the purpose of chartering a 1986 Beechcraft King
Air 300 airplane (the "Aircraft") to enable the Company to have air service into
locations which are not adequately served by commercial carriers. The rent is
$950 per flight hour. One of the subsidiaries has committed to a minimum of 200
flight hours per year, and the other subsidiary has committed to a minimum of 75
flight hours per year. Levetz leases the airplane from LightAir Ltd.
("LightAir"), an Ohio limited liability company owned by Mr. Hellman (80%) and
Mr. Fisi (20%).
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<PAGE> 48
Messrs. Hellman and Fisi guaranteed the repayment of $1,717,000 of indebtedness
incurred to purchase the Aircraft.
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of June 15, 1996, and as adjusted to reflect
the completion of the Offering, by: (i) each of the Company's directors and
executive officers; (ii) all directors and executive officers of the Company as
a group; (iii) each person known by the Company to own beneficially 5.0% or more
of the outstanding Common Stock; and (iv) the Selling Shareholders. Except as
otherwise noted below, each of the holders listed below has sole voting power
and investment power with respect to the shares shown as beneficially owned.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED SHARES BENEFICIALLY
PRIOR TO THE OWNED
OFFERING AFTER THE OFFERING
------------------- SHARES BEING -------------------
NAME AND ADDRESS(1) NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------------------------- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL
SHAREHOLDERS:
Wayne R. Hellman(2).................................... 6,130,316 56.9% 367,449 5,250,577 39.9%
Louis S. Fisi(3)....................................... 622,758 5.8 92,476 530,282 4.0
Francis H. Beam........................................ 34,685 * 0 34,685 *
Richard D. Capra....................................... 34,685 * 0 34,685 *
Theodore A. Filson..................................... 15,021 * 0 15,021 *
Susumu Harada(4)....................................... 190,768 1.8 0 190,768 1.4
A Gordon Tunstall...................................... 5,000 * 0 5,000 *
David L. Jennings(3)................................... 818,150 7.6 121,491 696,659 5.3
General Electric Company............................... 535,887 5.0 0 535,887 4.1
All Directors and Executive Officers as a Group(2)(4)
(7 persons).......................................... 6,405,475 59.5 5,525,736 42.0
OTHER SELLING SHAREHOLDERS:
Robert S. Roller(3)(5)................................. 477,334 4.4% 58,866 418,468 3.2%
James F. Sarver(3)..................................... 459,485 4.3 68,231 391,254 3.0
Juris Sulcs(3)......................................... 428,359 4.0 63,609 364,750 2.8
Christine Hellman(3)(6)................................ 380,000 3.5 56,428 323,572 2.5
Brian Hellman(3)(6).................................... 177,523 1.6 26,361 151,162 1.1
Lisa Hellman(3)(6)..................................... 167,206 1.6 24,829 142,377 1.1
James Schoolenberg(6).................................. 120,687 1.1 17,921 102,766 *
Ernest Mansour(6)...................................... 15,754 * 2,339 13,415 *
</TABLE>
- ---------------
* Less than one percent.
(1) The business address of each of Messrs. Hellman, Fisi, Jennings, and Filson
is 2307 E. Aurora Road, Suite One, Twinsburg, Ohio 44087. The business
addresses of Messrs. Beam, Capra, Harada and Tunstall are respectively, Mr.
Beam -- Pepper Capital Corporation, 3550 Lander Rd. #301, Pepper Pike, Ohio
44124, Mr. Capra -- 5764 Diamond Point Circle -- El Paso, Texas 79912, Mr.
Harada -- Koto Electric Co., Ltd., Bunmeido Bldg., 7th Floor, 3-16-5, Taito,
Taito-Ku, Tokyo 110, Japan and Mr. Tunstall -- Tunstall Consulting, 13153
North Dale Mabry, Tampa, Florida, 33618. The business address of GE is 3003
Summer Street, Stamford, Connecticut 06905.
(2) Includes 2,474,501 shares (2,107,052 shares after the Offering) owned by Mr.
Hellman individually, 125,000 shares (125,000 shares after the Offering)
which are owned by a limited liability company of which Mr. Hellman is the
manager and Mr. Hellman has voting and investment power as to all such
shares, 1,693,487 shares (1,454,029 shares after the Offering) beneficially
owned by certain shareholders of the Company held under a voting trust which
expires in 2005 (the "Trust") and 1,837,328 shares (1,564,495 shares after
the Offering) formerly owned by the Trust as to which Mr. Hellman holds an
irrevocable proxy under similar terms. These shares, totalling 3,530,815
(3,018,525 shares after the Offering), are referred to herein as the "Trust
Shares." The shares offered hereby include 367,449 shares owned by Mr.
Hellman, individually, and 512,290 Trust Shares. The Trust Shares include
all shares owned by Messrs. Fisi, Jennings, Roller, Sarver, Sulcs and Brian
Hellman and Ms. Christine Hellman and Ms. Lisa Hellman. Pursuant to the
terms of the Trust and the irrevocable proxies, Mr. Hellman is empowered to
vote the Trust Shares
46
<PAGE> 49
for all purposes at his sole discretion, but is not provided with investment
power with respect to the Trust Shares. Beneficial owners of the Trust
Shares may remove the shares from the Trust or release the shares from the
irrevocable proxy, as the case may be, to effect a bona fide sale free of
the restrictions of the Trust. All share distributions on account of the
Trust Shares become subject to the Trust and all cash and other non share
distributions on account of the Trust Shares are to be paid over to the
grantors of the Trust. The expiration of the Trust may be accelerated under
certain circumstances. Mr. Hellman does not receive any compensation for
serving as voting trustee of the Trust.
(3) All shares are Trust Shares subject to voting control by Mr. Hellman.
(4) Includes 182,268 shares owned by Koto Luminous Ltd., a Japanese corporation,
of which Mr. Harada is chief executive officer. Mr. Harada disclaims
beneficial ownership of these shares.
(5) Includes 80,914 shares owned by six trusts for the benefit of Mr. Roller's
children. Mr. Roller disclaims beneficial ownership of these shares. All
such shares are Trust Shares.
(6) Messrs. Schoolenberg and Brian Hellman and Ms. Lisa Hellman are employees of
the Company. Ms. Christine Hellman is a consultant to the Company and Mr.
Mansour has no relationship to the Company.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 22.0 million shares of
Common Stock having a par value of $.001 per share and 1.0 million shares of
preferred stock having a par value of $.001 per share. As of June 15, 1996,
10,767,736 shares of Common Stock and no shares of preferred stock were issued
and outstanding. The Company intends to seek shareholder approval for an
amendment to the Company's Articles of Incorporation to authorize an additional
58.0 million shares of Common Stock. If such shareholder approval is obtained,
the authorized capital stock would include, in the aggregate, 80.0 million
shares of Common Stock.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share held.
Shareholders do not have the right to cumulate their votes in elections of
directors. Accordingly, holders of a majority of the issued and outstanding
Common Stock will have the right to elect the Company's directors and otherwise
control the affairs of the Company.
Holders of Common Stock are entitled to dividends on a pro rata basis upon
declaration of dividends by the Board of Directors. Dividends are payable only
out of unreserved and unrestricted surplus that is legally available for the
payment of dividends. The Board of Directors is not required to declare
dividends, and it currently expects to retain any funds generated from
operations to finance the development of the Company's business. The payment of
dividends in the future will depend upon earnings, capital needs, and other
factors. See "Dividend Policy."
Upon a liquidation of the Company, holders of Common Stock will be entitled
to a pro rata distribution of the assets of the Company, after payment of all
amounts owed to the Company's creditors, and subject to any preferential amount
payable to holders of preferred stock of the Company, if any.
PREFERRED STOCK
The Company's Articles of Incorporation permit the Company's Board of
Directors to issue shares of preferred stock in one or more series, and to fix
the relative rights, preferences, and limitations of each series. Among such
rights, preferences, and limitations are dividend rights and rates, provisions
for redemption, rights upon liquidation, conversion privileges, and certain
voting powers. The Board of Directors of the Company currently has no plans to
issue any shares of preferred stock.
The purpose for authorizing the Board of Directors to issue and to
designate the features of preferred stock is, in part, to eliminate delays
associated with a shareholder vote to authorize the issuance of preferred stock.
The issuance of preferred stock, for example in connection with a shareholder
rights plan, could have
47
<PAGE> 50
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, a majority of the outstanding capital
stock of the Company.
CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF INCORPORATION
The Company's Articles of Incorporation provide for a classified Board of
Directors. The directors are divided into three classes. The directors are
elected for three-year terms, which are staggered so that the terms of one-third
of the directors expire each year. The Articles of Incorporation permit
shareholders to remove directors only for cause at a meeting by the affirmative
vote of at least a majority of the outstanding shares of Common Stock. Directors
of the Company may remove directors with or without cause.
The above-described provisions of the Company's Articles of Incorporation
may have certain antitakeover effects. Such provisions, in addition to the
provisions described below and the possible issuance of preferred stock
discussed above, may make it more difficult for other persons, without the
approval of the Company's Board of Directors, to make a tender offer or
acquisitions of substantial amounts of the Common Stock or to launch other
takeover attempts that a shareholder might consider to be in such shareholder's
best interests.
CERTAIN PROVISIONS OF OHIO LAW
The Company is subject to several antitakeover provisions under Ohio law
that apply to Ohio public corporations, unless the Company elects to opt out of
these provisions in its Articles of Incorporation or Code of Regulations
(by-laws). The Company has not opted out of these takeover provisions.
Under Ohio's Control Share Acquisition Act (the "Acquisition Act"), any
"control share acquisition" of an Ohio public corporation shall be made only
with the prior authorization of the shareholders of the corporation in
accordance with the provisions of the Acquisition Act. A "control share
acquisition" is defined under the Acquisition Act to mean the acquisition,
directly or indirectly, by any person of shares of a public corporation that,
when added to all other shares of the corporation such person owns, would
entitle such person, directly or indirectly, to exercise voting power in the
election of directors within the following ranges: more than 20%, more than 33%
and a majority.
The Acquisition Act also requires that the acquiring person deliver an
"acquiring person's statement" to the Ohio public corporation. The Ohio public
corporation must then call a special meeting of its shareholders to vote upon
the proposed acquisition within 50 days after receipt of such acquiring person's
statement, unless the acquiring person agrees to a later date.
The Acquisition Act further specifies that the shareholders of the
corporation must approve the proposed control share acquisition by certain
percentages at a special meeting of shareholders at which a quorum is present.
In order to comply with the Acquisition Act, the acquiring person may only
acquire the stock of the Ohio public corporation upon the affirmative vote of:
(i) a majority of the voting power of the corporation that is represented in
person or by proxy at the special meeting and (ii) a majority of the voting
power of the corporation that is represented in person or by proxy at the
special meeting, excluding those shares of the corporation deemed to be
"interested shares" for purposes of the Act.
"Interested shares" are defined under the Act to mean shares in respect of
which the voting power is controlled by any of the following persons: (i) an
acquiring person; (ii) any officer of the Ohio public corporation; and (iii) any
employee who is also a director of the corporation. "Interested shares" also
include shares of the corporation that are acquired by any person after the date
of the first public disclosure of the proposed acquisition and the date of the
special meeting, if either (i) the aggregate consideration paid by such person,
and any person acting in concert with him, for such shares of the Ohio public
corporation exceeds $250,000 or (ii) the number of shares acquired by such
person, and any person acting in concert with him, exceeds one-half of one
percent of the outstanding shares of the corporation.
Section 1701.59 of the Ohio Revised Code, inter alia, empowers an Ohio
corporation to indemnify any director, officer, employee or agent of the
corporation against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such
48
<PAGE> 51
action, suit or proceeding if he or she acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. Similar indemnity
is authorized for such person against expenses (including attorneys' fees)
actually and reasonably incurred in connection therewith.
In addition, Section 1701.59 eliminates the personal liability in damages
of a director for violations of the director's fiduciary duty, except if it is
proved by clear and convincing evidence that his action or failure to act
involved acts or omissions undertaken with deliberate intent to cause injury to
the corporation or with reckless disregard for the best interests of the
corporation. The Company has not opted out of Section 1701.59 of the Ohio
Revised Code. This statute does not affect the liability of directors pursuant
to Section 1701.95 of the Ohio Revised Code (providing for liability of
directors for unlawful payment of dividends or unlawful distribution of assets)
nor does it affect the liability of the directors under federal securities laws.
The Company is also subject to Ohio's Merger Moratorium Act. The Merger
Moratorium Act generally prohibits a wide range of business combinations and
other transactions (including mergers, consolidations, asset sales, loans,
disproportionate distributions of property and disproportionate issuances or
transfers of shares or rights to acquire shares) between an Ohio corporation and
a person that owns, alone or with other related parties, shares representing at
least 10% of the voting power of the corporation (an "Interested Shareholder")
for a period of three years after such person becomes an Interested Shareholder,
unless, prior to the date that the Interested Shareholder became such, the
directors approve either the transaction or the acquisition of the corporation's
shares that resulted in the person becoming an Interested Shareholder. Following
the three-year moratorium period, the corporation may engage in covered
transactions with an Interested Shareholder only if, among other things, (i) the
transaction receives the approval of the holders of two-thirds of all the voting
shares and the approval of the holders of a majority of the voting shares held
by persons other than an Interested Shareholder or (ii) the remaining
shareholders receive an amount for their shares equal to the higher of the
highest amount paid in the past by the Interested Shareholder for the
corporation's shares or the amount that would be due the shareholders if the
corporation were to dissolve.
Contemporaneous with the adoption of Ohio's Merger Moratorium Act, Ohio
enacted a so-called "green mailer disgorgement" statute which provides that a
person who announces a control bid must disgorge profits realized by that person
upon the sale of any equity securities within 18 months of the announcement of
the control bid.
The Company is also subject to Ohio's Control Bid Statute. Ohio's Control
Bid Statute provides that no offeror may make a "control bid" pursuant to a
tender offer or a request or invitation for tenders unless, on the day the
offeror commences a control bid, it files with the Ohio Division of Securities
(the "Securities Division") and the target company certain information in
respect of the offeror, his ownership of the corporation's shares and his plans
for the corporation (including, among other things, plans to terminate employee
benefit plans, close any plant or facility or reduce the work force). If the
Securities Division determines that the offeror's disclosures are inadequate, it
must act within three calendar days from the date of the offeror's filing to
issue a suspension order. If a bid is suspended, a hearing must be held within
10 calendar days from the date of the Securities Division's suspension order.
The hearing procedure must be completed no later than 16 calendar days after the
date on which the suspension was imposed.
A "control bid" under Ohio's Control Bid Statute is defined as the purchase
of or an offer to purchase any equity security of an issuer with certain
connections to Ohio from a resident of Ohio if (i) after the purchase of such
security, the offeror would directly or indirectly be the beneficial owner of
more than 10% of any class of the issued and outstanding equity securities of
the issuer or (ii) the offeror as the issuer, there is a pending control bid by
a person other than the issuer and the number of issued and outstanding shares
of the corporation will be reduced by more than 10%.
Finally, Ohio law provides for the right of the Board of Directors to
consider the interests of various constituencies, including employees,
customers, suppliers and creditors of the Company, as well as the communities in
which the Company is located, in addition to the interest of the Company and its
shareholders, in discharging their duties in determining what is in the
Company's best interests.
49
<PAGE> 52
The above-described provisions of Ohio law may have certain antitakeover
effects. Those provisions make it more difficult for other persons, without the
approval of the Company's Board of Directors, to make a tender offer or
acquisitions of substantial amounts of the Common Stock or to launch other
takeover attempts that a shareholder might consider in such shareholder's best
interests.
TRANSFER AGENT
American Stock Transfer & Trust Company, New York, New York, acts as
transfer agent for the Company's Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 13,167,736 shares of
Common Stock outstanding (13,662,736 shares if the Underwriters' over-allotment
option is exercised in full). Of these shares, the 3,300,000 shares offered
hereby (3,795,000 shares if the Underwriters' over-allotment option is exercised
in full), the 2,900,000 shares sold in the Company's initial public offering and
approximately 182,980 "Rule 701 Shares" will be freely tradeable without
restriction or further registration under the Securities Act of 1933 (the
"Securities Act"), except for those shares held by "affiliates" (as defined in
the Securities Act) of the Company. The remaining 6,784,756 shares outstanding
are "Restricted Securities" as that term is defined in Rule 144 of the
Securities Act and fall into two categories, "Rule 144 Shares" consisting of
6,734,756 shares and "Regulation S Shares" consisting of 50,000 shares. In
addition, 1,000,000 shares of Common Stock are reserved under the Incentive
Award Plan for exercises of stock options granted by the Company, of which
791,850 shares are issuable upon the exercise of stock options the Company has
granted as of the date of this Prospectus. The Company has registered the
issuance of Common Stock in connection with the exercise of options under the
Incentive Award Plan and, consequently, when such options become exercisable,
such shares will be available for sale in the public market without restriction,
to the extent they are not held by affiliates.
The Rule 144 Shares are subject to all the limitations on resale imposed by
Rule 144. In general, under Rule 144 as currently in effect, any affiliate of
the Company or any person (or persons whose shares are aggregated in accordance
with the Rule) who has beneficially owned Restricted Securities for at least two
years would be entitled to sell within any three-month period a number of shares
that does not exceed the greater of 1.0% of the outstanding shares of Common
Stock (approximately 132,446 shares based upon the number of shares outstanding
after the Offering) or the reported average weekly trading volume in the over-
the-counter market for the four weeks preceding the sale. Sales under Rule 144
are also subject to certain manner of sale restrictions and notice requirements
and to the availability of current public information concerning the Company.
Persons who have not been affiliates of the Company for at least three months
and who have held their shares for more than three years are entitled to sell
Restricted Securities without regard to the volume, manner of sale, notice and
public information requirements of Rule 144. With respect to resale of Rule 701
Shares by affiliates, all Rule 144 limitations continue to apply except the
two-year holding period.
The Regulation S Shares are subject to the resale restrictions in
Regulation S (governing foreign sales of securities) as well as contractual
restrictions. As a result, the 50,000 Regulation S Shares may not be resold
prior to February 9, 1997, except in compliance with Regulation S (foreign
sales) to a person agreeing to comparable resale restrictions, or, thereafter,
except pursuant to an applicable exemption, such as Regulation S or Rule 144.
The Selling Shareholders and certain other Company shareholders who, upon
completion of the Offering, will own in the aggregate 5,927,236 shares, and the
Company have each agreed that they will not, directly or indirectly, offer,
sell, offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale, contract
of sale, pledge, grant of any option to purchase or other sale or disposition)
of any shares of Common Stock or other capital stock or any securities
convertible into, or exercisable or exchangeable for, any shares of Common Stock
or other capital stock of the Company, for a period of 180 days after the date
of this Prospectus, without the prior written consent of Prudential Securities
Incorporated, on behalf of the Underwriters, except for bona fide gifts or
transfers effected by such
50
<PAGE> 53
shareholders other than on any securities exchange or in the over-the-counter
market to donees or transferees that agree to be bound by similar agreements.
The Company is unable to predict the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price for the Common Stock prevailing from time to time. Sales of substantial
amounts of Common Stock, or the perception that such sales could occur, could
adversely affect the market price for the Common Stock and could impair the
Company's future ability to obtain capital through offerings of equity
securities.
Following the Offering, the Company may issue its Common Stock from time to
time in connection with the acquisition of stock or assets of other companies.
Such securities may be issued in transactions exempt from registration under the
Securities Act.
51
<PAGE> 54
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom Prudential
Securities Incorporated and Raymond James & Associates, Inc. are acting as
representatives of the Underwriters (the "Representatives"), severally agreed,
subject to the terms and conditions contained in the Underwriting Agreement, to
purchase from the Company and the Selling Shareholders the number of shares of
Common Stock set forth below opposite their respective names:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Prudential Securities Incorporated........................................
Raymond James & Associates, Inc...........................................
---------
Total........................................................... 3,300,000
========
</TABLE>
The Company and the Selling Shareholders are obligated to sell, and the
Underwriters are obligated to purchase, all of the shares of Common Stock
offered hereby if any are purchased.
The Underwriters, through their representatives, have advised the Company
and the Selling Shareholders that they propose to offer the Common Stock
initially at the public offering price set forth on the cover page of this
Prospectus; that the Underwriters may allow to selected dealers a concession of
$ per share; and that such dealers may reallow a concession of
$ per share to certain other dealers. After the public offering,
the offering price and the concession may be changed by the Representatives.
The Company has granted the Underwriters an over-allotment option,
exercisable for 30 days from the date of this Prospectus, to purchase up to
495,000 additional shares of Common Stock at the public offering price, less
underwriting discounts, as set forth on the cover page of this Prospectus. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments incurred in the sale of the shares of Common Stock offered
hereby. To the extent such option to purchase is exercised, each Underwriter
will become obligated, subject to certain conditions, to purchase approximately
the same percentage of such additional shares as the number set forth next to
such Underwriter's name in the preceding table bears to 3,300,000.
The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters or contribute to losses arising out of certain liabilities,
including liabilities under the Securities Act.
The Selling Shareholders and certain other Company shareholders who, upon
completion of this Offering, will own in the aggregate 5,927,236 shares, and the
Company have agreed not to, directly or indirectly, offer, sell, contract to
sell, pledge, grant any option to purchase or otherwise sell or dispose (or
announce any offer, sale, offer of sale, contract of sale, pledge, grant of any
option to purchase or other sale or disposition) of any shares of Common Stock
or other capital stock or any securities convertible into, or exercisable or
exchangeable for, any shares of Common Stock or other capital stock of the
Company, for a period of 180 days after the date of this Prospectus without the
prior written consent of Prudential Securities Incorporated, on behalf of the
Underwriters.
In connection with this Offering, certain Underwriters and selling group
members (if any) who are qualified market makers on the Nasdaq National Market
may engage in passive market making transactions in the Common Stock on the
Nasdaq National Market in accordance with Rule 10b-6A under the Exchange Act
during the two business day period before the commencement of offers of sales of
the Common Stock. Passive market makers must comply with applicable volume and
price limitations and must be identified as
52
<PAGE> 55
such. In general, a passive market maker must display its bid at a price not in
excess of the highest independent bid for such security; if all independent bids
are lowered below the passive market maker's bid, however, such bid must then be
lowered when certain purchase limits are exceeded.
LEGAL MATTERS
Certain legal matters in connection with the validity of the Common Stock
offered hereby will be passed upon for the Company by Cowden, Humphrey & Sarlson
Co., L.P.A., Cleveland, Ohio, counsel to the Company, and by Ulmer & Berne
P.L.L., Cleveland, Ohio, securities counsel to the Company, and for the
Underwriters by King & Spalding, Atlanta, Georgia.
EXPERTS
The combined financial statements of Advanced Lighting Technologies, Inc.
Predecessor Companies at June 30, 1995 and 1994, and for each of the three years
in the period ended June 30, 1995, appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein and in the Registration
Statement, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The balance sheet of Spectro Electric Inc. as at December 31, 1995 and the
statements of operations and deficit and cash flows for the year then ended
appearing in this Prospectus and Registration Statement have been audited by
Doane Raymond, independent auditors, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Securities and Exchange Commission (the "Commission") under the
Securities Act with respect to the Common Stock offered hereby. This Prospectus
omits certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and related exhibits and
schedules for further information with respect to the Company and the Common
Stock offered hereby. Any statements contained herein concerning the provisions
of any document are not necessarily complete, and in each such instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such statement is qualified in its entirety by such
reference. The Registration Statement and the exhibits and schedules forming a
part thereof can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and are also available for inspection and copying at the following
regional offices of the Commission: 7 World Trade Center, Suite 1300, New York,
NY 10048; and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661-2511. Copies of such material can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates.
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files annual reports, containing audited
financial statements and a report thereon expressed by independent certified
accountants, quarterly reports for the first three fiscal quarters of each year,
containing certain unaudited interim financial information, proxy statements and
other information with the Commission. Such reports, proxy statements, and other
information filed by the Company can be inspected and copied at the public
reference facilities described above.
53
<PAGE> 56
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ADVANCED LIGHTING TECHNOLOGIES, INC. PREDECESSOR COMPANIES
Audited Combined Financial Statements:
Report of Ernst & Young LLP, Independent Auditors................................ F-2
Combined Balance Sheets as of June 30, 1994 and 1995............................. F-3
Combined Statements of Income for the Years Ended June 30, 1993, 1994 and 1995... F-4
Combined Statements of Shareholders' Equity for the Years Ended June 30, 1993,
1994 and 1995................................................................... F-5
Combined Statements of Cash Flows for the Years Ended June 30, 1993, 1994 and
1995............................................................................ F-6
Notes to Combined Financial Statements........................................... F-7
ADVANCED LIGHTING TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheet as of March 31, 1996 (Unaudited)............ F-17
Condensed Consolidated Statements of Income for the nine months ended March 31,
1995
and 1996 (Unaudited)........................................................... F-18
Condensed Statement of Consolidated Shareholders' Equity for the nine months
ended March 31, 1996 (Unaudited)................................................ F-19
Condensed Consolidated Statements of Cash Flows for the nine months ended
March 31, 1995 and 1996 (Unaudited)............................................ F-20
Notes to Condensed Consolidated Financial Statements (Unaudited)................. F-21
SPECTRO ELECTRIC INC.
Audited Financial Statements:
Report of Doane Raymond, Independent Auditors.................................... F-23
Balance Sheet as of December 31, 1995............................................ F-24
Statement of Operations and Deficit for the year ended December 31, 1995......... F-25
Statement of Cash Flows for the year ended December 31, 1995..................... F-26
Notes to the Financial Statements................................................ F-27
Unaudited Financial Statements:
Balance Sheets as of March 31, 1995 and 1996 (Unaudited)......................... F-31
Statements of Operations and Deficit for the three months ended March 31, 1995
and 1996 (Unaudited)............................................................ F-32
Statements of Cash Flows for the three months ended March 31, 1995 and 1996
(Unaudited)..................................................................... F-33
Notes to the Financial Statements (Unaudited).................................... F-34
ADVANCED LIGHTING TECHNOLOGIES, INC. AND SPECTRO ELECTRIC INC.
Pro Forma Condensed Combined Statement of Operations for the year
ended June 30, 1995 and the nine months ended March 31, 1996 (Unaudited)....... P-1
Notes to Pro Forma Condensed Combined Statements of Operations (Unaudited)....... P-2
</TABLE>
F-1
<PAGE> 57
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
Advanced Lighting Technologies, Inc.
We have audited the combined balance sheets of Advanced Lighting Technologies,
Inc. Predecessor Companies, as defined in Note A, as of June 30, 1995 and 1994,
and the related combined statements of income, shareholders' equity and cash
flows, for each of the three years in the period ended June 30, 1995. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Advanced Lighting
Technologies, Inc. Predecessor Companies as of June 30, 1995 and 1994 and the
combined 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.
ERNST & YOUNG LLP
Cleveland, Ohio
October 5, 1995
F-2
<PAGE> 58
ADVANCED LIGHTING TECHNOLOGIES, INC.
COMBINED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
JUNE 30
1994 1995
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 663 $ 1,030
Trade receivables, less allowances of $211 and $243, respectively.... 5,327 7,176
Receivables from related parties..................................... 218 673
Inventories:
Finished goods.................................................... 3,388 3,560
Raw materials and work-in-progress................................ 942 1,496
------- -------
4,330 5,056
Prepaid expenses..................................................... 564 909
------- -------
Total current assets................................................... 11,102 14,844
Fixed assets:
Land and buildings................................................... 1,747 1,849
Machinery and equipment.............................................. 12,390 13,673
Furniture and fixtures............................................... 1,521 1,687
------- -------
15,658 17,209
Less accumulated depreciation........................................ 4,244 5,199
------- -------
11,414 12,010
Other assets........................................................... 938 1,493
------- -------
$23,454 $28,347
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................... $ 3,222 $ 6,297
Accounts payable to related parties.................................. 42 449
Accrued expenses..................................................... 3,280 4,122
Current portion of long-term debt.................................... 3,053 2,600
Revolving credit facility............................................ 1,530 2,041
------- -------
Total current liabilities.............................................. 11,127 15,509
Long-term debt......................................................... 7,821 8,853
Other liabilities...................................................... 794 171
Redeemable stock purchase warrants..................................... 2,547 4,849
Shareholders' equity:
Preferred stocks..................................................... 2,175 50
Common stocks........................................................ 359 360
Retained earnings.................................................... (1,369) (1,445)
------- -------
1,165 (1,035)
------- -------
$23,454 $28,347
======= =======
</TABLE>
See notes to combined financial statements.
F-3
<PAGE> 59
ADVANCED LIGHTING TECHNOLOGIES, INC.
COMBINED STATEMENTS OF INCOME
For the Years Ended June 30
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Net sales................................................... $25,455 $30,938 $40,767
Costs and expenses:
Cost of sales............................................. 17,033 17,253 21,899
Selling, general and administrative....................... 5,500 8,400 11,833
Research and development.................................. 1,166 1,006 1,673
Reorganizing and restructuring............................ 7,152 852 (121)
------- ------- -------
Income (loss) from operations............................... (5,396) 3,427 5,483
Interest expense............................................ 938 2,150 2,129
------- ------- -------
Income (loss) before income taxes and extraordinary items... (6,334) 1,277 3,354
Income taxes................................................ 48 71 212
------- ------- -------
Income (loss) before extraordinary items.................... (6,382) 1,206 3,142
Extraordinary credits (losses) (net of applicable income
taxes of
$0 in 1993 and $168 in 1995).............................. 11,368 -- (253)
------- ------- -------
Net income.................................................. $ 4,986 $ 1,206 $ 2,889
======= ======= =======
Income (loss) per share:
Before extraordinary items................................ $ (.96) $ .13 $ .10
Extraordinary items....................................... 1.45 -- (.03)
------- ------- -------
Net income................................................ $ .49 $ .13 $ .07
======= ======= =======
Shares used for computing per share amounts............... 7,818 7,818 7,818
======= ======= =======
</TABLE>
See notes to combined financial statements.
F-4
<PAGE> 60
ADVANCED LIGHTING TECHNOLOGIES, INC.
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended June 30
(In Thousands)
<TABLE>
<CAPTION>
PREFERRED COMMON RETAINED SHAREHOLDERS'
STOCK STOCK EARNINGS EQUITY
--------- ------ -------- -------------
<S> <C> <C> <C> <C>
Balance at July 1, 1992....................... $ 2,125 $254 $ (6,724) $(4,345)
Net income.................................... -- -- 4,986 4,986
Change in value of warrants................... -- -- (961) (961)
--------- ------ -------- -------------
Balance at June 30, 1993...................... 2,125 254 (2,699) (320)
Net income.................................... -- -- 1,206 1,206
Capitalization of a Predecessor............... 50 105 -- 155
Redemption of warrants........................ -- -- (340) (340)
Change in value of warrants................... -- -- 464 464
--------- ------ -------- -------------
Balance at June 30, 1994...................... 2,175 359 (1,369) 1,165
Net income.................................... -- -- 2,889 2,889
Redemption of preferred stock................. (2,125) -- (663) (2,788)
Change in value of warrants................... -- -- (2,302) (2,302)
Capitalization of a Predecessor............... -- 1 -- 1
--------- ------ -------- -------------
Balance at June 30, 1995...................... $ 50 360 $ (1,445) $(1,035)
======= ====== ======= ==========
</TABLE>
See notes to combined financial statements.
F-5
<PAGE> 61
ADVANCED LIGHTING TECHNOLOGIES, INC.
COMBINED STATEMENTS OF CASH FLOWS
For the Years Ended June 30
(In Thousands)
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................................... $ 4,986 $ 1,206 $ 2,889
Adjustments to reconcile net income to net cash provided
by
(used in) operating activities:
Depreciation and amortization....................... 1,280 1,467 1,399
Provision for doubtful accounts..................... 46 70 32
Reorganizing and restructuring...................... 6,230 852 286
Deferred income taxes............................... (27) (19) (959)
Extraordinary (credit) loss......................... (11,368) -- 253
Changes in operating assets and liabilities:
Change in receivables............................. 775 (2,289) (2,338)
Change in inventories............................. 229 794 (986)
Change in prepaids and other assets............... 641 (425) (412)
Changes in accounts payable and accrued
expenses....................................... 506 (228) 4,369
Changes in other liabilities...................... (607) (25) (69)
-------- -------- --------
Net cash provided by operating activities................ 2,691 1,403 4,464
INVESTING ACTIVITIES
Purchases of fixed assets................................ (900) (1,043) (1,530)
-------- -------- --------
Net cash used in investing activities.................... (900) (1,043) (1,530)
FINANCING ACTIVITIES
Proceeds from revolving credit facility.................. 11,867 19,904 24,630
Repayments of revolving credit facility.................. (16,923) (18,569) (24,088)
Proceeds of long-term debt............................... 4,017 191 1,726
Payments of long-term debt and capital leases............ (985) (2,152) (4,776)
Issuance of common and preferred stocks.................. -- 155 --
Borrowings for preferred stock redemption and
dividends.............................................. -- -- 2,788
Redemption of preferred stock and dividends.............. -- -- (2,788)
Other.................................................... 1,013 (321) (59)
-------- -------- --------
Net cash used in financing activities.................... (1,011) (792) (2,567)
-------- -------- --------
Change in cash and cash equivalents...................... 780 (432) 367
Cash and cash equivalents at beginning of year........... 315 1,095 663
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR................. $ 1,095 $ 663 $ 1,030
======== ======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Equipment acquired by capital leases..................... $ 6 $ 79 $ 145
Interest paid............................................ 893 1,362 1,688
</TABLE>
See notes to combined financial statements.
F-6
<PAGE> 62
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1993, 1994 AND 1995
(DOLLARS IN THOUSANDS)
A. ORGANIZATION AND PRESENTATION
Advanced Lighting Technologies, Inc. (the "Company") is an innovation-driven
designer, manufacturer and marketer of metal halide lighting products, including
lamps (light bulbs), lamp components and lamp production equipment.
The Company was formed as an Ohio corporation on May 19, 1995 for the purpose of
acquiring ownership, primarily by merger (the "Combination"), of 17 affiliated
operating corporations that were previously under common ownership and
management (the "Predecessors"), each one of which is engaged in an aspect of
the metal halide lighting business. More specifically, the Combination was
principally effected through a series of non-monetary mergers or stock exchanges
in which the Predecessors' shareholders received shares of the Company, except
that certain former employees received, in the aggregate, an insignificant
amount of cash for their shares.
The Predecessors combining to form the Company included the following operating
corporations (with their dates of incorporation):
Venture Lighting International, Inc. ("Venture")
(October 23, 1981)
APL Engineered Materials, Inc. ("APL")
(May 21, 1990)
Lighting Resources International, Inc. ("LRI")
(March 28, 1984)
Specialty Discharge Lighting, Inc. ("SDL")
(November 21, 1991)
Energy-Wise Lighting, Inc. (April 3, 1992)
The Light Source, Inc. (January 24, 1992)
HID Direct, Inc. (November 8, 1993)
HID Recycling, Inc. (June 8, 1995)
Bright Ideas Advertising and Design, Inc.
(January 3, 1994)
Metal Halide Technologies, Inc.
(February 13, 1992)
Energy Efficient Products, Inc. (January 26, 1994)
Metal Halide Controls, Inc. (February 27, 1995)
Bio Light, Inc. (August 14, 1992)
MICROSUN Technologies, Inc. (June 30, 1995)
High Intensity Technologies, Inc.
(September 8, 1994)
Venture Lighting International, Ltd. (July 6, 1993)
Pacific Lighting, Inc. (May 30, 1994)
The Combination has been accounted for as a reorganization of entities under
common control. Historical financial statements of each of the Predecessors have
been combined for all periods presented. Certain adjustments have been recorded
primarily to eliminate intercompany transactions that would have been required
had the Company been a consolidated entity during such periods.
On July 29, 1992, Venture filed a voluntary petition for reorganization under
Chapter 11 of the United States Bankruptcy Code. On July 7, 1993, Venture
emerged from protection under Chapter 11. The results of operations of Venture
for the period July 4, 1992 to July 7, 1993 are classified in the combined
statements as results of operations for the year ended June 30, 1993.
Reference to the Company, in the following notes to combined financial
statements, refers to one or more of the Predecessors.
B. SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
F-7
<PAGE> 63
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS)
ACCOUNTS RECEIVABLE
Trade accounts receivable are principally from major manufacturers and
distributors in the lighting industry. Generally, collateral or other security
is not required.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out method) or
market.
FIXED ASSETS
Property, plant and equipment are stated at cost. The cost of self-constructed
assets include related materials, labor, overhead and interest. Depreciation of
plant and equipment is provided to amortize the assets' costs over their
estimated useful lives and is computed by the straight-line method. Repair and
maintenance costs are expensed as incurred. The weighted average useful lives
for each major category of fixed assets follow:
<TABLE>
<S> <C> <C>
Buildings.................................................. 30 years
Machinery and equipment.................................... 17 years
Furniture and fixtures..................................... 8 years
</TABLE>
REVENUE RECOGNITION
Lamp and lamp component revenue is recognized when products are shipped and lamp
production equipment revenue is recognized under the percentage of completion
method.
C. FINANCING ARRANGEMENTS
Short-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30
1994 1995
------ ------
<S> <C> <C>
Revolving credit facility................................. $1,435 $1,867
Other..................................................... 95 174
------ ------
$1,530 $2,041
====== ======
</TABLE>
The Company has a $4,000 revolving credit agreement (subject to collateral
availability) that expires on July 2, 1996 and bears interest at prime (9.00% at
June 30, 1995) plus 1%, payable monthly. Unused availability under the line
($1,517 at June 30, 1995) is subject to a 0.5% per annum commitment fee. The
cash receipts of the Company are automatically used to repay the line on a daily
basis via a lock-box sweep agreement controlled by the lender. Further, the
revolving credit agreement contains acceleration clauses that are subject to the
lender's interpretation. Accordingly, the amounts borrowed under the revolving
credit agreement are classified as a current liability.
The Company has available a $1,000 revolving credit facility which expires the
earlier of September 30, 1996 or the date on which the senior note (see
following chart) is paid in full. No amounts were borrowed as of June 30, 1995.
Commitment fees for the unused portion of this credit facility are 0.25% per
annum.
F-8
<PAGE> 64
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS)
C. FINANCING ARRANGEMENTS--CONTINUED
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30
1994 1995
------- -------
<S> <C> <C>
Senior note payable in variable quarterly installments, through
December 31, 1999; interest at 4.75% per annum plus the commercial
rate (10.81% at June 30, 1995)........................................ -- $ 6,254
Senior note payable in variable quarterly installments.................. $ 2,532 --
15% subordinated note payable in quarterly installments of $500......... 1,885 --
Term note payable in monthly installments of $75 with the remaining
balance due July 2, 1997; interest at prime plus 1.5%................. 3,000 3,500
Fixed rate note with financial institutions............................. 2,000 --
7.5% mortgage note payable in monthly principal installments of $5.5
plus accrued interest through October 1, 2008......................... 953 886
Term loan payable in monthly installments of $2.1 including interest
through October 1999; interest at prime plus 1.5%..................... 100 87
Term loan payable in quarterly installments of $5.4 including interest
through May 2000; interest at prime plus 1.5%......................... -- 91
Term loan payable in monthly installments of $1.6 through June 2000,
interest at 11%....................................................... -- 75
Subordinated note payable to affiliate (including accrued interest of
$25.5),
interest at 10%....................................................... 90 98
Unsecured indebtedness.................................................. 676 556
Debt discount........................................................... (509) (254)
Other................................................................... 147 160
------- -------
10,874 11,453
Less current maturities................................................. 3,053 2,600
------- -------
$ 7,821 $ 8,853
======= =======
</TABLE>
On October 31, 1994, the Company refinanced its senior and subordinated notes by
entering into an amended and restated secured senior note agreement. This
refinancing resulted in an extraordinary loss on the early extinguishment of
debt of $253 ($420 before income taxes) in fiscal 1995. The current portion of
the senior note payable under the amended and restated agreement is based upon
scheduled fixed payments. Such amounts may be increased according to formulas
for computing surplus cash flow as defined in the senior note agreement.
The term note maturing July 2, 1997 may be subject to certain mandatory
prepayments according to a formula for computing excess cash flow as defined in
the loan agreement. No prepayments were due as of June 30, 1995. Interest on the
term note is based on the prime rate which was 9.0% as of June 30, 1995. The
fixed rate note was merged into the term note during 1995.
The 7.5% mortgage note is secured by the land and building of APL (approximately
$1,670 at June 30, 1995).
The term loan payable through October 1999 is pursuant to a secured credit
agreement. The secured credit agreement contains a revolving credit facility
with maximum availability of $150 and a term loan of $100. Borrowings under the
revolving credit facility of the secured credit agreement are limited to certain
levels of eligible inventories, accounts receivable and equipment of SDL.
Borrowings under the agreement are secured
F-9
<PAGE> 65
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS)
C. FINANCING ARRANGEMENTS--CONTINUED
by substantially all of SDL's assets (approximately $875 at June 30, 1995). The
agreement also places restrictions on SDL's ability to make payments on the
subordinated note payable to affiliate.
The term loan payable through May 2000 represents a five-year term loan facility
with maximum borrowings of $250 to finance the acquisition of equipment. Under
the terms of the facility, the Company may draw on the loan as the equipment is
purchased. Such equipment (net book value of $198 at June 30, 1995) is pledged
as collateral under the terms of the agreement.
The term loan payable through June 2000 is pursuant to the Ohio Edison
Commercial Efficiency program and is unsecured.
The unsecured indebtedness is the remaining balance of the prepetition
liabilities of Venture which Venture agreed to pay to unsecured creditors as
part of its plan of reorganization. The unsecured indebtedness does not bear
interest and payments of $75 are due quarterly. As of June 30, 1995, the Company
had not made two quarterly payments. As of October 5, 1995, no collection action
has been undertaken or threatened by the Creditors' Committee. The Plan of
Reorganization does not provide for acceleration of future payments to the
unsecured Creditors in the event of non-payment.
The term note maturing July 2, 1997 and the revolving credit facility are
secured by substantially all of the assets of Venture ($16,500 at June 30,
1995). In addition, all of Venture's outstanding shares of common stock have
been pledged by Venture's shareholder in support of such borrowings.
The provisions of the agreements covering the term note maturing July 2, 1997,
and the revolving credit facility contain restrictions on Venture concerning the
incurrence of indebtedness and liens, investments, guarantees of the
indebtedness of others, the sale of assets, the issuance of capital stock and
the payment of dividends. In addition, Venture must maintain certain working
capital and debt ratios as well as certain net worth levels. As of June 30,
1995, Venture was not in compliance with certain restrictive covenants including
the requirement to maintain a current ratio and a minimum fixed charge coverage
ratio of greater than one. As of October 5, 1995, retroactively effective to
June 30, 1995, these events of noncompliance were waived by amendment to the
agreements by Venture's primary lending institution. Management has concluded
that Venture will be in compliance with the terms of all financial covenants
under the amended term note and revolving credit agreements for each of the
ensuing four quarters. As of June 30, 1995 no retained earnings were available
for the payment of dividends under the provisions of the agreement.
The provisions of the senior note payable through December 31, 1999 and a
revolving credit agreement contain restrictions on APL concerning the incurrence
of indebtedness and liens, investments, guarantees of the indebtedness of
others, the sale of assets, the issuance of capital stock and the payments of
dividends. In addition, APL must maintain certain current and debt ratios as
well as certain net worth levels. APL was not in compliance with certain of
these covenants as of June 30, 1995. On October 5, 1995, retroactively effective
to June 30, 1995, these events of noncompliance were waived by APL's primary
lending institution. Management has concluded that APL will be in compliance
with the terms of all financial covenants under the revolving credit agreement
for each of the ensuing four quarters. The senior note and the revolving credit
agreement are secured by all of the assets of APL except building and land. In
addition, all of the outstanding shares of common stock of APL are also pledged
in support of the senior note.
Aggregated scheduled maturities of long-term debt are: $2,600 in 1996; $4,066 in
1997; $1,487 in 1998; $1,563 in 1999 and $839 in 2000.
The fair value of debt, calculated using discounted cash flows at current
borrowings rates, approximates carrying value. Debt issuance costs and debt
discount are being amortized over the terms of the related debt.
F-10
<PAGE> 66
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS)
D. SHAREHOLDERS' EQUITY
The common stock authorized, issued and outstanding as of June 30, 1995
represents the aggregate of the Predecessors' common stocks. The shares
authorized, issued and outstanding of the individual issues of common stock of
the Predecessors are not presented as the information is not meaningful.
The Predecessors' common shares will be exchanged for 7,281,849 shares of the
Common Stock of the Company. Such exchange will be based upon the relative fair
values of the Predecessors. The Company plans to have 22,000,000 shares
authorized and anticipates having 7,281,849 shares outstanding prior to
completion of the initial public offering. An additional 2,900,000 shares are
planned to be issued in connection with the initial public offering.
The Company anticipates granting Incentive Options to purchase the Common Stock
of the Company prior to completion of the initial public offering. Approximately
230,000 "A" Incentive Options will be issued at an expected exercise price equal
to the initial public offering price per share and will become vested based on
operating performance or at the end of five years from date of grant.
Approximately 312,500 "B" Incentive Options will be issued at an expected
exercise price equal to the initial public offering price per share and will
become vested as follows: 25% in year one, 35% in year two and 40% in year
three, from the date of grant.
At June 30, 1995, the Company had 892,500 preferred shares outstanding (without
par value). In August 1995, the Company redeemed such preferred shares for
$1,012,500.
E. EMPLOYEE BENEFITS
The Company has two elective savings and retirement plans covering substantially
all full-time employees at two of the Predecessors. The Plans are funded by
participants' contributions with a portion matched by the Company if certain
criteria are met. Administrative expenses of the plan are paid by the Company.
Total expenses recognized for the plans were $234 in 1995, $163 for 1994 and
$111 for 1993.
The Company also has two profit-sharing retirement plans covering substantially
all salaried employees at two of the Predecessors. The plans are funded through
participant contributions, which are matched by Company contributions up to 2%.
Company contributions were $16 for the year ended June 30, 1995.
F. INCOME TAXES
The provision for income taxes is computed in accordance with Financial
Accounting Standards Board Statement No. 109 and is based on applicable federal
and state statutory rates adjusted for permanent differences between financial
and taxable income.
Income taxes have been provided as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------- ----- -----
<S> <C> <C> <C>
Federal:
Current................................................ $(2,907) $ 253 $ 776
Deferred............................................... 2,391 (188) (538)
------- ----- -----
State and Local:
Current................................................ (594) 50 160
Deferred............................................... 1,158 (44) (186)
------- ----- -----
$ 48 $ 71 $ 212
======= ===== =====
</TABLE>
The combined income tax provision has been calculated as if the Predecessors
have filed a consolidated tax return in all periods presented.
F-11
<PAGE> 67
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS)
F. INCOME TAXES--CONTINUED
Deferred income taxes reflect the tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's net deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation............................ $ 1,849 $ 1,016
Other................................................. -- 38
------- -------
Total deferred tax liabilities.......................... 1,849 1,054
Deferred tax assets:
Net operating loss carryforwards...................... 3,700 4,100
Deferred tax assets from AMT carryforward............. 73 43
Tax under book accrued expenses....................... 33 39
Other................................................. 900 604
------- -------
4,706 4,786
Valuation allowance..................................... (2,704) (2,872)
Total deferred tax assets............................... 2,002 1,914
------- -------
Net deferred tax asset.................................. $ 153 $ 860
======= =======
</TABLE>
The statutory federal income tax rate and the effective income tax rate are
reconciled as follows:
<TABLE>
<CAPTION>
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Statutory rate...................................................... 34.0% 35.0% 35.0%
State and local income taxes net of federal benefit................. 8.0 5.0 1.0
Net operating loss.................................................. (33.0) (15.0) (31.0)
Other............................................................... 2.0 5.0 2.0
----- ----- -----
Effective tax rate.................................................. 11.0% 30.0% 7.0%
===== ===== =====
</TABLE>
Income taxes paid (net of refunds) were $25 in 1993; $117 in 1994 and $280 in
1995.
As of June 30, 1995, the Company had net operating loss carryforwards for tax
purposes of approximately $11,000 available to offset future taxable income.
These carryforwards expire in the years fiscal 2006 through fiscal 2010.
G. REDEEMABLE STOCK PURCHASE WARRANTS
Warrants were issued in connection with the refinancing that enabled Venture to
emerge from protection under Chapter 11 of the United States Bankruptcy Code.
Venture valued the warrants at $1,300 on date of issuance based upon an
independent appraisal. The warrants may be exercised to purchase 4,000 shares of
Venture's common stock for a nominal amount. The warrants are exercisable
through September 30, 1998 and represent a potential 40% equity interest in
Venture.
Under certain conditions, the Company can reduce the Venture warrant position
pursuant to a formula based on Venture's earnings as defined in the warrant
agreement. Further, after 1999, the Company has the right to redeem the warrants
under terms specified in the warrant agreement.
F-12
<PAGE> 68
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS)
G. REDEEMABLE STOCK PURCHASE WARRANTS--CONTINUED
In October 1995, the Company entered into an Agreement to Repay the Venture
warrantholder, representing a potential 25% equity interest in Venture. Under
the terms of the Agreement, upon a successful public offering of the common
stock of the Company, such warrant holder may exchange its warrant together with
certain other consideration for $3,000 plus 5.0% of the Company's common stock.
The remaining Venture warrant (representing a potential 15% equity interest in
Venture) is held by the Company. Management of the Company has declared its
intent to cancel the remaining warrant upon a successful public offering of the
common stock of the Company.
Warrants were issued by APL in connection with a financing agreement that
permits the holder to purchase shares of APL's Class A convertible non voting
common stock equal to a 15% equity interest in APL. In October 1995, APL and its
lender entered into a non-binding letter of intent permitting APL to redeem the
warrants. Under the terms of the letter of intent the warrants may be redeemed
during the first three months of calendar year 1996, for the greater of $2,400
or at an amount based on a multiple of APL's earnings for the twelve-month
period ending the month prior to the redemption. The warrants have been valued
at $3,199 at June 30, 1995 reflecting management's estimate of the amount the
Company may be required to pay upon redemption. On December 7, 1995, APL will
have an unrestricted right to call the warrants.
H. REORGANIZATION AND RESTRUCTURING CHARGES
In 1993, upon emergence from operating under protection of Chapter 11 of the
U.S. Bankruptcy Code, Venture disposed of certain assets, consisting primarily
of $5.2 million of equipment related to exiting certain product lines.
Reorganizing charges also included $1.7 million of professional fees and
administrative expenses. Management does not expect these reorganization costs
to recur in future periods.
Effective June 30, 1994, APL recorded a provision of $852 for the costs,
principally inventory and equipment write-downs, to exit its non-lamp product
line. The non-lamp product line consisted of high purity chemicals with non-lamp
applications. The decision was made in order to focus solely on the
manufacturing of products related to the lighting industry.
During 1995, the disposition plan was revised resulting in a reduction ($121) of
the estimated costs to exit the non-lamp product line. Management of APL has
signed a letter of intent to effectively sell the non-lamp assets (principally
inventory and equipment) to a non combined affiliate of the Company for an
amount not to be less than the carrying value of such assets as of June 30,
1995. The carrying value of non lamp assets as of June 30, 1995 is approximately
$190.
I. RELATED PARTY TRANSACTIONS
All significant intercompany transactions between the Predecessors have been
eliminated for purposes of the combined financial statements. Management fees
were paid by the Predecessor to a non combined affiliate of $831, $173 and $82
in 1995, 1994 and 1993 respectively.
F-13
<PAGE> 69
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS)
J. COMMITMENTS
The Company leases a building and certain equipment under non-cancelable
operating lease agreements. The building lease is scheduled to expire on
December 31, 1995. Total rent expense was $476 in 1993, $580 in 1994 and $613 in
1995. Future minimum lease commitments are as follows:
<TABLE>
<S> <C>
Year:
1996...................................................... $ 808
1997...................................................... 673
1998...................................................... 678
1999...................................................... 510
2000...................................................... 466
Thereafter.................................................. 622
----
Minimum lease payments...................................... $ 3,757
====
</TABLE>
Estimated costs to complete construction in progress at June 30, 1995 were $423.
K. BUSINESS SEGMENT INFORMATION
The Company operates in a single industry: the design, manufacture and sale of
metal halide lighting products including lamps, components and production
equipment. While the Company offers a wide range of metal halide lighting
products, all of the Company's products are manufactured in the United States.
Export sales to unaffiliated customers, which were not significant in any
individual country, totaled $5,040, $6,442, and $12,129 in fiscal 1993, 1994 and
1995 respectively. Approximately $4,100 of net sales in 1995 were made to one
significant customer.
F-14
<PAGE> 70
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS)
L. INCOME (LOSS) PER SHARE
Income (loss) per share is computed as follows:
<TABLE>
<S> <C>
Shares in all years:
Weighted average shares deemed outstanding.......................... 7,281,849
Shares to be issued in exchange for warrants........................ 535,887
-----------
Weighted average shares used in computing income (loss) per share... 7,817,736
===========
</TABLE>
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Income (loss):
Income (loss) before extraordinary items........... $(6,382) $ 1,206 $ 3,142
Less: Preferred stock dividends(1)................. 170 170 58
Increase in warrants' value(2)............... 961 -- 2,302
------- ------- -------
Income before extraordinary items attributable to
common shareholders............................. $(7,513) $ 1,036 $ 782
======= ======= =======
Net income......................................... $ 4,986 $ 1,206 $ 2,889
Less: Preferred stock dividends(1)................. 170 170 58
Increase in warrants' value(2)............... 961 -- 2,302
------- ------- -------
Net income attributable to common shareholders..... $ 3,855 $ 1,036 $ 529
======= ======= =======
Income (loss) per share:
Income (loss) before extraordinary items........... $ (.96) $ .13 $ .10
Extraordinary gain (loss).......................... 1.45 -- (.03)
------- ------- -------
Net income......................................... $ .49 $ .13 $ .07
======= ======= =======
</TABLE>
- ---------------
(1) The preferred stock dividends represent cumulative dividends in arrears. No
dividends were declared on the preferred stock in any of the years
presented. The cumulative dividends were paid to the preferred shareholders
when the related preferred shares were redeemed in October 1994.
(2) There was no accretion in the value of the warrants in 1994. Upon successful
completion of the Company's initial public offering, management intends to
redeem the outstanding warrants.
M. SUBSEQUENT EVENT (UNAUDITED)
In connection with a claim made by former preferred shareholders, certain
shareholders of the Company agreed to contribute an aggregate of 273,185 common
shares from their personal holdings to such former preferred shareholders upon
the completion of the Company's initial public offering. The value of the
settlement of $2,732 was recognized as a nonrecurring, noncash expense of the
Company in the second quarter of fiscal 1996.
N. CONTINGENCY (UNAUDITED)
On March 1, 1996, Edmund E. Heartstedt asserted a claim in the United
States District Court for the Northern District of Ohio against Wayne R.
Hellman, Chief Executive Officer and a director of the Company, and Louis S.
Fisi, Chief Financial Officer and a director of the Company, alleging certain
misrepresentations and/or omissions were made to him in connection with: (i) the
cash-out of his interest effected by a merger of a Predecessor into the Company,
as to which Mr. Heartstedt did not exercise his statutory appraisal rights; and
F-15
<PAGE> 71
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS)
(ii) the purchase by Mr. Hellman of Mr. Heartstedt's beneficial interest in a
trust controlled by Mr. Hellman. Mr. Heartstedt alleges that the representations
and/or omissions made by Mr. Fisi and others on behalf of Messrs. Hellman and
Fisi caused him direct damages which he believes exceed $900,000. The suit also
claims punitive damages in an undetermined amount believed by the Plaintiff to
exceed $2.7 million. Messrs. Hellman and Fisi have denied the allegations and
are vigorously defending the claim. The Company does not believe this litigation
could reasonably be expected to have a material adverse effect on the Company.
F-16
<PAGE> 72
ADVANCED LIGHTING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
MARCH 31
1996
--------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................... $ 2,109
Trade receivables, less allowance of $280.................................... 13,067
Inventories:
Finished goods............................................................ 8,763
Raw materials and work-in-progress........................................ 2,673
-------
11,436
Prepaid expenses............................................................. 1,029
-------
Total current assets........................................................... 27,641
Property, plant and equipment:
Land and buildings........................................................... 2,070
Machinery and equipment...................................................... 15,509
Furniture and fixtures....................................................... 2,774
-------
20,353
Less accumulated depreciation................................................ 6,517
-------
13,836
Other assets................................................................... 4,250
-------
$ 45,727
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................................. $ 7,359
Accrued expenses............................................................. 6,060
Current portion of long-term debt............................................ 127
-------
Total current liabilities...................................................... 13,546
Long-term debt................................................................. 7,268
Other liabilities.............................................................. 553
Shareholders' equity:
Common stock................................................................. 11
Paid-in-capital.............................................................. 26,080
Retained earnings (deficit).................................................. (1,731)
-------
24,360
-------
$ 45,727
=======
</TABLE>
See notes to condensed consolidated financial statements (Unaudited).
F-17
<PAGE> 73
ADVANCED LIGHTING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share dollar amounts)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31
-------------------
1995 1996
------- -------
<S> <C> <C>
Net sales................................................................ $30,019 $37,295
Costs and expenses:
Cost of sales.......................................................... 16,280 19,957
Selling, general and administrative.................................... 8,460 10,259
Research and development............................................... 1,150 1,714
Noncash settlement of claim............................................ -- 2,732
Restructuring.......................................................... (395) --
------- -------
Income from operations................................................... 4,524 2,633
Interest expense......................................................... 1,638 1,150
------- -------
Income before income taxes and extraordinary charges..................... 2,886 1,483
Income taxes............................................................. 818 525
------- -------
Income before extraordinary charges...................................... 2,068 958
Extraordinary charges.................................................... 253 135
------- -------
Net income............................................................... $ 1,815 $ 823
======= =======
Income (loss) per share:
Before extraordinary charges........................................... $ 0.03 $ (0.04)
Extraordinary charges.................................................. (0.03) (0.02)
------- -------
Net income (loss) per share.............................................. $ -- $ (0.06)
======= =======
Shares used for computing per share amounts.............................. 7,818 8,999
======= =======
</TABLE>
See notes to condensed consolidated financial statements (Unaudited).
F-18
<PAGE> 74
ADVANCED LIGHTING TECHNOLOGIES, INC.
CONDENSED STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY (UNAUDITED)
NINE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
----------------------------------------------------
PREFERRED COMMON PAID-IN RETAINED
STOCK STOCK CAPITAL EARNINGS TOTAL
--------- ------ ------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at July 1, 1995 ......................... $ 50 $ 360 -- $ (1,445) $ (1,035)
Net income ...................................... -- -- -- 823 823
Activities prior to initial public offering of
stock:
Sale of common stock........................... -- 147 -- -- 147
Redemption of preferred and common stock....... (50) (252 ) -- (1,109) (1,411)
Stock options exercised........................ -- 10 -- -- 10
Exchange of subsidiary companies' stock for
parent company stock........................ -- (259 ) $ 259 -- --
Noncash settlement of claim.................... -- -- 2,732 -- 2,732
Activities subsequent to public offering of
stock:
Net proceeds from public offering.............. -- 3 23,958 -- 23,961
Issuance of 5% equity in exchange for warrants
and other consideration..................... -- 1 (1,350) -- (1,349)
Exchange of subsidiary company stock for parent
company stock............................... -- 1 481 -- 482
---- ----- ------- ------- -------
Balance at March 31, 1996........................ $ -- $ 11 $26,080 $ (1,731) $ 24,360
==== ===== ======= ======= =======
</TABLE>
See notes to condensed consolidated financial statements (Unaudited).
F-19
<PAGE> 75
ADVANCED LIGHTING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
--------------------
1995 1996
-------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................................ $ 1,815 $ 823
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization...................................... 1,278 1,272
Noncash settlement of claim........................................ -- 2,732
Extraordinary charges.............................................. 253 135
Changes in operating assets and liabilities:
Trade receivables................................................ (2,817) (4,255)
Inventories...................................................... (802) (4,006)
Prepaids and other assets........................................ (528) (1,408)
Accounts payable and accrued expenses............................ 3,236 5,845
Other liabilities................................................ (231) 380
-------- -------
Net cash provided by operating activities..................... 2,204 1,518
INVESTING ACTIVITIES
Purchase of businesses................................................ -- (3,330)
Purchases of plant and equipment...................................... (620) (2,462)
-------- -------
Net cash used in investing activities......................... (620) (5,792)
FINANCING ACTIVITIES
Proceeds from revolving credit facility............................... 18,315 10,580
Payments of revolving credit facility................................. (17,620) (8,084)
Proceeds from long-term debt.......................................... 251 6,478
Payments of long-term debt and capital leases......................... (2,164) (5,806)
Proceeds from issuance of common stock................................ 1 157
Borrowings for preferred stock redemption and dividends............... 2,789 --
Redemption of preferred stock and dividends........................... (2,789) (1,101)
Redemption of common stock............................................ -- (310)
Net proceeds from initial public offering............................. -- 23,961
Use of net proceeds from initial public offering:
Payment of long-term debt.......................................... -- (3,350)
Payment of revolving credit facility............................... -- (4,429)
Redemption of warrants............................................. -- (6,199)
Payment of trade payables.......................................... -- (4,447)
Payment of note.................................................... -- (1,541)
Other.............................................................. -- (556)
-------- -------
Net cash (used in) provided by financing activities........... (1,217) 5,353
-------- -------
Increase in cash and cash equivalents................................... 367 1,079
Cash and cash equivalents, beginning of period.......................... 663 1,030
-------- -------
Cash and cash equivalents, end of period...................... $ 1,030 $ 2,109
======== =======
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid......................................................... $ 1,044 $ 870
Income taxes paid..................................................... 204 136
Noncash transactions:
Equipment acquired by capital leases............................... -- 120
Noncash consideration for purchase of business..................... -- 579
</TABLE>
See notes to condensed consolidated financial statements (Unaudited).
F-20
<PAGE> 76
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1996
(In thousands)
A. ORGANIZATION
Advanced Lighting Technologies, Inc. (the "Company") was formed as an Ohio
corporation on May 19, 1995 for the purpose of acquiring ownership, primarily by
merger (the "Combination"), of 17 affiliated operating corporations that were
previously under common ownership and management (the "Predecessors"), each one
of which is engaged in an aspect of the metal halide lighting business. More
specifically, the Combination was principally effected through a series of
nonmonetary mergers or stock exchanges in which the Predecessors' shareholders
received shares of the Company.
The Combination was effective in October 1995 and has been accounted for as
a reorganization of entities under common control. Historical financial
statements of each of the Predecessors were combined for periods prior to the
Combination and reflect adjustments, primarily to eliminate intercompany
transactions, that would have been required had the Company been a consolidated
entity.
B. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions for Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and disclosures required by generally accepted accounting principles
for complete financial statements. All adjustments which are, in the opinion of
management, necessary for a fair presentation have been made and are of a normal
and recurring nature. The results of operations for the interim periods are not
necessarily indicative of results of operations that may be expected for the
full year ending June 30, 1996. For further information, refer to the combined
financial statements and notes thereto for the year ended June 30, 1995,
included elsewhere in this Prospectus.
C. CREDIT AGREEMENT
In March 1996, the Company entered into a three year revolving credit
agreement (the "Agreement") with a bank. The Agreement permits borrowings up to
$25,000 based on eligible levels of accounts receivable and inventories and
certain other criteria. Interest on the amounts borrowed are determined based on
a choice of formulas of the prime rate or LIBOR. The Agreement also provides for
the issuance of letters of credit against unborrowed availability.
D. NONCASH SETTLEMENT OF CLAIM
On October 27, 1995, several former preferred shareholders of the Company's
lamp manufacturing predecessor whose shares were redeemed in August 1995 (prior
to the Combination), asserted a claim against certain officers of the Company.
On November 15, 1995, such officers entered into a settlement agreement
with the former preferred shareholders, whereby they transferred, from their
personal holdings, an aggregate of 273,185 shares of the Company's common stock
to the former preferred shareholders. Since the settlement resulted in a
transfer of personal shares held by such officers, there was no dilution of the
ownership interest of shareholders of the Company. The settlement was recorded
as a noncash expense and paid-in capital of the Company in the three months
ended December 31, 1995.
F-21
<PAGE> 77
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
MARCH 31, 1996
(In thousands)
E. INCOME TAXES
The Company has net operating loss carryforwards for tax purposes of
approximately $10,000 which result in variations in the customary relationship
between income tax expense computed at the statutory income tax rate and pretax
income.
F. EXTRAORDINARY CHARGES
The extraordinary charges in the three and nine month periods ended March
31, 1996 and the nine months ended March 31, 1995 resulted from early
extinguishments of debt and are net of applicable income taxes of $22, $91 and
$168, respectively.
G. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is based on the weighted average number of
shares of common stock and common stock equivalents outstanding during each
period. Net income for the nine months ended March 31, 1996 and 1995 and the
three months ended March 31, 1995, used in the computation of per share amounts,
was reduced by the accretion in the value of stock purchase warrants, all of
which were redeemed prior to March 31, 1996.
H. CONTINGENCY
On March 1, 1996, Edmund E. Heartstedt asserted a claim in the United
States District Court for the Northern District of Ohio against Wayne R.
Hellman, Chief Executive Officer and a director of the Company, and Louis S.
Fisi, Chief Financial Officer and a director of the Company, alleging certain
misrepresentations and/or omissions were made to him in connection with: (i) the
cash-out of his interest effected by a merger of a Predecessor into the Company,
as to which Mr. Heartstedt did not exercise his statutory appraisal rights; and
(ii) the purchase by Mr. Hellman of Mr. Heartstedt's beneficial interest in a
trust controlled by Mr. Hellman. Mr. Heartstedt alleges that the representations
and/or omissions made by Mr. Fisi and others on behalf of Messrs. Hellman and
Fisi caused him direct damages which he believes exceed $900,000. The suit also
claims punitive damages in an undetermined amount believed by the Plaintiff to
exceed $2.7 million. Messrs. Hellman and Fisi have denied the allegations and
are vigorously defending the claim. The Company does not believe this litigation
could reasonably be expected to have a material adverse effect on the Company.
F-22
<PAGE> 78
CHARTERED ACCOUNTANTS
Canadian Member Firm of
Grant Thornton International
AUDITORS' REPORT
To the Directors of
Spectro Electric Inc.
We have audited the balance sheet of Spectro Electric Inc. as at December 31,
1995, and the statements of operations and deficit and cash flows for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1995 and the
results of its operations and cash flows for the year then ended in accordance
with accounting principles generally accepted in the United States.
Markham, Canada
February 14, 1996, except as Doane Raymond
to Note 16, which is as of May 1, 1996 Chartered Accountants
Suite 400
7030 Woodbine Ave.
Markham
Ontario
L3R 6G2
Tel: (905) 475-1100
Fax: (905) 475-8906
F-23
<PAGE> 79
SPECTRO ELECTRIC INC.
BALANCE SHEET
(Expressed in Canadian Dollars)
December 31, 1995
<TABLE>
<S> <C>
ASSETS
Current
Cash...................................................................... Cdn.$ 6,911
Receivables (Note 3)...................................................... 1,455,097
Inventories (Note 4)...................................................... 2,642,680
Prepaid expenses and deposits............................................. 66,569
-----------
4,171,257
Other
Prepaid pension costs (Note 5)............................................ 141,018
Fixed assets (Note 6)....................................................... 124,287
-----------
Cdn.$ 4,436,562
===========
LIABILITIES
Current
Bank indebtedness (Note 7)................................................ Cdn.$ 1,839,198
Payables and accruals (Note 8)............................................ 1,461,716
Capital and other taxes................................................... 14,452
-----------
3,315,366
-----------
SHAREHOLDER'S EQUITY
Capital stock (Note 9)...................................................... 6,200,001
Deficit..................................................................... (5,078,805)
-----------
1,121,196
-----------
Cdn.$ 4,436,562
===========
Commitments (Note 10)
Contingent liabilities (Note 11)
</TABLE>
See accompanying notes to the financial statements.
F-24
<PAGE> 80
SPECTRO ELECTRIC INC.
STATEMENT OF OPERATIONS AND DEFICIT
(Expressed in Canadian Dollars)
Year Ended December 31, 1995
<TABLE>
<S> <C>
Sales....................................................................... Cdn$ 9,341,710
Cost of sales
Inventories, beginning of year............................................ 2,558,200
Purchases................................................................. 6,436,867
-----------
8,995,067
Inventories, end of year.................................................. 2,501,513
-----------
6,493,554
-----------
Gross profit................................................................ 2,848,156
Selling, general and administrative expenses................................ 2,767,455
-----------
Restructuring charges (Note 12)........................................... 497,266
Loss before the undernoted and income taxes................................. (416,565)
Interest expense.......................................................... (173,121)
Other income.............................................................. 3,408
-----------
Loss before income taxes.................................................... (586,278)
Income taxes (recoveries) (Note 13)......................................... (8,977)
-----------
Net loss.................................................................... Cdn$ (577,301)
===========
Deficit, beginning of year.................................................. Cdn$(4,501,504)
Net loss.................................................................... (577,301)
-----------
Deficit, end of year........................................................ Cdn$(5,078,805)
===========
</TABLE>
See accompanying notes to the financial statements.
F-25
<PAGE> 81
SPECTRO ELECTRIC INC.
STATEMENT OF CASH FLOWS
(Expressed in Canadian Dollars)
Year Ended December 31, 1995
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss................................................................... Cdn.$(577,301)
Depreciation and amortization.............................................. 68,412
Write-off of leasehold improvement......................................... 22,000
Changes in assets and liabilities
Receivables............................................................. 241,629
Inventories............................................................. 78,128
Capital and other taxes................................................. (16,620)
Prepaid expenses and deposits........................................... 262,662
Payables and accruals................................................... (451,685)
-------------
Net cash used in operating activities................................... (372,775)
-------------
FINANCING ACTIVITIES
Prepaid pension costs...................................................... (8,223)
Proceeds of bank borrowings -- net......................................... 384,842
-------------
Net cash provided by financing activities.......................... 376,619
-------------
INVESTING ACTIVITIES
Purchase of fixed assets................................................... (9,240)
Proceeds from sale of fixed assets......................................... 9,995
-------------
Net cash provided by investing activities.......................... 755
-------------
Net increase in cash....................................................... 4,599
Cash, beginning of year.................................................... 2,312
-------------
Cash, end of year.......................................................... Cdn.$ 6,911
=============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest..................................... Cdn.$ 173,121
</TABLE>
See accompanying notes to the financial statements.
F-26
<PAGE> 82
SPECTRO ELECTRIC INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
December 31, 1995
1. OWNERSHIP
During the period under audit Spectro Electric Inc. (the Company) was a
wholly owned subsidiary of Sequel Industries Inc.
2. ACCOUNTING POLICIES
The Company's principal business activity is the wholesale distribution of
lighting products.
A. INVENTORIES
Inventories are valued at the lower of cost or net realizable value. Cost
is determined on a moving weighted average basis.
B. DEPRECIATION AND AMORTIZATION
Rates and bases of depreciation applied to write-off the cost less
estimated salvage value of property and equipment over their estimated lives are
as follows.
<TABLE>
<S> <C> <C>
Computer 30% straight-line
Office furniture 20% declining balance
Equipment 20% declining balance
Vehicles 30% declining balance
-- straight-line over the term of the
Leasehold improvements lease
</TABLE>
C. FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are recorded in Canadian dollars at the
rates of exchange prevailing on the date of transactions. Current assets and
liabilities at the year end are translated into Canadian dollars at the rates of
exchange prevailing on that date. Exchange gains and losses are reflected in
income.
D. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash, trade receivables and accounts payable
approximate fair value due to the short term maturities of these instruments.
E. USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
3. RECEIVABLES
<TABLE>
<S> <C>
Trade................................................................ Cdn.$ 1,425,287
Other................................................................ 29,810
--------------
Cdn.$ 1,455,097
==============
</TABLE>
F-27
<PAGE> 83
SPECTRO ELECTRIC INC.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
(Expressed in Canadian Dollars)
December 31, 1995
4. INVENTORIES
<TABLE>
<S> <C>
On hand.............................................................. Cdn.$ 2,501,513
Goods in transit..................................................... 141,167
--------------
Cdn.$ 2,642,680
==============
</TABLE>
5. PENSION PLAN AND PREPAID PENSION COSTS
The Company maintains a defined contribution pension plan which covers all
employees who have completed two years of service with the Company. Employees
are not required to contribute to the plan. The Company contributes 1% of the
employee earnings plus a portion of the profits of the Company. The proportion
of the profits, up to a maximum of 4%, is determined each year by the Company's
board of directors. The cost of the pension benefits to be provided in exchange
for services rendered during the year under this plan was $5,885.
The Company's 1995 required contributions were met from prepaid pension
costs and future required contributions will also be discharged from the prepaid
amount, subject to any limitation imposed by the Pension Commission of Ontario,
until such time as it has been fully amortized. Thereafter, the Company will
recommence making required employer contributions in accordance with the above.
6. FIXED ASSETS
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
------------- ------------ ------------
<S> <C> <C> <C>
Computer............................... Cdn.$ 266,663 Cdn.$218,133 Cdn.$ 48,530
Office furniture....................... 239,907 210,045 29,862
Equipment.............................. 188,865 148,101 40,764
Vehicles............................... 4,805 4,805 --
Leasehold improvements................. 52,992 47,861 5,131
------------ ------------ ------------
Cdn.$ 753,232 Cdn.$628,945 Cdn.$124,287
============ ============ ============
</TABLE>
Included in the amount charged for depreciation and amortization for the
year is a write off of computer and software equipment totalling $39,489.
7. BANK INDEBTEDNESS
As security for bank indebtedness and letters of credit (Note 8), the
Company has pledged receivables and inventories, assigned fire insurance
proceeds and issued a demand debenture providing a floating charge on all
assets.
The loan agreement with the bank contains restrictive covenants with
respect to working capital levels, minimum tangible net worth, and maintenance
of certain financial ratios. As at December 31, 1995, the Company's financial
position did not satisfy certain of these covenants and, accordingly, the bank
indebtedness is classified as a current liability.
8. PAYABLES AND ACCRUALS
This includes Cdn.$141,245 owed to trade suppliers which are secured by
letters of credit.
F-28
<PAGE> 84
SPECTRO ELECTRIC INC.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
(Expressed in Canadian Dollars)
December 31, 1995
9. CAPITAL STOCK
<TABLE>
<C> <S> <C>
Authorized:
Unlimited 7% non-voting, non-cumulative first preference shares
4,000 7% non-voting, non-cumulative second preference shares
9,000,000 Common shares
Issued:
1,000,000 First preference shares................................. Cdn.$3,000,000
9,000,000 Common shares........................................... 3,200,001
--------------
Cdn.$6,200,001
=============
</TABLE>
10. COMMITMENTS
The Company rents premises and equipment under long-term leases which
expire at various dates up to 1999 and for which minimum rentals total
Cdn.$182,300. Annual minimum rentals under these leases to date of expiry are as
follows:
<TABLE>
<CAPTION>
PREMISES
----------------------------
HEAD OFFICE BRANCHES EQUIPMENT TOTAL
----------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
1996...................... Cdn.$50,500 Cdn.$ 51,600 Cdn.$ 5,700 Cdn.$ 107,800
1997...................... -- 51,600 4,500 56,100
1998...................... -- 11,700 4,500 16,200
1999...................... -- -- 2,200 2,200
----------- ------------ ----------- ------------
Cdn.$50,500 Cdn.$114,900 Cdn.$16,900 Cdn.$ 182,300
=========== ============ =========== ============
</TABLE>
On January 10, 1996 the Company was given notice by the landlord of its
Toronto head office and warehouse facilities of termination of lease, effective
April 10, 1996.
11. CONTINGENT LIABILITIES
a) Unlimited guarantee issued to parent Company's bankers. At December 31,
1995 that Company's bank indebtedness amounted to Cdn.$389,812 together with
interest of Cdn.$69,303 accrued to that date.
b) Outstanding letters of credit amounting to Cdn.$100,645.
c) During 1994, a Receiver Manager was appointed for a partnership in which
the Company had an indirect interest and which was disposed of during 1991. The
Company is unable to determine the extent, if any, for which it may be liable
for any of the liabilities of the partnership.
F-29
<PAGE> 85
SPECTRO ELECTRIC INC.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
(Expressed in Canadian Dollars)
December 31, 1995
12. RESTRUCTURING CHARGES
During 1994 the Company initiated a restructuring plan to reduce costs and
consolidate facilities. These charges are comprised of the following:
<TABLE>
<S> <C>
Lease cancellations and other related costs........................... Cdn.$ 442,705
Writedown of leaseholds............................................... 22,000
Employee termination and related costs................................ 18,296
Relocation expenses................................................... 14,265
------------
Cdn.$ 497,266
============
</TABLE>
13. LOSSES
The Company has recorded deferred taxes for the income tax benefits of net
operating loss carryforwards. These losses which aggregate Cdn.$1,772,000 are
available to reduce taxable income in future years and will expire as follows:
<TABLE>
<S> <C>
1999.......................................................... Cdn.$181,000
2000.......................................................... 452,000
2001.......................................................... 605,000
2002.......................................................... 534,000
</TABLE>
Due to historical losses, a valuation allowance of Cdn.$790,000 has been
recorded which offsets the entire amount of the deferred taxes related to the
net operating loss carryforwards.
14. RELATED PARTY TRANSACTION
A management fee of Cdn.$249,500 was paid to Sequel Industries Inc. for
management advisory services.
15. CONCENTRATION OF CREDIT RISK
The Company sells on credit terms to its customers, all of whom are located
in Canada. No single customer represented more than 10% of the Company sales in
1995.
16. SUBSEQUENT EVENTS
On February 5, 1996, the bank made a formal demand for repayment of the
bank indebtedness of the Company amounting to Cdn.$2,088,285 as at February 2,
1996. The bank also made a formal demand for immediate payment of the Company's
indebtedness under a guarantee of the bank indebtedness of the Company's parent
company amounting to Cdn.$389,812 as at February 2, 1996, together with interest
of Cdn.$72,012 accrued to that date.
On March 7, 1995, the bank appointed an agent, pursuant to certain
hypothetications to take control of the collateral provided by the Company's
parent. The right, title and interest of the bank in the shares of the Company
pledged, being all the issued and outstanding shares of the Company were sold on
March 25, 1996 to Advanced Lighting Technologies Inc. ("ADLT") on an "as is
basis." The consideration comprised the purchase price of the shares and the
purchase payment for the security held by the bank against the Company together
with the debt of the Company to the bank.
Following the above transaction, the Company became an indirect wholly
owned subsidiary of ADLT, a company listed on the Nasdaq stock market's national
market.
F-30
<PAGE> 86
SPECTRO ELECTRIC INC.
BALANCE SHEETS
(UNAUDITED)
(Expressed in Canadian Dollars)
<TABLE>
<CAPTION>
MARCH 31
-----------------------------------
1995 1996
--------------- ---------------
<S> <C> <C>
ASSETS
Current
Cash................................................... Cdn.$ 2,200 Cdn.$ 2,578
Receivables (Note 3)................................... 1,749,205 1,485,260
Receivable from related company........................ -- 23,305
Inventories (Note 4)................................... 2,548,236 2,905,392
Prepaid expenses and deposits.......................... 387,532 53,406
--------------- ---------------
4,687,173 4,469,941
Other
Prepaid pension costs (Note 5)......................... 135,026 140,496
Fixed assets (Note 6).................................... 201,124 111,581
--------------- ---------------
Cdn.$ 5,023,323 Cdn.$ 4,722,018
============== ==============
LIABILITIES
Current
Bank indebtedness (Note 7)............................. Cdn.$ 1,625,542 Cdn.$ 208,685
Payables and accruals.................................. 1,633,495 724,531
Payable to related party............................... -- 548,564
Capital and other taxes................................ 18,560 14,336
--------------- ---------------
3,277,597 1,496,116
Loan from parent company (Note 8)........................ -- 2,036,649
--------------- ---------------
3,277,597 3,532,765
SHAREHOLDER'S EQUITY
Capital stock (Note 9)................................... 6,200,001 6,200,001
Deficit.................................................. (4,454,275) (5,010,748)
--------------- ---------------
1,745,726 1,189,253
--------------- ---------------
Cdn.$ 5,023,323 Cdn.$ 4,722,018
============== ==============
Commitments (Note 10)
Contingent liabilities (Note 11)
</TABLE>
See accompanying notes to financial statements (unaudited).
F-31
<PAGE> 87
SPECTRO ELECTRIC INC.
STATEMENTS OF OPERATIONS AND DEFICIT
(UNAUDITED)
(Expressed in Canadian Dollars)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1995 MARCH 31, 1996
--------------- ---------------
<S> <C> <C>
Sales.................................................... Cdn.$ 2,600,163 Cdn.$ 2,359,074
Cost of sales
Inventories, beginning of period....................... 2,558,200 2,501,513
Purchases.............................................. 1,686,416 1,695,287
--------------- ---------------
4,244,616 4,196,800
Inventories, end of period............................. 2,434,401 2,622,624
--------------- ---------------
1,810,215 1,574,176
--------------- ---------------
Gross profit............................................. 789,948 784,898
Selling, general and administrative expense.............. 709,591 675,640
--------------- ---------------
Earnings before the undernoted and income taxes.......... 80,357 109,258
Interest expense......................................... 42,105 41,201
--------------- ---------------
Earnings before income taxes............................. 38,252 68,057
Income taxes (recoveries) -- (Note 12)................... (8,977) --
--------------- ---------------
Net earnings............................................. Cdn.$ 47,229 Cdn.$ 68,057
============== ==============
Deficit, beginning of period............................. Cdn.$(4,501,504) Cdn.$(5,078,805)
Net earnings............................................. 47,229 68,057
--------------- ---------------
Deficit, end of period................................... Cdn.$(4,454,275) Cdn.$(5,010,748)
============== ==============
</TABLE>
See accompanying notes to financial statements (unaudited).
F-32
<PAGE> 88
SPECTRO ELECTRIC INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Expressed in Canadian Dollars)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1995 MARCH 31, 1996
-------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings............................................ Cdn.$ 47,229 Cdn.$ 68,057
Depreciation and amortization........................... 18,612 15,955
Changes in assets and liabilities
Receivables.......................................... (52,479) (30,163)
Inventories.......................................... 172,572 (262,712)
Income taxes......................................... (12,512) (116)
Prepaid expenses and deposits........................ (58,301) 13,163
Payables and accruals................................ (279,906) (737,185)
Receivable from/payable to related party............. -- 525,259
-------------- ---------------
Net cash used in operating activities.............. (164,785) (407,742)
-------------- ---------------
FINANCING ACTIVITIES
Prepaid pension costs................................... (2,231) 522
Proceeds (repayments) of bank borrowings -- net......... 171,186 (1,630,513)
Advances from parent company............................ -- 2,036,649
-------------- ---------------
Net cash provided by financing activities............ 168,955 406,658
-------------- ---------------
INVESTING ACTIVITIES
Purchase of fixed assets................................ (4,282) (3,249)
-------------- ---------------
Net cash used in investing activities................ (4,282) (3,249)
-------------- ---------------
Net (decrease) increase in cash........................... (112) (4,333)
Cash, beginning of period................................. 2,312 6,911
-------------- ---------------
Cash, end of period....................................... Cdn.$ 2,200 Cdn.$ 2,578
============= ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest.................. Cdn.$ 42,105 Cdn.$ 41,201
</TABLE>
See accompanying notes to financial statements (unaudited).
F-33
<PAGE> 89
SPECTRO ELECTRIC INC.
NOTES TO THE FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed in Canadian Dollars)
March 31, 1996 and 1995
1. OWNERSHIP
Effective March 25, 1996, the Company became a wholly-owned subsidiary of
Advanced Lighting Technologies Inc. ("ADLT").
2. ACCOUNTING POLICIES
The Company's principal business activity is the wholesale distribution of
lighting products.
A. INVENTORIES
Inventories are valued at the lower of cost or net realizable value. Cost
is determined on a moving weighted average basis.
B. DEPRECIATION AND AMORTIZATION
Rates and bases of depreciation applied to write-off the cost less
estimated salvage value of property and equipment over their estimated lives are
as follows:
<TABLE>
<S> <C>
Computer 30% straight-line
Office furniture 20% declining balance
Equipment 20% declining balance
Vehicles 30% declining balance
Leasehold improvements -- straight-line over the term of the lease
</TABLE>
C. FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are recorded in Canadian dollars at the
rates of exchange prevailing on the date of transactions. Current assets and
liabilities at the period end are translated into Canadian dollars at the rates
of exchange prevailing on that date. Exchange gains and losses are reflected in
income.
D. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash, trade receivables and accounts payable
approximate fair value due to the short term maturities of these instruments.
E. USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
3. RECEIVABLES
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1995 1996
-------------- --------------
<S> <C> <C>
Trade................................................. Cdn.$ 1,712,764 Cdn.$ 1,467,229
Other................................................. 36,441 18,031
-------------- --------------
Cdn.$ 1,749,205 Cdn.$ 1,485,260
============== ==============
</TABLE>
F-34
<PAGE> 90
SPECTRO ELECTRIC INC.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
(Expressed in Canadian Dollars)
March 31, 1996 and 1995
4. INVENTORIES
<TABLE>
<CAPTION>
1995 1996
--------------- ---------------
<S> <C> <C>
On hand............................................... Cdn.$ 2,434,401 Cdn.$ 2,622,624
Goods in transit...................................... 113,835 282,768
--------------- ---------------
Cdn.$ 2,548,236 Cdn.$ 2,905,392
============= =============
</TABLE>
5. PENSION PLAN AND PREPAID PENSION COSTS
The Company maintains a defined contribution pension plan which covers all
employees who have completed two years of service with the Company. Employees
are not required to contribute to the plan. The Company contributes 1% of the
employee earnings plus a portion of the profits of the Company. The proportion
of the profits, up to a maximum of 4%, is determined each year by the Company's
board of directors. The cost of the pension benefits to be provided in exchange
for services rendered during the three months ended March 31, 1996 under this
plan was Cdn.$1,506 (three months ended March 31, 1995 -- Cdn.$1,295).
The Company's 1996 and 1995 required contributions were met from prepaid
pension costs and future required contributions will also be discharged from the
prepaid amount, subject to any limitation imposed by the Pension Commission of
Ontario, until such time as it has been fully amortized. Thereafter, the Company
will recommence making required employer contributions in accordance with the
above.
6. FIXED ASSETS
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1995
------------ ------------
ACCUMULATED NET BOOK NET BOOK
COST DEPRECIATION VALUE VALUE
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Computer................ Cdn.$ 269,912 Cdn.$228,468 Cdn.$ 41,444 Cdn.$ 78,206
Office furniture........ 239,907 211,545 28,362 34,276
Equipment............... 188,865 150,171 38,694 51,210
Vehicles................ -- -- -- --
Leasehold
improvements.......... 5,735 2,654 3,081 37,432
------------ ------------ ------------ ------------
Cdn.$ 704,419 Cdn.$592,838 Cdn.$111,581 Cdn.$201,124
============ ============ ============ ============
</TABLE>
7. BANK INDEBTEDNESS
On March 7, 1996, the bank appointed an agent, pursuant to certain
hypothecations to take control of the collateral provided by the Company's
former parent, Sequel Industries Inc. The right, title and interest of the bank
in the shares of the Company pledged, being all the issued and outstanding
shares of the Company were sold on March 25, 1996 for Cdn.$2,168,000 on an "as
is basis." This consideration comprised the purchase price for shares and the
purchase payment for the security held by the bank against the Company together
with the debt of the Company to the bank.
The bank indebtedness at March 31, 1996 of Cdn.$208,685 consisted of an
unsecured bank overdraft of Cdn.$77,400 and outstanding checks in excess of cash
balance totalling Cdn.$131,285.
F-35
<PAGE> 91
SPECTRO ELECTRIC INC.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
(Expressed in Canadian Dollars)
March 31, 1996 and 1995
8. LOANS PAYABLE TO PARENT -- ADLT
Purchase of debt held by the bank against the Company -- refer to Note 7
above. As part of the purchase transaction the bank assigned its security to
ADLT, part of which consists of general assignments of book debts and a demand
debenture providing a floating charge on all assets. The loan balance due to
ADLT at March 31, 1996 is Cdn.$2,036,649.
9. CAPITAL STOCK
<TABLE>
<CAPTION>
1995 1996
-------------- --------------
<S> <C> <C> <C>
Authorized:
Unlimited 7% non-voting, non-cumulative first
preference shares
4,000 7% non-voting, non-cumulative second
preference shares
9,000,000 Common shares
Issued:
1,000,000 First preference shares................. Cdn.$ 3,000,001 Cdn.$ 3,000,001
9,000,000 Common shares........................... 3,200,000 3,200,000
--------------- ---------------
Cdn.$ 6,200,001 Cdn.$ 6,200,001
=============== ===============
</TABLE>
10. COMMITMENTS
The Company rents premises and equipment under long-term leases which
expire at various dates up to 1999 and for which minimum rentals total
Cdn.$319,300. Annual minimum rentals under these leases to date of expiry are as
follows:
<TABLE>
<CAPTION>
PREMISES
-----------------------------
HEAD OFFICE BRANCHES EQUIPMENT TOTAL
------------ ------------ ----------- -------------
<S> <C> <C> <C> <C>
March 1997............... Cdn.$ 56,500 Cdn.$ 51,600 Cdn.$ 4,500 Cdn.$ 112,600
March 1998............... 66,800 45,600 4,500 116,900
March 1999............... 72,400 4,700 4,500 81,600
March 2000............... 6,000 -- 2,200 8,200
----------- ------------ ----------- ------------
Cdn.$201,700 Cdn.$101,900 Cdn.$15,700 Cdn.$ 319,300
=========== ============ =========== ============
</TABLE>
11. CONTINGENT LIABILITIES
During 1994, a Receiver Manager was appointed for a partnership in which
the Company had an indirect interest and which was disposed of during 1991. The
Company is unable to determine the extent, if any, for which it may be liable
for any of the liabilities of the partnership.
F-36
<PAGE> 92
SPECTRO ELECTRIC INC.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
(Expressed in Canadian Dollars)
March 31, 1996 and 1995
12. LOSSES
The Company has recorded deferred taxes for the income tax benefits of net
operating loss carryforwards. These losses, which aggregate Cdn.$1,704,000 are
available to reduce taxable income in future years and will expire as follows:
<TABLE>
<S> <C>
1999.......................................................... Cdn.$113,000
2000.......................................................... 452,000
2001.......................................................... 605,000
2002.......................................................... 534,000
</TABLE>
Due to historical losses, a valuation allowance of Cdn.$760,000 has been
recorded which offsets the entire amount of the deferred taxes related to the
net operating loss carryforwards.
13. RELATED PARTY TRANSACTIONS
(a) Purchase of goods from an affiliated company during the period March 25
to March 31, 1996 totalled Cdn.$21,700.
(b) Management fee of Cdn.$65,640 in the three months ended March 31, 1996
(Cdn $61,500 in the three months ended March 31, 1995) was paid to the
former parent company for management advisory services.
14. CONCENTRATION OF CREDIT RISK
The Company sells on credit terms to its customers, all of whom are located
in Canada. No single customer represented more than 10% of the Company sales in
the three months ended March 31, 1996.
F-37
<PAGE> 93
ADVANCED LIGHTING TECHNOLOGIES, INC. ("ADLT")
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands of U.S. dollars, except per share dollar amounts)
The following pro forma condensed combined statements of operations
(unaudited) for the year ended June 30, 1995, and the nine months ended March
31, 1996, have been prepared to reflect the results of operations of Advanced
Lighting Technologies, Inc. ("ADLT") as if the acquisition of Spectro Electric
Inc. ("Spectro") occurred on July 1, 1994.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30, 1995
------------------------------------------------
HISTORICAL PRO FORMA
------------------- --------------------------
ADLT SPECTRO ADJUSTMENTS COMBINED
------- ------- ----------- --------
<S> <C> <C> <C> <C>
Net sales......................................... $40,767 $ 7,531 $(429)(a) $47,869
Costs and expenses:
Cost of sales................................... 21,899 5,452 (442)(b) 26,909
Selling, general and administrative............. 11,833 2,150 -- 13,983
Research and development........................ 1,673 -- -- 1,673
Restructuring................................... (121) 254 -- 133
------- ------ ----- -------
35,284 7,856 (442) 42,698
------- ------ ----- -------
Income (loss) from operations..................... 5,483 (325) 13 5,171
Interest expense.................................. 2,129 129 -- 2,258
------- ------ ----- -------
Income (loss) before income taxes and
extraordinary charge............................ 3,354 (454) 13 2,913
Income taxes...................................... 212 (6) -- 206
------- ------ ----- -------
Income (loss) before extraordinary charge......... $ 3,142 $ (448) $ 13 $ 2,707
======= ====== ===== =======
Income per common share before extraordinary
charge.......................................... $ 0.10(c) $ 0.04 (c)
======= =======
Shares used for computing per share amounts....... 7,818 7,868 (d)
======= =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED MARCH 31, 1996
------------------------------------------------
HISTORICAL PRO FORMA
------------------- --------------------------
ADLT SPECTRO ADJUSTMENTS COMBINED
------- ------- ----------- --------
<S> <C> <C> <C> <C>
Net sales......................................... $37,295 $ 5,002 $(908)(a)(e) $41,389
Costs and expenses:
Cost of sales................................... 19,957 3,375 (754)(b)(e) 22,578
Selling, general and administrative............. 10,259 1,480 (48)(e) 11,691
Research and development........................ 1,714 -- -- 1,714
Noncash settlement of claim..................... 2,732 -- -- 2,732
Restructuring................................... -- 182 -- 182
------- ------ ----- -------
34,662 5,037 (802) 38,897
------- ------ ----- -------
Income (loss) from operations..................... 2,633 (35) (106) 2,492
Interest expense.................................. 1,150 94 -- 1,244
------- ------ ----- -------
Income (loss) before income taxes and
extraordinary charge............................ 1,483 (129) (106) 1,248
Income taxes...................................... 525 -- -- 525
------- ------ ----- -------
Income (loss) before extraordinary charge......... $ 958 $ (129) $(106) $ 723
======= ====== ===== =======
Loss per common share before extraordinary
charge.......................................... $ (0.04)(f) $ (0.07 )(f)
======= =======
Shares used for computing per share amounts....... 8,999 9,048 (d)
======= =======
</TABLE>
See Notes to Pro Forma Condensed Combined Statements of Operations (Unaudited).
P-1
<PAGE> 94
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS)
The pro forma condensed combined statements of operations (Unaudited) based
on (i) ADLT's audited combined statement of operations for year ended June 30,
1995 and unaudited consolidated statement of operations for the nine months
ended March 31, 1996 and (ii) historical financial information for the
comparable periods derived from Spectro's audited financial statements for the
years ended December 31, 1995 and 1994 and Spectro's unaudited statement of
operations for the three months ended March 31, 1996. The financial statements
of Spectro, expressed in Canadian dollars, have been translated to U.S. dollars
using the principles of Statement of Financial Accounting Standard No. 52,
Foreign Currency Translation. The acquisition of Spectro occurred on March 25,
1996, and, accordingly, Spectro is included in the consolidated balance sheet of
ADLT as of March 31, 1996. Consequently, a pro forma balance sheet is not
presented. The acquisition was accounted for as a purchase business combination.
The pro forma condensed combined statements of operations (Unaudited) do
not purport to be indicative of the combined results of operations that actually
would have occurred if the acquisition of Spectro had occurred on July 1, 1994
or the expected results of operations that may be achieved in the future.
The pro forma adjustments are made to reflect:
(a) The elimination of sales from ADLT to Spectro.
(b) The elimination of cost of sales and intercompany profit related
to Spectro purchases from ADLT.
(c) Income per common share before extraordinary charge, on both a
historical and pro forma combined basis, is based upon income before
extraordinary charge attributable to common shareholders after having been
decreased by preferred share dividends of $58 and increases in the value of
warrants aggregating $2,302.
(d) Includes weighted-average common shares contingently issuable in
connection with the acquisition.
(e) The elimination of operations of Spectro included in both
Spectro's statement of operations and ADLT's consolidated statement of
operations from March 25, 1996 to March 31, 1996.
(f) Income per common share before extraordinary charge for the nine
months ended March 31, 1996, on both a historical and pro forma combined
basis, is based upon income before extraordinary charge attributable to
common shareholders after having been decreased by increases in the value
of warrants aggregating $1,350.
P-2
<PAGE> 95
(INSIDE REAR COVER)
ADVANCED LIGHTING
TECHNOLOGIES SYSTEMS
INNOVATIONS AIM
TO ACCELERATE DEMAND
FOR METAL HALIDE
LIGHTING
[LOGO]
[Four photographs in a column as follows: (1) fiber optic cables (labelled
"Fiber Optics"); (2) automobiles on a highway (labelled "Automotive
Headlamps"); (3) multiple televisions (labelled "Televisions") and (4) a table
lamp (labelled "Residential Lighting.")]
<PAGE> 96
- ------------------------------------------------------------
- ------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY OF THE SELLING SHAREHOLDERS OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON
STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................ 3
Risk Factors.................................. 6
The Company................................... 10
Background of the Company..................... 11
Use of Proceeds............................... 13
Price Range of Common Stock................... 13
Dividend Policy............................... 13
Capitalization................................ 14
Selected Financial Data....................... 15
Management's Discussion and Analysis of
Financial Condition and
Results of Operations....................... 17
Business...................................... 25
Management.................................... 39
Certain Transactions.......................... 43
Principal and Selling Shareholders............ 46
Description of Capital Stock.................. 47
Shares Eligible for Future Sale............... 50
Underwriting.................................. 52
Legal Matters................................. 53
Experts....................................... 53
Additional Information........................ 53
Index to Financial Statements................. F-1
</TABLE>
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
3,300,000 Shares
LOGO
ADVANCED LIGHTING
TECHNOLOGIES INC.
Common Stock
---------------------
PROSPECTUS
---------------------
PRUDENTIAL SECURITIES INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.
, 1996
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE> 97
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized statement of expenses of the Company in
connection with the issuance and distribution of the shares of Common Stock
being registered. All but the Securities and Exchange Commission registration
fee and the National Association of Securities Dealers, Inc. filing fee are
estimates.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee........................... $ 22,247
National Association of Securities Dealers, Inc. Filing Fee................... 6,952
NASDAQ National Market System Listing Fee..................................... 17,500
Printing and Engraving Expenses............................................... 200,000
Blue Sky Fees and Expenses.................................................... 6,500
Legal Fees and Expenses....................................................... 225,000
Accounting Fees and Expenses.................................................. 75,000
Transfer Agent Fees........................................................... 6,000
Miscellaneous Expenses........................................................ 65,801
------------
Total......................................................................... $625,000
============
</TABLE>
The Selling Shareholders will not pay expenses in connection with the
Offering.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Section 1701.59 of the Ohio Revised Code, which
eliminates the personal liability in damages of a director for violations of the
director's fiduciary duty, except if it is proved by clear and convincing
evidence that his action or failure to act involved acts or omissions undertaken
with deliberate intent to cause injury to the corporation or with reckless
disregard for the best interests of the corporation. This statute does not
affect the liability of directors pursuant to Section 1701.95 of the Ohio
Revised Code(providing for liability of directors for unlawful payment of
dividends or unlawful distribution of assets).
Reference is made to Section 1701.13 of the Ohio Revised Code, which
provides that a corporation may indemnify directors and officers as well as
other employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative other than an action by or in the name of the corporation (a
"derivative action") if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe their conduct was unlawful. A similar standard is applicable in the case
of derivative actions, except that indemnification only extends to expenses
(including attorneys' fees) incurred in connection with defense or settlement of
such action, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's articles of
incorporation, code of regulations, disinterested director vote, shareholder
vote, agreement or otherwise.
Reference is made to Article Seven of the Code of Regulations (by-laws) of
the Company contained in Exhibit 3.2 hereto which provides for the
indemnification of directors and officers to the fullest extent permitted by
Ohio law.
Reference is also made to Section 8 of the Underwriting Agreement contained
in Exhibit 1.1 hereto, indemnifying directors and officers of the Company
against certain liabilities.
II-1
<PAGE> 98
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In a merger of parents of the certain Predecessors into the Company
effective October 6, 1995, the Company issued 452,863 shares of Common Stock to
a total of 13 officers, directors and/or employees of the Company or its
Predecessors. The consideration received by the Company was various shares of
common stock of the parents of the Predecessors. Such securities were sold
pursuant to Section 4(2) of the 1933 Act, in that they were offered in
transactions not involving any public offering, exclusively to a limited number
of persons, each of whom had a preexisting relationship with the Company or its
Predecessors and, in each case, had access to all material information
concerning the Company, and such securities were offered without the use of any
form of general solicitation or advertising.
On October 10, 1995, the Company issued 137,490 shares of Common Stock to
92 employees pursuant to the exemption provided by Rule 701. Pursuant to the
Incentive Award Plan and in connection with a merger of a Predecessor's parent
into the Company the merger caused the cancellation of the common stock of the
Predecessor's parent held by such employees if the employees elected to receive
$.02 plus the receipt of Common Stock pursuant to the Incentive Award Plan.
Those employees electing this option received such securities pursuant to a
written compensatory benefit plan established by the Company for the
participation of its employees. Each participant in the compensatory benefit
plan was provided with a copy of such plan. The aggregate offering price
received by the issuer for the issuance of the securities was non-cash
consideration comprised of the cancellation of the Predecessor's parent common
stock pursuant to the merger and the employees' services provided in the regular
course of their duties. The aggregate offering price of these shares issued
pursuant to Rule 701 did not exceed 15% of the Company's total assets.
Also, in connection with such merger effective October 10, 1995, the
Company issued 2,692,905 shares of Common Stock to Mr. Hellman individually and
as voting trustee on behalf of the beneficial owners thereof. Such securities
were issued pursuant to Section 4(2) of the 1933 Act, in that they were offered
in transactions not involving any public offering, exclusively to a limited
number of persons, each of whom had a preexisting relationship with the Company
or its Predecessors and, in each case, had access to all material information
concerning the Company, and such securities were offered without the use of any
form of general solicitation or advertising.
On October 10, 1995, the Company issued 45,490 shares of Common Stock to 29
employees pursuant to the exemption provided by Rule 701. These securities were
issued pursuant to a written compensatory benefit plan established by the
Company for the participation of its employees and in connection with an
exchange of stock between shareholders of the Predecessor and the Company. Each
participant in the compensatory benefit plan was provided with a copy of such
plan. The aggregate offering price received by the issuer for the issuance of
the securities was noncash consideration comprised of the common stock of the
Predecessor and the employees' services provided in the regular course of their
duties. The aggregate offering price of these shares issued pursuant to Rule 701
did not exceed 15% of the Company's total assets.
In a merger of another parent of a Predecessor into the Company effective
October 10, 1995, the Company issued 2,785,090 shares of Common Stock to a total
of eight officers, directors and/or employees of the Company or its
Predecessors. The consideration received by the Company was 997 shares of common
stock of the parents of the Predecessors. Such securities were sold pursuant to
Section 4(2) of the 1933 Act, in that they were offered in transactions not
involving any public offering, exclusively to a limited number of persons, each
of whom had a preexisting relationship with the Company or its Predecessors and,
in each case, had access to all material information concerning the Company, and
such securities were offered without the use of any form of general solicitation
or advertising. After this merger, the remaining ten shareholders of the
Predecessor exchanged a total of 7,505 shares of Predecessor common stock for a
total of 348,367 shares of Common Stock. Such securities were sold pursuant to
Section 4(2) of the 1933 Act, in that they were offered in transactions not
involving any public offering, exclusively to a limited number of persons, each
of whom had a preexisting relationship with the Company or its Predecessors and,
in each case, had access to all material information concerning the Company, and
such securities were offered without the use of any form of general solicitation
or advertising.
II-2
<PAGE> 99
On October 10, 1995, Wayne R. Hellman exchanged 100 shares of Predecessor
common stock for 5,718 shares of Common Stock of the Company. Such securities
were sold pursuant to Section 4(2) of the 1933 Act, in that they were offered in
transactions not involving any public offering, exclusively to a limited number
of persons, each of whom had a preexisting relationship with the Company or its
Predecessors and, in each case, had access to all material information
concerning the Company, and such securities were offered without the use of any
form of general solicitation or advertising.
On October 10, 1995, six officers, directors and employees of the Company
exchanged 106 shares in a Predecessor with the Company for a total of 148,096
shares of Common Stock. Such securities were sold pursuant to Section 4(2) of
the 1933 Act, in that they were offered in transactions not involving any public
offering, exclusively to a limited number of persons, each of whom had a
preexisting relationship with the Company or its Predecessors and, in each case,
had access to all material information concerning the Company, and such
securities were offered without the use of any form of general solicitation or
advertising.
On October 10, 1995, the Company issued to 32 employees "A" Incentive
Options under its Incentive Award Plan for an aggregate of 230,000 shares of
Common Stock, each exercisable at $7.00 per share. These options will become
vested if certain financial goals are met or after five years from date of
grant. These options were issued in reliance upon the exemption provided by Rule
701. These securities were issued pursuant to a written compensatory benefit
plan established by the Company for the participation of its employees. Each
participant in the compensatory benefit plan was provided with a copy of such
plan. The aggregate offering price received by the issuer for the issuance of
the securities was noncash consideration comprised of the employees' services
provided in the regular course of their duties. The aggregate offering price of
these shares issued pursuant to Rule 701 did not exceed 15% of the Company's
total assets.
On December 8, 1995, the Company amended the "A" Incentive Options so that
the exercise price equaled the initial public offering price of the Common Stock
($10 per share).
Effective February 9, 1996, the Company acquired the 20% remaining equity
interest in its 80%-owned English subsidiary in exchange for 50,000 shares of
Common Stock. Such securities were sold in reliance upon an exemption pursuant
to Regulation S under the Securities Act, in that they were offered and sold in
England to two individual residents of the United Kingdom in exchange for their
minority interests in the Company's subsidiary, and are subject to transfer
restrictions.
No underwriters were used, no underwriting discounts were incurred, and no
commissions were paid in connection with any of the above transactions.
ITEM 16. EXHIBITS
a. Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Second Amended and Restated Articles of Incorporation; First Amendment to Second
Amended and Restated Articles of Incorporation**
3.2 Code of Regulations**
4.1 Reference is made to Exhibits 3.1 and 3.2
4.2 Form of Stock Certificate for Common Stock of the Company**
5.1 Opinion of Cowden, Humphrey & Sarlson
5.2 Opinion of Ulmer & Berne P.L.L.
9.1 Form of Voting Trust Agreement dated as of October 10, 1995 by and among the
Company, Wayne R. Hellman, Louis S. Fisi, David L. Jennings, Robert S. Roller,
Juris Sulcs, James F. Sarver, Brian A. Hellman, and Lisa Hellman, as amended
December 20, 1995.
9.2 Form of Irrevocable Proxy
10.1 Copy of the Company's Incentive Award Plan**
10.1/A Form of Amended Option "A" Grant, qualifying as an Incentive Stock Option**
10.2 Copy of the Non-Employee Director Stock Purchase Plan for Venture Lighting
International, Inc.**
</TABLE>
II-3
<PAGE> 100
<TABLE>
<S> <C>
10.3 Plan and Agreement of Merger Among H & F Four, Inc., VLI Partners II, Inc. and
Venture Lighting International, Inc., effective as of October 6, 1995**
10.4 Plan and Agreement of Merger With of H&F Six, Inc., H&F Seven, Inc., H&F Eight,
Inc., H&F Nine, Inc., H&F Twelve, Inc., H&F Thirteen, Inc., H&F Fourteen, Inc., H&F
Fifteen, Inc. and H&F Sixteen, Inc. and Into Advanced Lighting Technologies, Inc.,
effective as of October 6, 1995**
10.5 Plan and Agreement for Exchange of Stock Among Advanced Lighting Technologies, Inc.
and Shareholders of Metal Halide Technologies, Inc., effective as of October 10,
1995**
10.6 Plan and Agreement for Exchange of Stock Among Advanced Lighting Technologies, Inc.
and Shareholders of Microsun Technologies, Inc., effective as of October 10, 1995**
10.7 Plan and Agreement of Merger of VLI Partners II, Inc. With and Into Advanced
Lighting Technologies, Inc., effective as of October 10, 1995, as amended**
10.8 Plan and Agreement of H & F One, Inc. With and Into Advanced Lighting Technologies,
Inc., effective as of October 10, 1995, as amended**
10.9 Form of Plan and Agreement for Exchange of Stock Among Advanced Lighting
Technologies, Inc. and Individual Shareholders of APL Engineered Materials, Inc.,
effective as of October 10, 1995**
10.10 Form of Preferred Stock Redemption Agreement between VLI Partners II, Inc. and its
preferred shareholders (all are substantially the same except the number of shares
being redeemed and the total redemption price)**
10.11 Agreement to Repay, dated October 5, 1995 with GE**
10.12 Bill of Sale dated September 15, 1995 from APL Engineered Materials, Inc. to H & F
Five, Inc.**
10.13 Letter Agreement between Greyrock Financial Group and APL Engineered Materials,
Inc. dated October 10, 1995**
10.14 Lease Agreement dated January 1, 1993, by and between Weston, Inc. and Venture
Lighting International, Inc.**
10.15 Amended Lease Agreement dated September 30, 1992, by and between LR Properties and
Lighting Resources International, Inc.**
10.16 Employment Agreement dated October 6, 1995, by and between the Company and Wayne R.
Hellman**
10.17 Employment Agreement dated October 6, 1995, by and between the Company and Louis S.
Fisi**
10.18 Settlement Agreement, Covenant Not To Sue and Mutual Release**
10.19 Aircraft Lease Agreement between LightAir, Ltd., an Ohio limited liability company,
of which Wayne R. Hellman owns 80% of the membership interests and Louis S. Fisi
owns 20% of the membership interests, and Levetz Investments, Inc., an unrelated
corporation engaged in the business of chartering aircraft and otherwise providing
general aviation services ("Levetz Investments"), dated as of January 22, 1996.
(Form 10-Q Exhibit 10.1)***
10.20 Aircraft Operating Agreement between Levetz Investments and Venture Lighting
International, Inc., a wholly-owned subsidiary of the Company, dated as of January
22, 1996. (Form 10-Q Exhibit 10.2)***
10.21 Aircraft Operating Agreement between Levetz Investments and APL Engineered
Materials, Inc., a wholly-owned subsidiary of the Company, dated as of January 22,
1996. (Form 10-Q Exhibit 10.3)***
10.22 Asset Purchase Agreement between Current Industries, Inc., Metal Halide Controls,
Inc. and Advanced Lighting Technologies, Inc. dated January 26, 1996. (Form 10-Q
Exhibit 10.1)****
10.23 Letter Agreement between Venture Lighting International, Inc. and the Bank of Nova
Scotia dated March 11, 1996 regarding the purchase of capital stock and certain
indebtedness of Spectro Electric, Inc. (Form 10-Q Exhibit 10.2)****
10.24 Revolving Credit and Security Agreement between the Company and BNY Financial
Corporation dated March 25, 1996. (Form 10-Q Exhibit 10.3)****
11.1 Statement regarding Computation of Per Share Earnings.
21.0 List of subsidiaries, states of organization**
23.1 Consent of Ernst & Young LLP
23.2 Consent of Cowden, Humphrey & Sarlson -- See Exhibit 5.1
</TABLE>
II-4
<PAGE> 101
<TABLE>
<S> <C>
23.3 Consent of Ulmer & Berne P.L.L. -- See Exhibit 5.2
23.4 Consent of Doane Raymond
24.1 Powers of Attorney*
</TABLE>
- ---------------
* To be filed by amendment
** Incorporated by reference to Exhibit of same number in Company's
Registration Statement on Form S-1, Registration No. 33-97902, Effective
December 11, 1995.
*** Incorporated by reference to referenced Exhibit in Company's Quarterly
Report on Form 10-Q for the Quarterly Period ended December 31, 1995.
****Incorporated by reference to referenced Exhibit in Company's Quarterly
Report on Form 10-Q for the Quarterly Period ended March 31, 1996.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described in Item 14 above
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has already been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that (1) for the purposes of
determining any liability under the Securities Act of 1933 (the "Act"), the
information omitted from the form of prospectus filed as part of a 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
Act shall be deemed to be part of the registration statement as of the time it
was declared effective, and (2) 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-5
<PAGE> 102
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cleveland, State of Ohio,
on June 13, 1996.
ADVANCED LIGHTING TECHNOLOGIES, INC.
By: /s/ WAYNE R. HELLMAN
Wayne R. Hellman
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- -------------------------------- ------------------
<S> <C> <C>
/s/ WAYNE R. HELLMAN Chief Executive Officer June 13, 1996
Wayne R. Hellman and Director
/s/ LOUIS S. FISI Chief Financial Officer, June 13, 1996
Louis S. Fisi Chief Accounting Officer and
Director
/s/ RICHARD D. CAPRA Director June 13, 1996
Richard D. Capra
/s/ THEODORE A. FILSON Director June 13, 1996
Theodore A. Filson
_________________ Director June , 1996
Francis H. Beam
/s/ SUSUMA HARADA Director June 13, 1996
Susuma Harada
___________________ Director June , 1996
A Gordon Tunstall
</TABLE>
The undersigned, by signing his name hereto, does hereby execute this
Registration Statement on behalf of the above indicated officers and directors
of Advanced Lighting Technologies, Inc. pursuant to Powers of Attorney executed
by each such officer and director appointing the undersigned as attorney-in-fact
and filed with the Securities and Exchange Commission.
By: /s/ Wayne R. Hellman
_______________________
Wayne R. Hellman
Attorney-in-Fact
II-6
<PAGE> 103
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
EXHIBITS TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ADVANCED LIGHTING TECHNOLOGIES, INC.
<PAGE> 104
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
IN
SEQUENTIAL
NUMBERING
EXHIBIT SYSTEM
- ------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement
3.1 Second Amended and Restated Articles of Incorporation; First Amendment to
Second Amended and Restated Articles of Incorporation**
3.2 Code of Regulations**
4.1 Reference is made to Exhibits 3.1 and 3.2
4.2 Form of Stock Certificate for Common Stock of the Company**
5.1 Opinion of Cowden, Humphrey & Sarlson
5.2 Opinion of Ulmer & Berne P.L.L.
9.1 Form of Voting Trust Agreement dated as of October 10, 1995 by and among
the Company, Wayne R. Hellman, Louis S. Fisi, David L. Jennings, Robert S.
Roller, Juris Sulcs, James F. Sarver, Brian A. Hellman and Lisa Hellman,
as amended December 20, 1995.
9.2 Form of Irrevocable Proxy
10.1 Copy of the Company's Incentive Award Plan**
10.1/A Form of Amended Option "A" Grant, qualifying as an Incentive Stock
Option**
10.2 Copy of the Non-Employee Director Stock Purchase Plan for Venture Lighting
International, Inc.**
10.3 Plan and Agreement of Merger Among H&F Four, Inc., VLI Partners II, Inc.
and Venture Lighting International, Inc., effective as of October 6,
1995**
10.4 Plan and Agreement of Merger With of H&F Six, Inc., H&F Seven, Inc., H&F
Eight, Inc., H&F Nine, Inc., H&F Twelve, Inc., H&F Thirteen, Inc., H&F
Fourteen, Inc., H&F Fifteen, Inc. and H&F Sixteen, Inc. and Into Advanced
Lighting Technologies, Inc., effective as of October 6, 1995**
10.5 Plan and Agreement for Exchange of Stock Among Advanced Lighting
Technologies, Inc. and Shareholders of Metal Halide Technologies, Inc.,
effective as of October 10, 1995**
10.6 Plan and Agreement for Exchange of Stock Among Advanced Lighting
Technologies, Inc. and Shareholders of Microsun Technologies, Inc.,
effective as of October 10, 1995**
10.7 Plan and Agreement of Merger of VLI Partners II, Inc. With and Into
Advanced Lighting Technologies, Inc., effective as of October 10, 1995, as
amended**
10.8 Plan and Agreement of H&F One, Inc. With and Into Advanced Lighting
Technologies, Inc., effective as of October 10, 1995, as amended**
10.9 Form of Plan and Agreement for Exchange of Stock Among Advanced Lighting
Technologies, Inc. and Individual Shareholders of APL Engineered
Materials, Inc., effective as of October 10, 1995**
10.10 Form of Preferred Stock Redemption Agreement between VLI Partners II, Inc.
and its preferred shareholders (all are substantially the same except the
number of shares being redeemed and the total redemption price)**
10.11 Agreement to Repay, dated October 5, 1995 with GE**
10.12 Bill of Sale dated September 15, 1995 from APL Engineered Materials, Inc.
to H&F Five, Inc.**
10.13 Letter Agreement between Greyrock Financial Group and APL Engineered
Materials, Inc. dated October 10, 1995**
10.14 Lease Agreement dated January 1, 1993, by and between Weston, Inc. and
Venture Lighting International, Inc.**
10.15 Amended Lease Agreement dated September 30, 1992, by and between LR
Properties and Lighting Resources International, Inc.**
10.16 Employment Agreement dated October 6, 1995, by and between the Company and
Wayne R. Hellman**
10.17 Employment Agreement dated October 6, 1995, by and between the Company and
Louis S. Fisi**
10.18 Settlement Agreement, Covenant Not To Sue and Mutual Release**
</TABLE>
<PAGE> 105
<TABLE>
<CAPTION>
PAGE NUMBER
IN
SEQUENTIAL
NUMBERING
EXHIBIT SYSTEM
- ------- -----------
<S> <C> <C>
10.19 Aircraft Lease Agreement between LightAir, Ltd., an Ohio limited liability
company, of which Wayne R. Hellman owns 80% of the membership interests
and Louis S. Fisi owns 20% of the membership interests, and Levetz
Investments, Inc., an unrelated corporation engaged in the business of
chartering aircraft and otherwise providing general aviation services
("Levetz Investments"), dated as of January 22, 1996. (Form 10-Q Exhibit
10.1)***
10.20 Aircraft Operating Agreement between Levetz Investments and Venture
Lighting International, Inc., a wholly-owned subsidiary of the Company,
dated as of January 22, 1996. (Form 10-Q Exhibit 10.2)***
10.21 Aircraft Operating Agreement between Levetz Investments and APL Engineered
Materials, Inc., a wholly-owned subsidiary of the Company, dated as of
January 22, 1996. (Form 10-Q Exhibit 10.3)***
10.22 Asset Purchase Agreement between Current Industries, Inc., Metal Halide
Controls, Inc. and Advanced Lighting Technologies, Inc. dated January 26,
1996. (Form 10-Q Exhibit 10.1)****
10.23 Letter Agreement between Venture Lighting International, Inc. and the Bank
of Nova Scotia dated March 11, 1996 regarding the purchase of capital
stock and certain indebtedness of Spectro Electric, Inc. (Form 10-Q
Exhibit 10.2)****
10.24 Revolving Credit and Security Agreement between the Company and BNY
Financial Corporation dated March 25, 1996. (Form 10-Q Exhibit 10.3)****
11.1 Statement regarding Computation of Per Share Earnings.
21.0 List of subsidiaries, states of organization**
23.1 Consent of Ernst & Young LLP
23.2 Consent of Cowden, Humphrey & Sarlson -- See Exhibit 5.1
23.3 Consent of Ulmer & Berne P.L.L. -- See Exhibit 5.2
23.4 Consent of Doane Raymond
24.1 Powers of Attorney*
</TABLE>
- ---------------
* To be filed by amendment.
** Incorporated by Reference to Exhibit of same number in Company's
Registration Statement on Form S-1, Registration No. 33-97902, Effective
December 11, 1995.
*** Incorporated by reference to referenced Exhibit in Company's Quarterly
Report on Form 10-Q for the Quarterly Period ended December 31, 1995.
****Incorporated by reference to referenced Exhibit in Company's Quarterly
Report on Form 10-Q for the Quarterly Period ended March 31, 1996.
<PAGE> 1
ADVANCED LIGHTING TECHNOLOGIES, INC.
3,300,000 Shares1
Common Stock
UNDERWRITING AGREEMENT
----------------------
June ___, 1996
PRUDENTIAL SECURITIES INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.
As Representatives of the several Underwriters
c/o Prudential Securities Incorporated
One Seaport Plaza
New York, New York 10292
Dear Sirs:
Advanced Lighting Technologies, Inc., an Ohio corporation (the
"Company"), and the selling securityholders named in Schedule 2 hereto (each a
"Selling Securityholder" and together the "Selling Securityholders"), hereby
confirm their agreement with the several underwriters named in Schedule 1 hereto
(the "Underwriters"), for whom you have been duly authorized to act as
representatives (in such capacities, the "Representatives"), as set forth below.
If you are the only Underwriters, all references herein to the Representatives
shall be deemed to be to the Underwriters.
1. SECURITIES. Subject to the terms and conditions herein contained,
the Company and the Selling Securityholders propose to sell to the several
Underwriters an aggregate of 3,300,000 shares (the "Firm Securities") of the
Company's Common Stock, par value $0.001 per share ("Common Stock") of which
2,400,000 shares will be issued and sold by the Company (the "Company's Firm
Securities") and 900,000 shares will be sold by the Selling Securityholders (the
"Selling Securityholders' Firm Securities"). Of the Selling Securityholders'
Firm Securities, each Selling Securityholder will sell the number of shares
listed opposite its name on Schedule 2
- --------
1 Plus an option to purchase from Advanced Lighting Technologies, Inc.
up to 495,000 additional shares to cover over-allotments.
<PAGE> 2
hereto. The Company also proposes to issue and sell to the several Underwriters
not more than 495,000 additional shares of Common Stock if requested by the
Underwriters as provided in Section 3 of this Agreement. Any and all shares of
Common Stock to be purchased by the Underwriters pursuant to such option are
referred to herein as the "Option Securities", and the Firm Securities and any
Option Securities are collectively referred to herein as the "Securities."
2. Representations and Warranties of the Company and the
-----------------------------------------------------
Selling Securityholders.
------------------------
(a) The Company and the Selling Securityholders identified in Schedule
2 hereto as Group 1 Selling Securityholders (collectively, the "Group 1 Selling
Securityholders"), jointly and severally, represent and warrant to, and agree
with, each of the several Underwriters that:
(i) A registration statement on Form S-1 (File No.
333-_______) with respect to the Securities, including a prospectus
subject to completion, has been filed by the Company with the
Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), and one or more
amendments to such registration statement may have been so filed. After
the execution of this Agreement, the Company will file with the
Commission either (A) if such registration statement, as it may have
been amended, has been declared by the Commission to be effective under
the Act, either (1) if the Company relies on Rule 434 under the Act, a
Term Sheet (as hereinafter defined) relating to the Securities, that
shall identify the Preliminary Prospectus (as hereinafter defined) that
it supplements containing such information as is required or permitted
by Rules 434, 430A and 424(b) under the Act or (2) if the Company does
not rely on Rule 434 under the Act, a prospectus in the form most
recently included in an amendment to such registration statement (or,
if no such amendment shall have been filed, in such registration
statement), with such changes or insertions as are required by Rule
430A under the Act or permitted by Rule 424(b) under the Act, and in
the case of either clause (i)(A) or (i)(B) of this sentence as have
been provided to and approved by the Representatives prior to the
execution of this Agreement, or (B) if such registration statement, as
it may have been amended, has not been declared by the Commission to be
effective under the Act, an amendment to such registration statement,
including a form of prospectus, a copy of which amendment has been
furnished to and approved by the Representatives prior to the execution
of this Agreement. The Company may also file a related registration
statement with the Commission pursuant to Rule 462(b) under the Act for
the purpose of registering certain additional Securities, which
registration shall be effective upon filing with the Commission. As
used in this Agreement, the term "Original Registration Statement"
means the registration statement initially filed relating to the
Securities, as amended at the time when it was or is declared
effective, including (A) all financial schedules and exhibits thereto,
(B) all documents incorporated by reference therein filed under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and
(C) any information omitted therefrom pursuant to Rule 430A under the
Act and included in the Prospectus (as hereinafter defined); the term
"Rule 462(b) Registration Statement" means any registration statement
filed with the Commission pursuant to Rule
2
<PAGE> 3
462(b) (including the Original Registration Statement and any
Preliminary Prospectus or Prospectus incorporated therein at the time
such Registration Statement becomes effective); the term "Registration
Statement" includes both the Original Registration Statement and any
Rule 462(b) Registration Statement; the term "Preliminary Prospectus"
means each prospectus subject to completion filed with the Original
Registration Statement or any amendment thereto (including the
prospectus subject to completion, if any, included in the Registration
Statement or any amendment thereto at the time it was or is declared
effective), including all documents incorporated by referenced therein
filed under the Exchange Act; the term "Prospectus" means:
(A) if the Company relies on Rule 434 under the
Act, the Term Sheet relating to the Securities that is first
filed pursuant to Rule 424(b)(7) under the Act, together with
the Preliminary Prospectus identified therein that such Term
Sheet supplements;
(B) if the Company does not rely on Rule 434 under
the Act, the prospectus first filed with the Commission
pursuant to Rule 424(b) under the Act; or
(C) if the Company does not rely on Rule 434 under
the Act and if no prospectus is required to be filed pursuant
to Rule 424(b) under the Act, the prospectus included in the
Registration Statement,
including, in the case of the immediately foregoing clause (A), (B) or
(C) of this sentence, all documents incorporated by reference therein
filed under the Exchange Act. The term "Term Sheet" means any
abbreviated Term Sheet that satisfies the requirements of Rule 434
under the Act. Any reference in this Agreement to an "amendment or
supplement" to any Preliminary Prospectus, the Prospectus or any
Integrated Prospectus or an "amendment" to any registration statement
(including the Registration Statement) shall be deemed to include any
document incorporated by reference therein that is filed with the
Commission under the Exchange Act after the date of such Preliminary
Prospectus, Prospectus, any Integrated Prospectus, or registration
statement, as the case may be; any reference herein to the "date" of a
Prospectus that includes a Term Sheet shall mean the date of such Term
Sheet. For purposes of the preceding sentence, any reference to the
"effective date" of an amendment to a registration statement shall, if
such amendment is effected by means of the filing with the Commission
under the Exchange Act of a document incorporated by reference in such
registration statement, be deemed to refer to the date on which such
document was filed with the Commission.
(ii) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. When any Preliminary
Prospectus was filed with the Commission it (A) contained all
statements required to be stated therein in accordance with, and
complied in all material respects with the requirements of, the Act and
the rules
3
<PAGE> 4
and regulations of the Commission thereunder, and (B) did not include
any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. When the
Registration Statement or any amendment thereto was or is declared
effective, it (A) contained or will contain all statements required to
be stated therein in accordance with, and complied or will comply in
all material respects with the requirements of, the Act and the rules
and regulations of the Commission thereunder and (B) did not or will
not include any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not
misleading. When the Prospectus or, any Term Sheet that is a part
thereof or any amendment or supplement to the Prospectus is filed with
the Commission pursuant to Rule 424(b) (or, if the Prospectus or part
thereof or such amendment or supplement is not required to be so filed,
when the Registration Statement or the amendment thereto containing
such amendment or supplement to the Prospectus was or is declared
effective) and on the Firm Closing Date and any Option Closing Date
(both as hereinafter defined), the Prospectus, as amended or
supplemented at any such time, (A) contained or will contain all
statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements
of, the Act and the rules and regulations of the Commission thereunder
and (B) did not or will not include any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. The foregoing provisions of this paragraph
(b) do not apply to statements or omissions made in any Preliminary
Prospectus, the Registration Statement or any amendment thereto or the
Prospectus or any amendment or supplement thereto in reliance upon and
in conformity with written information furnished to the Company by any
Underwriter through the Representatives specifically for use therein.
(iii) If the Company has elected to rely on Rule 462(b) and
the Rule 462(b) Registration Statement has not been declared effective
(i) the Company has filed a Rule 462(b) Registration Statement in
compliance with and that is effective upon filing pursuant to Rule
462(b) and has received confirmation of its receipt and (ii) the
Company has given irrevocable instructions for transmission of the
applicable filing fee in connection with the filing of the Rule 462(b)
Registration Statement, in compliance with Rule 111 promulgated under
the Act or the Commission has received payment of such filing fee.
(iv) The Company and each of its subsidiaries (other than
Venture Lighting International, Ltd.) have been duly organized and are
validly existing as corporations in good standing under the laws of
their respective jurisdictions of incorporation and are duly qualified
to transact business as foreign corporations and are in good standing
under the laws of all other jurisdictions where the ownership or
leasing of their respective properties or the conduct of their
respective businesses requires such qualification, except where the
failure to be so qualified does not amount to a material liability or
disability to the Company and its subsidiaries, taken as a whole.
Venture Lighting International, Ltd. is
4
<PAGE> 5
duly organized and is validly existing as a corporation under the laws
of the England and is duly qualified to transact business as a foreign
corporation under the laws of all other jurisdictions where the
ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so
qualified does not amount to a material liability or disability to the
Company and its subsidiaries, taken as a whole.
(v) The Company and each of its subsidiaries have full power
(corporate and other) to own or lease their respective properties and
conduct their respective businesses as described in the Registration
Statement and the Prospectus or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus; and the Company has full power
(corporate and other) to enter into this Agreement and to carry out all
the terms and provisions hereof to be carried out by it.
(vi) The issued shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued,
are fully paid and nonassessable and are owned beneficially by the
Company, except for the shares of Venture Lighting International, Ltd.
and Pacific Lighting, Inc. not owned by the Company, free and clear of
any security interests, liens, encumbrances, equities or claims.
(vii) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus. All of the
issued shares of capital stock of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. The Company's
Firm Securities and the Option Securities have been duly authorized and
at the Firm Closing Date or Option Closing Date, after payment therefor
in accordance herewith, will be validly issued, fully paid and
nonassessable. No holders of outstanding shares of capital stock of the
Company are entitled as such to any preemptive or other rights to
subscribe for any of the Securities, and no holder of securities of the
Company has any right which has not been fully exercised or waived to
require the Company to register the offer or sale of any securities
owned by such holder under the Act in the public offering contemplated
by this Agreement.
(viii) The capital stock of the Company conforms to the
description thereof contained in the Prospectus or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus.
(ix) The combined financial statements and schedules of the
Company and its subsidiaries included in the Registration Statement and
the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus) fairly present the financial position of
the Company and the results of operations and cash flows as of the
dates and periods therein specified. Such financial statements and
schedules have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved (except as otherwise noted therein). The selected
5
<PAGE> 6
financial data set forth under the caption "Selected Financial Data" in
the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus) fairly present, on the basis stated in
the Prospectus (or such Preliminary Prospectus), the information
included therein.
(x) Ernst & Young LLP and Doane Raymond, who have audited
certain financial statements of the Company and delivered their report
with respect to the audited combined financial statements and schedules
included in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus), are independent public accountants as required by the Act
and the applicable rules and regulations thereunder.
(xi) The execution and delivery of this Agreement have been
duly authorized by the Company, and this Agreement has been duly
executed and delivered by the Company and is the valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms except that rights to contribution or indemnity may be
limited by applicable law and the enforceability of this Agreement may
be limited by bankruptcy, insolvency or similar laws affecting the
rights of creditors and by equitable principles limited by the right to
specific performance or equitable relief.
(xii) No legal or governmental proceedings are pending to
which the Company or any of its subsidiaries is a party or to which the
property of the Company or any of its subsidiaries is subject that are
required to be described in the Registration Statement or the
Prospectus and are not described therein (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus), and, except as
described in the Registration Statement or the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus)
no such proceedings to the knowledge of the Company or any of its
subsidiaries have been threatened against the Company, any of its
subsidiaries or with respect to any of their respective properties; no
contract or other document is required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit
to the Registration Statement that is not described therein (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus)
or filed as required.
(xiii) The issuance, offering and sale of the Company's Firm
Securities to the Underwriters by the Company pursuant to this
Agreement, the compliance by the Company with the other provisions of
this Agreement and the consummation of the other transactions herein
contemplated do not (A) require the consent, approval, authorization,
registration or qualification of or with any governmental authority,
except such as have been obtained, such as may be required under state
securities or blue sky laws and, if the registration statement filed
with respect to the Securities (as amended) is not effective under the
Act as of the time of the execution hereof, such as may be required
(and shall be obtained as provided in this Agreement) under the Act, or
(B) conflict with or result in a
6
<PAGE> 7
breach or violation of any terms and provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, lease or other
agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or any of
their respective properties are bound, or the charter documents or code
of regulations of the Company or any of its subsidiaries, or any
statute or any judgment, decree, order, rule or regulation of any court
or other governmental authority or any arbitrator applicable to the
Company or any of its subsidiaries.
(xiv) The Company has not, directly or indirectly, (A) taken
any action designed to cause or to result in, or that has constituted
or which might reasonably be expected to constitute, the stabilization
or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or (B) since the filing
of the Registration Statement (I) sold, bid for, purchased, or paid
anyone any compensation for soliciting purchases of, the Securities or
(II) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.
(xv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus), (A) neither the Company nor any of its subsidiaries has
sustained any material loss or interference with their respective
businesses or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor
dispute or any legal or governmental proceeding and there has not been
any material adverse change, or any development involving a prospective
material adverse change, in the condition (financial or otherwise),
management, business prospects, net worth, or results of operations of
the Company or any of its subsidiaries; (B) the Company and its
subsidiaries have not incurred any material liability or obligation,
direct or contingent, nor entered into any material transaction not in
the ordinary course of business; (C) the Company has not purchased any
of its outstanding capital stock, nor declared, paid or otherwise made
any dividend or distribution of any kind on its capital stock; and (D)
there has not been any material change in the capital stock, short-term
debt or long-term debt of the Company and its consolidated
subsidiaries, except in each case as described in or contemplated by
the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus).
(xvi) The Company and each of its subsidiaries have good and
marketable title in fee simple to all items or real property and
marketable title to all personal property owned by each of them, in
each case free and clear of any security interests, liens,
encumbrances, equities, claims and other defects, except such as do not
materially and adversely affect the value of such property and do not
interfere with the use made or proposed to be made of such property by
the Company or such subsidiary, and any real property and buildings
held under lease by the Company or any such subsidiary are held under
valid, subsisting and enforceable leases, with such exceptions as are
not material and do not interfere with the use made or proposed to be
made of such property and buildings
7
<PAGE> 8
by the Company or such subsidiary, in each case except as described in
or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(xvii) No labor dispute with the employees of the Company or
any of its subsidiaries exists or is threatened or imminent that could
result in a material adverse change in the condition (financial or
otherwise), business prospects, net worth or results of operations of
the Company and its subsidiaries taken as a whole, except as described
in or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(xviii) The Company and its subsidiaries own or possess, or
can acquire on reasonable terms, all material patents, patent
applications, trademarks, service marks, trade names, licenses,
copyrights and proprietary or other confidential information currently
employed by them in connection with their respective businesses, and
neither the Company nor any such subsidiary has received any notice of,
or has any reasonable belief that its use constitutes, a material
infringement of or conflict with asserted rights of any third party
with respect to any of the foregoing which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
result in a material adverse change in the condition (financial or
otherwise), business prospects, net worth or results of operations of
the Company and its subsidiaries, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(xix) The Company and each of its subsidiaries is insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; neither the Company nor any such
subsidiary has been refused any insurance coverage sought or applied
for; and neither the Company nor any such subsidiary has any reason to
believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the
condition (financial or otherwise), business prospects, net worth, or
results of operations of the Company and its subsidiaries taken as a
whole, except as described in or contemplated by the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary
Prospectus).
(xx) No subsidiary of the Company is currently prohibited
pursuant to an agreement, directly or indirectly, from paying any
dividends to the Company, from making any other distribution on such
subsidiary's capital stock, from repaying to the Company any loans or
advances to such subsidiary from the Company or from transferring any
of such subsidiary's property or assets to the Company or any other
subsidiary of the Company, except as described in or contemplated by
the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus).
8
<PAGE> 9
(xxi) The Company and its subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct
their respective businesses, and neither the Company nor any such
subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a material
adverse change in the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company and its
subsidiaries, except as described in or contemplated by the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus).
(xxii) The Company will conduct its operations in a manner
that will not subject it to registration as an investment company under
the Investment Company Act of 1940, as amended, and this transaction
will not cause the Company to become an investment company subject to
registration under such Act.
(xxiii) The Company and its subsidiaries (and each
Predecessor, as that term is defined in the Prospectus) have filed all
foreign, federal, state and local tax returns that are required to be
filed or have requested extensions thereof (except in any case in which
the failure so to file would not have a material adverse effect on the
Company and its subsidiaries taken as a whole) and have paid all taxes
required to be paid by them and any other assessment, fine or penalty
levied against them, to the extent that any of the foregoing is due and
payable, except for any such assessment, fine or penalty that is
currently being contested in good faith or as described in or
contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(xxiv) Neither the Company nor any of its subsidiaries is in
violation of any federal or state law or regulation relating to (i)
the environment or hazardous or toxic substances or wastes, pollutants
or contaminants or to the storage, handling or transportation of
hazardous or toxic material ("Environmental Laws") or (ii) to
occupational safety and health and the Company and its subsidiaries
have received all permits, licenses or other approvals required of
them under applicable federal and state occupational safety and health
and Environmental Laws and regulations to conduct their respective
businesses, and the Company and each such subsidiary is in compliance
with all terms and conditions of any such permit, license or approval,
except any such violation of law or regulation, failure to receive
required permits, licenses or other approvals or failure to comply
with the terms and conditions of such permits, licenses or approvals
which would not, singly or in the aggregate, result in a material
adverse change in the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company and its
subsidiaries, except as described in or contemplated by the Prospectus
(or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus). Neither
9
<PAGE> 10
the Company nor any of its subsidiaries have any pending or threatened
Environmental Law or occupational safety and health claims against it
nor are there circumstances with respect to any property or operations
of the Company or its subsidiaries that could reasonably be anticipated
to form the basis of an Environmental Law or occupational safety and
health claim against the company or any of its subsidiaries which,
singly or in the aggregate, result in a material adverse change in the
condition (financial or otherwise), business prospects, net worth or
results of operations of the Company and its subsidiaries, except as
described in or contemplated by the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus).
(xxv) In the ordinary course of its business, the Company
conducts a periodic review of the effect of Environmental Laws on the
business, operations and properties of the Company and its
subsidiaries, in the course of which it identifies and evaluates
associated costs and liabilities (including, without limitation, any
capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws or any permit, license
or approval, any related constraints on operating activities and any
potential liabilities to third parties). On the basis of such review,
the Company has reasonably concluded that such associated costs and
liabilities would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(xxvi) Each certificate signed by any officer of the Company
and delivered to the Representatives or counsel for the Underwriters
pursuant to Section 7(h) or 7(m), if any, or Section 7(l) hereof shall
be deemed to be a representation and warranty by the Company to each
Underwriter as to the matters covered thereby.
(xxvii) Except for the shares of capital stock of each of the
subsidiaries owned by the Company and such subsidiaries, neither the
Company nor any such subsidiary owns any shares of stock or any other
equity securities of any corporation or has any equity interest in any
firm, partnership, association or other entity, except as described in
or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(xxviii) The Company and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (A) transactions are executed in accordance with
management's general or specific authorizations; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (C) access to assets is permitted only
in accordance with management's general or specific authorization; and
(D) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
10
<PAGE> 11
(xxix) No default exists, and no event has occurred which,
with notice or lapse of time or both, would constitute a default in the
due performance and observance of any term, covenant or condition of
any indenture, mortgage, deed of trust, lease or other material
agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or any of
their respective properties is bound or may be affected in any material
adverse respect with regard to property, business or operations of the
Company and its subsidiaries taken as a whole.
(xxx) All offers and sales of the Company's capital stock
prior to the date hereof, including the offer and sale of 7,281,839
shares of Common Stock in connection with the Combination (as such term
is defined in the Prospectus or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus), were at all relevant times
exempt from the registration requirements of the Act, and were the
subject of an available exemption from the registration requirements of
all applicable state securities or blue sky laws; and the letter to the
preferred shareholders of VLI Partners II, Inc. dated August 14, 1995
(the "Investor Letter") delivered to potential investors in connection
with the Combination, did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(xxxi) The Ammons Preferred Stock Redemption Agreement dated
as of August 15, 1995, the Smith Preferred Stock Redemption Agreement
dated as of August 16, 1995, the Ludwig Preferred Stock Redemption
Agreement dated as of August 17, 1995, the Schaffer Preferred Stock
Redemption Agreement dated as of August 25, 1995, the Sievila Preferred
Stock Redemption Agreement dated as of August 28, 1995, the Rapaport
Preferred Stock Redemption Agreements dated as of August 16, 1995, the
Linda Schwartz Preferred Stock Redemption Agreement dated as of August
15, 1995, the Erin Schwartz Preferred Stock Redemption Agreement dated
as of August 15, 1995, the Jessica Schwartz Preferred Stock Redemption
Agreement dated as of August 18, 1995, the Ayers Preferred Stock
Redemption Agreement dated as of August 18, 1995, the Susan Yaroma
Preferred Stock Redemption Agreement dated as of August 18, 1995, the
Robert Yaroma Preferred Stock Redemption Agreement dated as of August
18, 1995 and the Wipper Preferred Stock Redemption Agreement dated as
of August 28, 1995, to which certain predecessors of the Company are a
party (the "Redemption Agreement"), and the Voting Trust Agreement,
effective as of October 10, 1995, have each been duly authorized,
executed and delivered by the Company or its predecessors and each of
the agreements providing for a transaction that is part of the
Combination has been duly authorized, executed and delivered by the
Company or the Company's subsidiaries; each of the above-listed
documents constitutes the valid and legally binding obligation of each
of the other parties thereto, and are enforceable in accordance with
their terms; there are no statutory or contractual rights of dissent or
appraisal with respect to the transfer of any of the properties in the
Combination; and the Combination was effective on October 6 and 10,
1995 and conformed to the description thereof contained in the Investor
Letter.
11
<PAGE> 12
(xxxii) The Company has complied with all provisions of
Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida) to
the extent such provisions are applicable to the Company.
(xxxiii) Except as disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus), there are no outstanding (A) securities or obligations of
the Company or any of its subsidiaries convertible into or exchangeable
for any capital stock of the Company or any such subsidiary, (B)
warrants, rights or options to subscribe for or purchase from the
Company or any such subsidiary any such capital stock or any such
convertible or exchangeable securities or obligations, or (C)
obligations of the Company or any such subsidiary to issue any shares
of capital stock, any such convertible or exchangeable securities or
obligations, or any such warrants, rights or options.
(xxxiv) The Company has not distributed and, prior to the
later of (A) the Firm Closing Date and (B) the completion of the
distribution of the Securities, will not distribute any offering
material in connection with the offering and sale of the Securities
other than the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any supplement or amendment
thereto, or any materials, if any permitted by the Act.
(b) The Selling Securityholders identified in Schedule 2 hereto as
Group 2 Selling Securityholders (collectively, the "Group 2 Selling
Securityholders") severally and not jointly represent and warrant to, and agree
with, each of the several Underwriters that the Preliminary Prospectus, the
Registration Statement, the Prospectus, and any amendments or supplements
thereto, when they become effective or are filed with the Commission, as the
case may be, did and will conform in all material respects to the requirements
of the Act, the Exchange Act and the respective rules and regulations of the
Commission thereunder and will not contain 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 the light of the circumstances
under which they are made, not misleading. Each Group 2 Selling Securityholder
has reviewed the Prospectus or if the Prospectus is not in existence, the most
recent Preliminary Prospectus, and the Registration Statement, and the
information regarding such Group 2 Selling Securityholder set forth therein
under the caption "Principal and Selling Shareholders" is complete and accurate
in all material respects.
(c) The Selling Securityholders identified in Schedule 2 hereto as
Group 3 Selling Securityholders (collectively, the "Group 3 Selling
Securityholders") severally and not jointly represent and warrant to, and agree
with, each of the several Underwriters that, to the extent that any statements
or omissions are made in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by such Group 3
Selling Securityholder specifically
12
<PAGE> 13
for use therein, such information in the Preliminary Prospectus, the
Registration Statement, the Prospectus, and any amendments or supplements
thereto, when they become effective or are filed with the Commission, as the
case may be, did and will conform in all material respects to the requirements
of the Act, the Exchange Act and the respective rules and regulations of the
Commission thereunder and will not contain 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 the light of the circumstances
under which they are made, not misleading. Each Group 3 Selling Securityholder
has reviewed the Prospectus or if the Prospectus is not in existence, the most
recent Preliminary Prospectus, and the Registration Statement, and the
information regarding such Group 3 Selling Securityholder set forth therein
under the caption "Principal and Selling Shareholders" is complete and accurate
in all material respects.
(d) Each Selling Securityholder severally represents and warrants to,
and agrees with, each of the several Underwriters that:
(i) Such Selling Securityholder has full power (partnership,
trust and other) to enter into this Agreement and to sell, assign,
transfer and deliver to the Underwriters the Securities to be sold by
such Selling Securityholder hereunder in accordance with the terms of
this Agreement; the execution and delivery of this Agreement have been
duly authorized by all necessary actions of such Selling Securityholder
(partnership, trust or other, as applicable); and this Agreement has
been duly executed and delivered by such Selling Securityholder.
(ii) Such Selling Securityholder has duly executed and
delivered a power of attorney and custody agreement (with respect to
such Selling Securityholder, the "Power of Attorney" and the "Custody
Agreement," respectively), each in the form heretofore delivered to the
Representatives, appointing Wayne R. Hellman as such Selling
Securityholder's attorney-in-fact (the "Attorney-in-Fact") with
authority to execute, deliver and perform this Agreement on behalf of
such Selling Securityholder and appointing American Stock Transfer &
Trust Company, as custodian thereunder (the "Custodian"). Certificates
in negotiable form, endorsed in blank or accompanied by blank stock
powers duly executed, with signatures appropriately guaranteed,
representing the Securities to be sold by such Selling Securityholder
hereunder have been deposited with the Custodian pursuant to the
Custody Agreement for the purpose of delivery pursuant to this
Agreement. Such Selling Securityholder has full power (partnership,
trust or other, as applicable) to enter into the Custody Agreement and
the Power of Attorney and to perform his obligations under the Custody
Agreement. The Custody Agreement and the Power of Attorney have been
duly executed and delivered by such Selling Securityholder and,
assuming due authorization, execution and delivery by the Custodian,
are the legal, valid, binding and enforceable instruments of such
Selling Securityholder. Such Selling Securityholder agrees that each of
the Securities represented by the certificates on deposit with the
Custodian is subject to the interests of the Underwriters hereunder,
that the arrangements made for such custody, the appointment of the
Attorney-in-Fact and the
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<PAGE> 14
right, power and authority of the Attorney-in-Fact to execute and
deliver this Agreement, to agree on the price at which the Securities
(including such Selling Securityholder's Securities) are to be sold to
the Underwriters, and to carry out the terms of this Agreement, are to
that extent irrevocable and that the obligations of such Selling
Securityholder hereunder shall not be terminated, except as provided in
this Agreement or the Custody Agreement, by any act of such Selling
Securityholder, by operation of law or otherwise, whether in the case
of any individual Selling Securityholder by the death or incapacity of
such Selling Securityholder, 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
Selling Securityholder by its liquidation or dissolution or by the
occurrence of any other event. If any individual Selling
Securityholder, trustee or executor should die or become incapacitated
or any such trust should be terminated, or if any corporate or
partnership Selling Securityholder shall liquidate or dissolve, or if
any other event should occur, before the delivery of such Securities
hereunder, the certificates for such Securities deposited with the
Custodian shall be delivered by the Custodian in accordance with the
respective terms and conditions of this Agreement as if such death,
incapacity, termination, liquidation or dissolution or other event had
not occurred, regardless of whether or not the Custodian or the
Attorney-in-Fact shall have received notice thereof.
(iii) Such Selling Securityholder is the lawful owner of the
Securities to be sold by such Selling Securityholder hereunder and upon
sale and delivery of, and payment for, such Securities, as provided
herein, such Selling Securityholder will convey good and valid title to
such Securities, free and clear of any security interests, liens,
encumbrances, equities, claims or other defects.
(iv) Such Selling Securityholder has not, directly or
indirectly, (A) taken any action designed to cause or result in, or
that has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Securities or (B) since the filing of the Registration Statement (I)
sold, bid for, purchased, or paid anyone any compensation for
soliciting purchases of, the Securities or (II) paid or agreed to pay
to any person any compensation for soliciting another to purchase any
other securities of the Company (except for the sale of Securities by
the Selling Securityholders under this Agreement).
(v) Such Selling Securityholder has reviewed the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) and the Registration Statement, and the information
regarding such Selling Securityholder set forth therein under the
captions "Management," "Principal and Selling Shareholders" and
"Certain Transactions" is complete and accurate.
(vi) The Selling Securityholders have not distributed and,
prior to the later of (A) the Firm Closing Date and (B) the completion
of the distribution of the Securities,
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<PAGE> 15
will not distribute any offering material in connection with the
offering and sale of the Securities other than the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any supplement or amendment thereto, or any materials, if
any permitted by the Act.
(vii) In order to document the Underwriters' compliance with
the reporting and withholding provisions of the Internal Revenue Code
of 1986, as amended, with respect to the transactions herein
contemplated, such Selling Securityholder agrees to deliver to the
Representatives prior to or on the Firm Closing Date a properly
completed and executed United States Treasury Department Form W-8 or
W-9 (or other applicable form or statement specified by the Treasury
Department regulations in lieu thereof).
(viii) The sale by such Selling Securityholder of Securities
pursuant hereto is not prompted by any adverse information concerning
the Company that is not set forth in the Registration Statement or the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(ix) The sale of the Securities to the Underwriters by such
Selling Securityholder pursuant to this Agreement, the compliance by
such Selling Securityholder with the other provisions of this Agreement
and the Custody Agreement and the consummation of the other
transactions herein contemplated do not (A) require the consent,
approval, authorization, registration or qualification of or with any
governmental authority, except such as has been obtained, such as the
registration under state securities or blue sky laws and, if the
registration statement filed with respect to the Securities (as
amended) is not effective under the Act as of the time of execution
hereof, such as may be required (and shall be obtained as provided in
this Agreement) under the Act and the Exchange Act, or (B) conflict
with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under any indenture, mortgage,
deed of trust, lease or other agreement or instrument to which such
Selling Securityholder is a party or by which such Selling
Securityholder or any of such Selling Securityholder's properties are
bound, or any statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority or any
arbitrator applicable to such Selling Securityholder.
3. Purchase, Sale and Delivery of the Securities.
---------------------------------------------
(a) On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and conditions herein set
forth, the Company agrees to issue and sell to, and each of the Selling
Securityholders agrees to sell to, each of the Underwriters, and each of the
Underwriters, severally and not jointly, agrees to purchase from the Company and
the Selling Securityholders at a purchase price of $______ per share, the number
of Firm Securities set forth opposite the name of such Underwriter in Schedule 1
hereto. The Company's Firm Securities shall consist of 2,400,000 shares of
Common Stock and the Selling Securityholders' Firm Securities shall consist of
900,000 shares of Common Stock. The number of Firm Securities
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<PAGE> 16
to be purchased by each Underwriter from the Company and each Selling
Securityholder shall be as nearly as practicable in the same proportion to the
total number of Firm Securities being sold by each of the Company and each
Selling Securityholder as the total number of Firm Securities to be purchased by
such Underwriter bears to the total number of Firm Securities to be purchased by
the Underwriters hereunder. The obligations of the Company and of each of the
Selling Securityholders shall be several and not joint. One or more certificates
in definitive form for the Firm Securities that the several Underwriters have
agreed to purchase hereunder, and in such denomination or denominations and
registered in such name or names as the Representatives request upon notice to
the Company and the Selling Securityholders at least 48 hours prior to the Firm
Closing Date, shall be delivered by or on behalf of the Company and the Selling
Securityholders to the Representatives for the respective accounts of the
Underwriters, against payment by or on behalf of the Underwriters of the
purchase price therefor by certified or official bank check or checks drawn upon
or by a New York Clearing House bank and payable in same-day funds (the "Wired
Funds") to the order of the Custodian. Such delivery of and payment for the Firm
Securities shall be made at the offices of Ulmer & Berne P.P.L., 1300 East Ninth
Street, Suite 900, Cleveland Ohio 44114 at 9:30 A.M., Cleveland time, on
___________, 1996; or at such other place, time or date as the Representatives
and the Company may agree upon or as the Representatives may determine pursuant
to Section 9 hereof, such time and date of delivery against payment being herein
referred to as the "Firm Closing Date." The Company and the Selling
Securityholders will make such certificate or certificates for the Firm
Securities available for checking and packaging by the Representatives at the
offices in New York, New York of the Company's transfer agent or registrar or of
Prudential Securities Incorporated at least 24 hours prior to the Firm Closing
Date.
(b) The Company and each of the Selling Securityholders hereby
acknowledge that the wire transfer by or on behalf of the Underwriters of the
purchase price for any Securities does not constitute closing of a purchase and
sales of the Securities. Only execution and delivery of a receipt for Securities
by the Underwriters indicates completion of the closing of a purchase of the
Securities from the Company and the Selling Securityholders. Furthermore, in the
event that the Underwriters wire funds to the Company and the Selling
Securityholders prior to the completion of the closing of a purchase of the
Securities, the Company and the Selling Securityholders hereby acknowledge that
until the Underwriters execute and deliver a receipt for the Securities, by
facsimile or otherwise, the Company and the Selling Securityholders will not be
entitled to the Wired Funds and shall return the Wired Funds to the Underwriters
as soon as practicable (by wire transfer of same-day funds) upon demand. In the
event that the closing of a purchase of the Securities is not completed and the
Wired Funds are not returned by the Company and the Selling Securityholders to
the Underwriters on the same day the Wired Funds were received by the Company
and the Selling Securityholders, the Company and each of the Selling
Securityholders agree to reimburse the Underwriters for each day the Wired Funds
are not returned, in same-day funds, interest on the amount of Wired Funds in an
amount equal to each day's interest, based on an annual interest rate, simple
interest, representing the Underwriters' cost of financing as reasonably
determined by Prudential Securities Incorporated. Upon satisfactory receipt of
the Securities by the Underwriters in accordance with all the terms of this
Agreement and the
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<PAGE> 17
compliance by the Company and the Selling Securityholders with all the terms of
this Agreement to be performed on or before the Closing Date, the Underwriters
shall execute the receipt described above for the Securities.
(c) For the purpose of covering any over-allotments in connection with
the distribution and sale of the Firm Securities as contemplated by the
Prospectus, the Company hereby grants to the several Underwriters an option to
purchase, severally and not jointly, the Option Securities. The purchase price
to be paid for any Option Securities shall be the same price per share as the
price per share for the Firm Securities set forth above in paragraph (a) of this
Section 3. The option granted hereby may be exercised as to all or any part of
the Option Securities from time to time within thirty days after the date of the
Prospectus (or, if such 30th day shall be a Saturday or Sunday or a holiday, on
the next business day thereafter when the New York Stock Exchange is open for
trading). The Underwriters shall not be under any obligation to purchase any of
the Option Securities prior to the exercise of such option. The Representatives
may from time to time exercise the option granted hereby by giving notice in
writing or by telephone (confirmed in writing) to the Company setting forth the
aggregate number of Option Securities as to which the several Underwriters are
then exercising the option and the date and time for delivery of and payment for
such Option Securities. Any such date of delivery shall be determined by the
Representatives but shall not be earlier than two business days or later than
five business days after such exercise of the option and, in any event, shall
not be earlier than the Firm Closing Date. The time and date set forth in such
notice, or such other time on such other date as the Representatives and the
Company may agree upon or as the Representatives may determine pursuant to
Section 9 hereof, is herein called the "Option Closing Date" with respect to
such Option Securities. Upon exercise of the option as provided herein, the
Company shall become obligated to sell to each of the several Underwriters, and,
subject to the terms and conditions herein set forth, each of the Underwriters
(severally and not jointly) shall become obligated to purchase from the Company,
the same percentage of the total number of the Option Securities as to which the
several Underwriters are then exercising the option as such Underwriter is
obligated to purchase of the aggregate number of Firm Securities, as adjusted by
the Representatives in such manner as they deem advisable to avoid fractional
shares. If the option is exercised as to all or any portion of the Option
Securities, one or more certificates in definitive form for such Option
Securities, and payment therefor, shall be delivered on the related Option
Closing Date in the manner, and upon the terms and conditions, set forth in
paragraph (a) of this Section 3 with respect to the sale of the Firm Securities,
except that reference therein to the Firm Securities and the Firm Closing Date
shall be deemed, for purposes of this paragraph (b), to refer to such Option
Securities and Option Closing Date, respectively.
(d) It is understood that either of you, individually and not as one of
the Representatives, may (but shall not be obligated to) make payment on behalf
of any Underwriter or Underwriters for any of the Securities to be purchased by
such Underwriter or Underwriters. No such payment shall relieve such Underwriter
or Underwriters from any of its or their obligations hereunder.
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<PAGE> 18
4. OFFERING BY THE UNDERWRITERS. Upon your authorization of the release
of the Firm Securities, the several Underwriters propose to offer the Firm
Securities for sale to the public upon the terms set forth in the Prospectus.
5. Covenants of the Company and the Selling Securityholders.
--------------------------------------------------------
(a) The Company covenants and agrees with each of the Underwriters
that:
(i) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of
this Agreement, and any amendments thereto to become effective as
promptly as possible. If required, the Company will file the Prospectus
or any Term Sheet that constitutes a part thereof and any amendment or
supplement thereto with the Commission in the manner and within the
time period required by Rules 434 and 424(b) under the Act. During any
time when a prospectus relating to the Securities is required to be
delivered under the Act, the Company (A) will comply with all
requirements imposed upon it by the Act and the rules and regulations
of the Commission thereunder to the extent necessary to permit the
continuance of sales of or dealings in the Securities in accordance
with the provisions hereof and of the Prospectus, as then amended or
supplemented, and (B) will not file with the Commission the Prospectus,
Term Sheet or the amendment referred to in the second sentence of
Section 2(a)(i) hereof, any amendment or supplement to such Prospectus,
Term Sheet or any amendment to the Registration Statement or any Rule
462(b) Registration Statement of which the Representatives shall not
previously have been advised and furnished with a copy for a reasonable
period of time prior to the proposed filing and as to which filing the
Representatives shall not have given their consent. The Company will
prepare and file with the Commission, in accordance with the rules and
regulations of the Commission, promptly upon request by the
Representatives or counsel for the Underwriters, any amendments to the
Registration Statement or any Rule 462(b) Registration Statement or
amendments or supplements to the Prospectus that may be necessary or
advisable in connection with the distribution of the Securities by the
several Underwriters, and will use its best efforts to cause any such
amendment to the Registration Statement to be declared effective by the
Commission as promptly as possible. The Company will advise the
Representatives, promptly after receiving notice thereof, of the time
when the Registration Statement or any amendment thereto has been filed
or declared effective or the Prospectus or any amendment or supplement
thereto has been filed and will provide evidence satisfactory to the
Representatives of each such filing or effectiveness.
(ii) The Company will advise the Representatives, promptly
after receiving notice or obtaining knowledge thereof, of (A) the
issuance by the Commission of any stop order suspending the
effectiveness of the Original Registration Statement or any 462(b)
Registration Statement or any amendment thereto or any order preventing
or suspending the use of any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, (B) the suspension of the
qualification of the Securities for offering or sale in any
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<PAGE> 19
jurisdiction, (C) the institution, threatening or contemplation of any
proceeding for any such purpose or (D) any request made by the
Commission for amending the Original Registration Statement or any Rule
462(b) Registration Statement, for amending or supplementing the
Prospectus or for additional information. The Company will use its best
efforts to prevent the issuance of any such stop order and, if any such
stop order is issued, to obtain the withdrawal thereof as promptly as
possible.
(iii) The Company will arrange for the qualification of the
Securities for offering and sale under the securities or blue sky laws
of such jurisdictions as the Representatives may designate and will
continue such qualifications in effect for as long as may be necessary
to complete the distribution of the Securities, provided, however, that
in connection therewith the Company shall not be required to qualify as
a foreign corporation or to execute a general consent to service of
process in any jurisdiction.
(iv) If, at any time prior to the later of (A) the final date
when a prospectus relating to the Securities is required to be
delivered under the Act or (B) the Option Closing Date, any event
occurs as a result of which the Prospectus, as then amended or
supplemented, would include any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or if for any other reason it is necessary at any time
to amend or supplement the Prospectus to comply with the Act or the
rules or regulations of the Commission thereunder, the Company will
promptly notify the Representatives thereof and, subject to Section
5(a) hereof, will prepare and file with the Commission, at the
Company's expense, an amendment to the Registration Statement or an
amendment or supplement to the Prospectus that corrects such statement
or omission or effects such compliance.
(v) The Company will, without charge, provide (A) to the
Representatives and to counsel for the Underwriters as many signed
copies of the registration statement originally filed with respect to
the Securities and each amendment thereto and any Rule 462(b)
Registration Statement (in each case including exhibits thereto) as the
Representatives and counsel to the Underwriters may reasonably request,
(B) to each other Underwriter, a conformed copy of such Registration
Statement and any Rule 462(b) Registration Statement and each amendment
thereto (in each case without exhibits thereto) and (C) so long as a
prospectus relating to the Securities is required to be delivered under
the Act, as many copies of each Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto as the
Representatives may reasonably request; without limiting the
application of clause (C) of this sentence, the Company, not later than
(1) 6:00 PM, New York City time, on the date of determination of the
public offering price, if such determination occurred at or prior to
9:00 AM, New York City time, on such date or (2) 2:00 PM, New York City
time, on the business day following the date of determination of the
public offering price, if such determination occurred after 9:00 AM,
New York City time, on such date, will deliver to the Underwriters,
without charge, as
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<PAGE> 20
many copies of the Prospectus and any amendment or supplement thereto
as the Representatives may reasonably request for purposes of
confirming orders that are expected to settle on the Firm Closing Date.
(vi) The Company, as soon as practicable, will make generally
available to its securityholders and to the Representatives a
consolidated earnings statement of the Company and its subsidiaries
that satisfies the provisions of Section 11(a) of the Act and Rule 158
thereunder.
(vii) The Company will apply the net proceeds from the sale of
the Securities as set forth under "Use of Proceeds" in the Prospectus.
(viii) The Company will not, directly or indirectly, without
the prior written consent of Prudential Securities Incorporated, on
behalf of the Underwriters, offer, sell, offer to sell, contract to
sell, pledge, grant any option to purchase or otherwise sell or dispose
(or announce any offer, sale, offer of sale, contract of sale, pledge,
grant of any option to purchase or other sale or disposition) of any
shares of Common Stock or any securities convertible into, or
exchangeable or exercisable for, Common Stock or other stock of the
Company, or any right to purchase or acquire Common Stock or other
capital stock of the Company for a period of 180 days after the date
hereof, except pursuant to this Agreement, and except for issuances
pursuant to the exercise of employee stock options outstanding on the
date hereof.
(ix) The Company will not, directly or indirectly, (A) take
any action designed to cause or to result in, or that has constituted
or which might reasonably be expected to constitute, the stabilization
or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or (B) (I) sell, bid
for, purchase, or pay anyone any compensation for soliciting purchases
of, the Securities or (II) pay or agree to pay to any person any
compensation for soliciting another to purchase any other securities of
the Company.
(x) The Company, during the period when the Prospectus is
required to be delivered under the Act or the Exchange Act, will file
all documents required to be filed with the Commission pursuant to
Section 13, 14 or 15 of the Exchange Act within the time periods
required by the Exchange Act and the rules and regulations thereunder.
(xi) The Company will cause the Firm Securities to be duly
included for quotation on The Nasdaq Stock Market's National Market
(the "Nasdaq Stock Market") prior to the Firm Closing Date. The Company
will ensure that the Securities remain included for quotation on the
Nasdaq Stock Market following the Firm Closing Date.
(xii) During a period of five years from the effective date of
the Registration Statement, the Company will furnish to you and, upon
request, to each of the other
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<PAGE> 21
Underwriters, without charge, (A) copies of all reports or other
communications (financial or other) furnished to securityholders, (B)
as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national
securities exchange, and (C) such additional publicly available
information concerning the business and financial condition of the
Company and its subsidiaries, if any, as you may reasonably request.
(xiii) If at any time during the 25-day period after the
Registration Statement becomes effective or the period prior to the
Option Closing Date, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion
the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or
event necessitates a supplement to or amendment of the Prospectus), the
Company will, after written notice from you advising the Company to the
effect set forth above, to the extent consistent with the Act and the
rules and regulations thereunder, prepare, consult with you concerning
the substance of, and disseminate a press release or other public
statement, reasonably satisfactory to you, responding to or commenting
on such rumor, publication or event.
(xiv) If the Company elects to rely on Rule 462(b), the
Company shall both file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) and pay the applicable fees
in accordance with Rule 111 promulgated under the Act by the earlier of
(i) 10:00 P.M. Eastern time on the date of this Agreement and (ii) the
time confirmations are sent or given, as specified by Rule 462(b)(2).
(xv) The Company will obtain the agreements described in
Section 7(l) hereof prior to the Firm Closing Date.
(b) Each Selling Securityholder covenants and agrees with each of
the Underwriters that:
(i) Such Selling Securityholder will not, directly or
indirectly, (A) take any action designed to cause or to result in, or
that has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Securities or (B) (I) sell, bid for, purchase, or pay anyone any
compensation for soliciting purchases of, the Securities or (II) pay or
agree to pay to any person any compensation for soliciting another to
purchase any other securities of the Company (except for the sale of
Securities by the Selling Securityholder under this Agreement).
(ii) Such Selling Securityholder will not, directly or
indirectly, without the prior written consent of Prudential Securities
Incorporated, on behalf of the Underwriters, offer, sell, offer to
sell, contract to sell, grant any option to purchase or otherwise sell
or dispose (or announce any offer, sale, offer of sale, contract of
sale, grant of any option to
21
<PAGE> 22
purchase or other sale or disposition) of any shares of Common Stock or
any securities convertible into, or exchangeable or exercisable for,
Common Stock or other stock of the Company, or any right to purchase or
acquire Common Stock or other capital stock of the Company for a period
of 180 days after the date hereof, except pursuant to this Agreement.
6. EXPENSES. The Company will pay all costs and expenses incident to
the performance of the obligations of the Company and the Selling
Securityholders under this Agreement, whether or not the transactions
contemplated herein are consummated or this Agreement is terminated pursuant to
Section 12 hereof, including all costs and expenses incident to (a) the printing
or other production of documents with respect to the transactions, including any
costs of printing the registration statement originally filed with respect to
the Securities and any amendment thereto, any Rule 462(b) Registration
Statement, any Preliminary Prospectus and the Prospectus and any amendment or
supplement thereto, this Agreement and any blue sky memoranda, (b) all
arrangements relating to the delivery to the Underwriters of copies of the
foregoing documents, (c) the fees and disbursements of the counsel, the
accountants and any other experts or advisors retained by the Company, (d)
preparation, issuance and delivery to the Underwriters of any certificates
evidencing the Securities, including transfer agent's and registrar's fees and
the Custodian's fees, (e) the qualification of the Securities under state
securities and blue sky laws, including filing fees and fees and disbursements
of counsel for the Underwriters relating thereto, (f) the filing fees of the
Commission and the National Association of Securities Dealers, Inc. relating to
the Securities, (g) any quotation of the Securities on the Nasdaq Stock Market
and (h) the expenses of the Company in connection with any meetings with
prospective investors in the Securities. To the extent, if at all, that any of
the Selling Securityholders engage special legal counsel to represent them in
connection with this offering, other than special counsel to the Company, the
fees and expenses of such counsel shall be borne by such Selling
Securityholders. Any transfer taxes imposed on the sale of the Securities to the
several Underwriters will be paid by the Company and the Selling Securityholders
pro rata. If the sale of the Securities provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 7 hereof is not satisfied, because this Agreement is terminated pursuant
to Section 12(a)(i) and (a)(ii) hereof or because of any failure, refusal or
inability on the part of the Company or any Selling Securityholder to perform
all obligations and satisfy all conditions on its part to be performed or
satisfied hereunder other than by reason of a default by any of the
Underwriters, the Company will reimburse the Underwriters severally upon demand
for all out-of-pocket expenses (including counsel fees and disbursements) that
shall have been incurred by them in connection with the proposed purchase and
sale of the Securities. The Company shall not in any event be liable to any of
the Underwriters for the loss of anticipated profits from the transactions
covered by this Agreement.
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Firm Securities shall be
subject, in the Representatives' sole discretion, to the accuracy of the
representations and warranties of the Company and the Selling Securityholders
contained herein as of the date hereof and as of the Firm Closing Date, as
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<PAGE> 23
if made on and as of the Firm Closing Date, to the accuracy of the statements of
the Company's officers made pursuant to the provisions hereof, to the
performance by the Company and the Selling Securityholders of its covenants and
agreements hereunder and to the following additional conditions:
(a) If the Original Registration Statement or any amendment thereto
filed prior to the Firm Closing Date has not been declared effective as of the
time of execution hereof, the Original Registration Statement or such amendment
and, if the Company has elected to rely upon Rule 462(b), the Rule 462(b)
Registration Statement shall have been declared effective not later than the
earlier of (1) 11:00 A.M., New York time, on the date on which the amendment to
the registration statement originally filed with respect to the Securities or to
the Registration Statement, as the case may be, containing information regarding
the initial public offering price of the Securities has been filed with the
Commission, and (ii) the time confirmations are sent or given as specified by
Rule 462(b)(2) or, with respect to the Original Registration Statement, such
later time and date as shall have been consented to by the Representatives; if
required, the Prospectus or any Term Sheet that constitutes a part thereof and
any amendment or supplement thereto shall have been filed with the Commission in
the manner and within the time period required by Rules 434 and 424(b) under the
Act; no stop order suspending the effectiveness of the Registration Statement or
any amendment thereto shall have been issued, and no proceedings for that
purpose shall have been instituted or threatened or, to the knowledge of the
Company or the Representatives, shall be contemplated by the Commission; and the
Company shall have complied with any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise).
(b) The Representatives shall have received an opinion, dated the Firm
Closing Date, of Cowden, Humphrey & Sarlson Co., L.P.A., counsel for the
Company, to the effect that:
(i) the Company and each of its subsidiaries (other than
Venture Lighting International, Ltd.) listed in Exhibit 21 to the
Registration Statement (the "Subsidiaries") have been duly organized
and are validly existing as corporations in good standing under the
laws of their respective jurisdictions of incorporation and are duly
qualified to transact business as foreign corporations and are in good
standing under the laws of all other jurisdictions where the ownership
or leasing of their respective properties or the conduct of their
respective businesses requires such qualification, except where the
failure to be so qualified does not amount to a material liability or
disability to the Company and its subsidiaries, taken as a whole;
(ii) the Company and each of its subsidiaries have corporate
power to own or lease their respective properties and conduct their
respective businesses as described in the Registration Statement and
the Prospectus, and the Company has corporate power to enter into this
Agreement and to carry out all the terms and provisions hereof to be
carried out by it;
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<PAGE> 24
(iii) the issued shares of capital stock of each of its
subsidiaries have been duly authorized and validly issued, are fully
paid and nonassessable and are owned beneficially by the Company,
except for the shares of Venture Lighting International, Ltd. and
Pacific Lighting, Inc. not owned by the Company, free and clear of any
perfected security interests or, to the best knowledge of such counsel,
any other security interests, liens, encumbrances, equities or claims;
(iv) the Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus; all of the issued shares
of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable and were not issued in
violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities; the Company's Firm Securities
have been duly authorized by all necessary corporate action of the
Company and, when issued and delivered to and paid for by the
Underwriters pursuant to this Agreement, will be validly issued, fully
paid and nonassessable; the Company's Firm Securities have been duly
included for quotation on the Nasdaq Stock Market; no holders of
outstanding shares of capital stock of the Company are entitled as such
to any preemptive or other rights to subscribe for any of the
Securities; and no holders of securities of the Company are entitled to
have such securities registered under the Registration Statement;
(v) the statements set forth under the heading "Description of
Capital Stock" in the Prospectus, insofar as such statements purport to
summarize certain provisions of the capital stock of the Company,
provide a fair summary of such provisions, and the statements set forth
under the headings "Business-Environmental Regulation" and "Certain
Transactions" in the Prospectus, insofar as such statements constitute
a summary of the agreements and matters referred to therein, provide a
fair summary of such agreements and matters;
(vi) the execution and delivery of this Agreement have been
duly authorized by all necessary corporate action of the Company and
this Agreement has been duly executed and delivered by the Company;
(vii) (A) to the best knowledge of such counsel, no legal or
governmental proceedings are pending to which the Company or any of its
subsidiaries is a party or to which the property of the Company or any
of its subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not described therein,
and, to the best knowledge of such counsel, no such proceedings have
been threatened against the Company or any of its subsidiaries or with
respect to any of their respective properties and (B) no contract or
other document is required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement that is not described therein or filed as
required;
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<PAGE> 25
(viii) the issuance, offering and sale of the Securities to
the Underwriters by the Company pursuant to this Agreement, the
compliance by the Company with the other provisions of this Agreement
and the consummation of the other transactions herein contemplated do
not (A) require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as
have been obtained and such as may be required under state securities
or blue sky laws, or (B) conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, lease or other
agreement or instrument known to such counsel to which the Company or
any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or any of their respective properties are bound, or
the charter documents or the code or regulations of the Company or any
of its subsidiaries, or any statute or any judgment, decree, order,
rule or regulation of any court or other governmental authority or any
arbitrator known to such counsel and applicable to the Company or any
of its subsidiaries;
(ix) the Registration Statement is effective under the Act;
any required filing of the Prospectus or any Term Sheet that
constitutes a part thereof pursuant to Rules 434 and 424(b) has been
made in the manner and within the time period required by Rules 434 and
424(b); and no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued, and no
proceedings for that purpose have been instituted or threatened or, to
the best knowledge of such counsel, are contemplated by the Commission;
(x) to the best knowledge of such counsel, the Company and its
subsidiaries possess all material certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, and
neither the Company nor any such subsidiary has received any notice of
proceedings relating to the revocation or modification of any such
certificate, authorization or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
result in a material adverse change in the condition (financial or
otherwise), business prospects, net worth or results of operations of
the Company and its subsidiaries, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus);
(xi) the Company is not an "investment company" under the
Investment Company Act of 1940, as amended, and consummation of the
transactions herein contemplated will not cause the Company to become
an investment company subject to registration under such Act;
(xii) except for the shares of capital stock of each of its
subsidiaries owned by the Company and such subsidiaries, neither the
Company nor any such subsidiary owns any shares of stock or any other
equity securities of any corporation or has any equity interest in any
firm, partnership, association or other entity, except as described in
or
25
<PAGE> 26
contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus);
(xiii) all offers and sales of the Company's capital stock
prior to the date hereof, including the offer and sale of 7,281,839
shares of Common Stock in connection with the Combination (as such term
is defined in the Prospectus or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus), were at all relevant times
exempt from the registration requirements of the Act, and were the
subject of an available exemption from the registration requirements of
all applicable state securities or blue sky laws; and the letter to the
preferred shareholders of VLI Partners II, Inc. dated August 14, 1995
(the "Investor Letter") delivered to potential investors in connection
with the Combination, did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading and, if any misstatement or
omission were made, such misstatement or omission would not have a
material adverse effect on the Company and its subsidiaries taken as a
whole;
(xiv) the Ammons Preferred Stock Redemption Agreement dated as
of August 15, 1995, the Smith Preferred Stock Redemption Agreement
dated as of August 16, 1995, the Ludwig Preferred Stock Redemption
Agreement dated as of August 17, 1995, the Schaffer Preferred Stock
Redemption Agreement dated as of August 25, 1995, the Sievila Preferred
Stock Redemption Agreement dated as of August 28, 1995, the Rapaport
Preferred Stock Redemption Agreements dated as of August 16, 1995, the
Linda Schwartz Preferred Stock Redemption Agreement dated as of August
15, 1995, the Erin Schwartz Preferred Stock Redemption Agreement dated
as of August 15, 1995, the Jessica Schwartz Preferred Stock Redemption
Agreement dated as of August 18, 1995, the Ayers Preferred Stock
Redemption Agreement dated as of August 18, 1995, the Susan Yaroma
Preferred Stock Redemption Agreement dated as of August 18, 1995, the
Robert Yaroma Preferred Stock Redemption Agreement dated as of August
18, 1995 and the Wipper Preferred Stock Redemption Agreement dated as
of August 28, 1995, to which certain predecessors of the Company are a
party (the "Redemption Agreement"), and the Voting Trust Agreement,
effective as of October 10, 1995, have each been duly authorized,
executed and delivered by the Company or its predecessors and each of
the agreements providing for a transaction that is part of the
Combination has been duly authorized, executed and delivered by the
Company or the Company's subsidiaries; each of the above-listed
documents constitute the valid and legally binding obligation of each
of the other parties thereto; there are no statutory or contractual
rights of dissent or appraisal with respect to the transfer of any of
the properties in the Combination; and the Combination was effective on
October 6 and 10, 1995 and conformed to the description thereof
contained in the Investor Letter; and
(xv) except as disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus), there are no outstanding (A) securities
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<PAGE> 27
or obligations of the Company or any of its subsidiaries convertible
into or exchangeable for any capital stock of the Company or any such
subsidiary, (B) warrants, rights or options to subscribe for or
purchase from the Company or any such subsidiary any such capital stock
or any such convertible or exchangeable securities or obligations, or
(C) obligations of the Company or any such subsidiary to issue any
shares of capital stock, any such convertible or exchangeable
securities or obligations, or any such warrants, rights or options.
Such counsel shall also state that they have no reason to
believe (A) that the Registration Statement, as of its effective date,
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 not misleading and (B) that the Prospectus, as
of its date or the date of such opinion, included or includes any
untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
Such counsel shall also state that no facts have come to their
attention that cause them to believe that the Company or its
subsidiaries are not conducting their respective business in compliance
with the laws, rules and regulations applicable thereto a violation of
which would result in a fine, penalty or similar sanction, and nothing
has come to their attention that causes them to believe that the
provisions of the manufacturing, purchasing, service, consulting and
management agreements and other business arrangements entered into by
the Company or any subsidiary described in the Prospectus, or the
operations of the Company and its subsidiaries in accordance with the
terms thereof, are not in material compliance with applicable laws and
governmental regulations (such statement as to jurisdictions other than
the State of Ohio and the Federal law of the United States to be based
solely on such counsel's reading of published statutes and regulations
and the case annotations published therewith).
In rendering any such opinion, such counsel may rely, as to
matters of fact, to the extent such counsel deems proper, on
certificates of responsible officers of the Company and public
officials.
References to the Registration Statement and the Prospectus in
this paragraph (b) shall include any amendment or supplement thereto at
the date of such opinion.
(c) The Representatives shall have received an opinion, dated the Firm
Closing Date, of Ulmer & Berne P.P.L., also counsel for the Company to the
effect that:
(i) the statement set forth under the heading "Description of
Capital Stock" in the Prospectus, insofar as such statements purport to
summarize certain provisions of the capital stock of the Company,
provide a fair summary of such provisions, and the statements set forth
under the headings "Business-Environmental Regulation" and "Certain
Transactions" in the Prospectus, insofar as such statements constitute
a summary of the
27
<PAGE> 28
agreements and matters referred to therein, provide a fair summary of
such agreements and matters;
(ii) the Registration Statement is effective under the Act;
any required filing of the Prospectus or any Term Sheet that
constitutes a part thereof pursuant to Rules 434 and 424(b) has been
made in the manner and within the time period required by Rules 434 and
424(b); and no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued, and no
proceedings for that purpose have been instituted or threatened or, to
the best knowledge of such counsel, are contemplated by the Commission;
(iii) the registration statement originally filed with respect
to the Securities and each amendment thereto and the Prospectus (in
each case, other than the financial statements and notes thereto and
other financial information contained therein, as to which such counsel
need express no opinion) comply as to form in all material respects
with the applicable requirements of the Act and the rules and
regulations of the Commission thereunder;
(iv) the Company is not an "investment company" under the
Investment Company Act of 1940, as amended, and consummation of the
transactions herein contemplated will not cause the Company to become
an investment company subject to registration under such Act;
(v) the registration statement originally filed with respect
to the Securities and each amendment thereto, any Rule 462(b)
Registration Statement and the Prospectus (in each case, including the
documents incorporated by reference therein but not including the
financial statements and other financial information contained therein,
as to which such counsel need express no opinion) comply as to form in
all material respects with the applicable requirements of the Act, the
Exchange Act, and the respective rules and regulations of the
Commission thereunder;
Such counsel shall also state that they have no reason to
believe (A) that the Registration Statement, as of its effective date,
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 not misleading and (B) that the Prospectus, as
of its date or the date of such opinion, included or includes any
untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
In rendering any such opinion, such counsel may rely, as to
matters of fact, to the extent such counsel deems proper, on
certificates of responsible officers of the Company and public
officials and may also rely on the prompt delivery of the Prospectus
by the Underwriters as required by applicable federal or state laws.
In addition, with respect to
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<PAGE> 29
matters not opined to in paragraphs (i)-(iv) above, such counsel may
rely on the opinion of Cowden, Humphrey & Sarlson Co., L.P.A. rendered
pursuant to Section 7(b) hereof.
References to the Registration Statement and the Prospectus
in this paragraph (c) shall include any amendment or supplement thereto
at the date of such opinion.
(d) The Representatives shall have received an opinion, dated the
Firm Closing Date of Cowden, Humphrey & Sarlson Co., L.P.A. for the Selling
Securityholders, to the effect that:
(i) each Selling Securityholder has full power (partnership,
trust or other) to enter into this Agreement, the Custody Agreement and
the Power of Attorney and to sell, assign, transfer and deliver to the
Underwriters the Securities to be sold by such Selling Securityholder
hereunder in accordance with the terms of this Agreement, and to
perform his or its obligations under the Custody Agreement; the
execution and delivery of this Agreement, the Custody Agreement and the
Power of Attorney have been duly authorized by all necessary action
(partnership, trust or other) of each Selling Securityholder; this
Agreement, the Custody Agreement and the Power of Attorney have been
executed and delivered by such Selling Securityholder; this Agreement
and, assuming due authorization, execution and delivery by the
Custodian, the Custody Agreement and the Power of Attorney, are the
legal, valid, binding and enforceable instruments of such Selling
Securityholder, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law);
(ii) the delivery by such Selling Securityholder to the
Underwriters of certificates for the Securities being sold hereunder by
such Selling Securityholder against payment therefor as provided
herein, will convey good and marketable title to such Securities to the
several Underwriters, free and clear of any security interests, liens,
encumbrances, equities, claims or other defects; and
(iii) the sale of the Securities to the Underwriters by such
Selling Securityholder pursuant to this Agreement, the compliance by
such Selling Securityholder with the other provisions of this Agreement
and the Custody Agreement and the consummation of the other
transactions herein contemplated do not (A) require the consent,
approval, authorization, registration or qualification of or with any
governmental authority, except such as has been obtained, and except
such as may be required for registration under state securities or blue
sky laws and, if the registration statement filed with respect to the
Securities (as amended) is not effective under the Act as of the time
of execution hereof, such as may be required (and shall be obtained as
provided in this Agreement) under the Act and the Exchange Act, or (B)
conflict with or result in a breach or violation of any of the terms
and provisions of, or constitute a default under any indenture,
mortgage, deed of trust, lease or other agreement or instrument to
which such
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<PAGE> 30
Selling Securityholder is a party or by which such Selling
Securityholder or any of such Selling Securityholder's properties are
bound, or any statute or any judgment, decree, order, rule or
regulation known to such counsel of any court or other governmental
authority or any arbitrator applicable to such Selling Securityholder.
In rendering any such opinion, such counsel may rely, as to
matters of fact, to the extent such counsel deems proper, on
certificates of responsible officers of the Company and public
officials.
References to the Registration Statement and the Prospectus in
this paragraph (c) shall include any amendment or supplement thereto at
the date of such opinion.
(e) The Representatives shall have received an opinion, dated the Firm
Closing Date, of King & Spalding, counsel for the Underwriters, with respect to
the issuance and sale of the Firm Securities, the Registration Statement and the
Prospectus, and such other related matters as the Representatives may reasonably
require, and the Company shall have furnished to such counsel such documents as
they may reasonably request for the purpose of enabling them to pass upon such
matters.
(f) The Representatives shall have received from Ernst & Young LLP a
letter or letters dated, respectively, the date hereof and the Firm Closing
Date, in form and substance satisfactory to the Representatives, to the effect
that:
(i) they are independent accountants with respect to the
Company and its subsidiaries within the meaning of the Act and the
applicable rules and regulations thereunder;
(ii) in their opinion, the audited combined financial
statements and schedules of the Company included in the Registration
Statement and the Prospectus comply in form in all material respects
with the applicable accounting requirements of the Act and the related
published rules and regulations;
(iii) on the basis of their limited review in accordance with
standards established by the American Institute of Certified Public
Accountants of any interim unaudited consolidated financial statements
of the Company included in the Registration Statement and the
Prospectus, carrying out certain specified procedures (which do not
constitute an examination made in accordance with generally accepted
auditing standards) that would not necessarily reveal matters of
significance with respect to the comments set forth in this paragraph
(iii), a reading of the minute books of the stockholders, the board of
directors and any committees thereof of the Company, officials of the
Company, and inquiries of certain officials of the Company and its
subsidiaries who have responsibility for financial and accounting
matters, nothing came to their attention that caused them to believe
that:
30
<PAGE> 31
(A) the unaudited consolidated financial statements
of the Company included in the Registration Statement and the
Prospectus do not comply in form in all material respects with
the applicable accounting requirements of the Act and the
related published rules and regulations thereunder or are not
in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the
audited combined financial statements included in the
Registration Statement and the Prospectus;
(B) at a specific date not more than five business
days prior to the date of such letter, there was any change in
long-term debt of the Company and its subsidiaries or any
decreases in net current assets or stockholders' equity of the
Company and its subsidiaries, in each case compared with
amounts shown on the March 31, 1996 unaudited consolidated
balance sheet included in the Registration Statement and the
Prospectus, or for the period from April 1, 1996 to such
specified date there were any decreases, as compared with the
prior comparable period, in net revenues, income before income
taxes or net income of the Company and its subsidiaries,
except in all instances for changes, decreases or increases
set forth in such letter; and
(iv) they have carried out certain specified procedures (as
requested by the Representatives), not constituting an audit, with
respect to certain amounts, percentages and financial information that
are derived from the general accounting records of the Company and its
subsidiaries and are included in the Registration Statement and the
Prospectus, and have compared such amounts, percentages and financial
information with such records of the Company and its subsidiaries or
with information derived from such records and have found them to be in
agreement, excluding any questions of legal interpretation.
(v) on the basis of a reading of the unaudited pro forma
financial data included in the Registration Statement and the
Prospectus, carrying out certain specified procedures that would not
necessarily reveal matters of significance with respect to the comments
set forth in this paragraph (v), inquiries of certain officials of the
Company and its subsidiaries who have responsibility for financial and
accounting matters and proving the arithmetic accuracy of the
application of the pro forma adjustments to the historical amounts in
the unaudited pro forma financial data, nothing came to their attention
that caused them to believe that the unaudited pro forma financial data
do not comply in form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X or that the pro
forma adjustments have not been properly applied to the historical
amounts in the compilation of such data.
In the event that the letters referred to above set forth any
such changes, decreases or increases, it shall be a further condition
to the obligations of the Underwriters that (A)
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<PAGE> 32
such letters shall be accompanied by a written explanation from the
Company as to the significance thereof, unless the Representatives deem
such explanation unnecessary, and (B) such changes, decreases or
increases do not, in the sole judgment of the Representatives, make it
impractical or inadvisable to proceed with the purchase and delivery of
the Securities as contemplated by the Registration Statement, as
amended as of the date hereof.
References to the Registration Statement and the Prospectus in
this paragraph (f) with respect to either letter referred to above
shall include any amendment or supplement thereto at the date of such
letter.
(g) The Representative shall have received from Doane Raymond a letter
or letters dated, respectively, the date hereof and the Firm Closing Date, in
form and substance satisfactory to the Representatives, to the effect that Doane
Raymond is an independent accountant with respect to the Company and its
subsidiaries within the meaning of the Act and the applicable rules and
regulations thereunder and stating that in their opinion the financial
statements and schedules examined by them and included in the Registration
Statement and the Prospectus comply in form in all material respects with the
applicable accounting requirements of the Act and the related published rules
and regulations.
References to the Registration Statement and the Prospectus in
this paragraph (g) shall include any amendment or supplement thereto at the date
of such opinion.
(h) The Representatives shall have received a certificate, dated the
Firm Closing Date, of the principal executive officer and the principal
financial or accounting officer of the Company to the effect that:
(i) the representations and warranties of the Company in this
Agreement are true and correct as if made on and as of the Firm Closing
Date; the Registration Statement, as amended as of the Firm Closing
Date, does not include any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading, and the Prospectus, as amended or supplemented as of the
Firm Closing Date, does not include any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; and the Company has performed all covenants
and agreements and satisfied all conditions on its part to be performed
or satisfied at or prior to the Firm Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued, and no
proceedings for that purpose have been instituted or threatened or, to
the best of the Company's knowledge, are contemplated by the
Commission; and
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<PAGE> 33
(iii) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
neither the Company nor any of its subsidiaries has sustained any
material loss or interference with their respective businesses or
properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any labor dispute or any
legal or governmental proceeding, and there has not been any material
adverse change, or any development involving a prospective material
adverse change, in the condition (financial or otherwise), management,
business prospects, net worth or results of operations of the Company
or any of its subsidiaries, except in each case as described in or
contemplated by the Prospectus (exclusive of any amendment or
supplement thereto).
(i) The Underwriters shall have received a certificate from each Group
1 Selling Securityholder, signed by such Group 1 Selling Securityholder, dated
the Firm Closing Date, to the effect that:
(i) the representations and warranties of such Group 1 Selling
Securityholder in this Agreement are true and correct as if made on
and as of the Firm Closing Date;
(ii) the Registration Statement, as amended as of the Firm
Closing Date, does not include any untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein not misleading, and the Prospectus, as amended or supplemented
as of the Firm Closing Date, does not include any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statement therein, in the light of the circumstances under
which they were made, not misleading; and
(iii) such Group 1 Selling Securityholder has performed all
covenants and agreements on his or its part to be performed or
satisfied at or prior to the Firm Closing Date.
(j) The Representatives shall have received a certificate from each
Group 2 Selling Securityholder, signed by such Group 2 Selling Securityholder,
dated the Firm Closing Date, to the effect that:
(i) the representations and warranties of such Group 2 Selling
Securityholder in this Agreement are true and correct as if made on
and as of the Firm Closing Date;
(ii) the Registration Statement, as amended as of the Firm
Closing Date, does not include any untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein not misleading and the Prospectus, as amended or supplemented
as of the Firm Closing Date, does not include any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; and
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<PAGE> 34
(iii) such Group 2 Selling Securityholder has performed all
covenants and agreements on its part to be performed or satisfied at or
prior to the Firm Closing Date.
(k) The Representatives shall have received a certificate from each
Group 3 Selling Securityholder, signed by such Group 3 Selling Securityholder,
dated the Firm Closing Date, to the effect that:
(i) the representations and warranties of such Group 3 Selling
Securityholder in this Agreement are true and correct as if made on and
as of the Firm Closing Date;
(ii) to the extent that any statements or omissions are made
in the Registration Statement and the Prospectus in reliance upon and
in conformity with written information furnished to the Company by the
Group 3 Selling Securityholder specifically for use therein, the
Registration Statement, as amended as of the Firm Closing Date, does
not include any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not
misleading and the Prospectus, as amended or supplemented as of the
Firm Closing Date, does not include any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; and
(iii) such Group 3 Selling Securityholder has performed all
covenants and agreements on its part to be performed or satisfied at or
prior to the Firm Closing Date.
(l) The Representatives shall have received, or in the case of (ii)
below shall use best efforts to obtain, from (i) each Selling Securityholder and
(ii) Koto Luminous Co., Ltd., an agreement to the effect that such person
or entity will not, directly or indirectly, without the prior written consent of
Prudential Securities Incorporated, on behalf of the Underwriters, offer, sell,
offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, pledge, offer of sale,
contract of sale, grant of an option to purchase or other sale or disposition)
of any shares of Common Stock or any securities convertible into, or
exchangeable or exercisable for, shares of Common Stock or other capital stock
of the Company, or any right to purchase or acquire Common Stock or other
capital stock of the Company for a period of 180 days after the date of this
Agreement, except for bona fide gifts or transfers effected by such stockholders
other than on any securities exchange or in the over-the-counter market to
donees or transferees that agree to be bound by similar agreements; provided
that Mr. Hellman may pledge to General Electric up to 279,391 shares to secure
his obligations to General Electric to purchase from General Electric up to
279,391 shares during the period commencing December 12, 1996 until two years
from such date pursuant to the Agreement to Repay, dated October 5, 1995.
(m) On or before the Firm Closing Date, the Representatives and counsel
for the Underwriters shall have received such further certificates, documents or
other information as they may have reasonably requested from the Company.
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<PAGE> 35
(n) Prior to the commencement of the offering of the Securities, the
Firm Securities shall have been included for trading on the Nasdaq Stock Market.
All opinions, certificates, letters and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Representatives and
counsel for the Underwriters. The Company shall furnish to the Representatives
such conformed copies of such opinions, certificates, letters and documents in
such quantities as the Representatives and counsel for the Underwriters shall
reasonably request.
The respective obligations of the several Underwriters to purchase and
pay for any Option Securities shall be subject, in their discretion, to each of
the foregoing conditions to purchase the Firm Securities, except that all
references to the Firm Securities and the Firm Closing Date shall be deemed to
refer to such Option Securities and the related Option Closing Date,
respectively.
8. Indemnification and Contribution.
--------------------------------
(a) The Company and each Group 1 Selling Securityholder jointly and
severally agree to indemnify and hold harmless each Underwriter and each person,
if any, who controls any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter or such controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon:
(i) any untrue statement or alleged untrue statement made by
the Company or such Group 1 Selling Securityholder in Section 2 of
this Agreement,
(ii) any untrue statement or alleged untrue statement of any
material fact contained in (A) the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto or (B) any application or other
document, or any amendment or supplement thereto, executed by the
Company or such Group 1 Selling Securityholder or based upon written
information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Securities under the securities or
blue sky laws thereof or filed with the Commission or any securities
association or securities exchange (each an "Application"),
(iii) the omission or alleged omission to state in the
Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or
any Application a material fact required to be stated therein or
necessary to make the statements therein not misleading or
(iv) any untrue statement or alleged untrue statement of any
material fact contained in any audio or visual materials derived solely
from information supplied by the
35
<PAGE> 36
Company to be used in connection with the marketing of the Securities,
including without limitations, slides, videos, films and tape
recordings,
and will reimburse, as incurred, each Underwriter and each
such controlling person for any legal or other expenses reasonably
incurred by such Underwriter or such controlling person in connection
with investigating, defending against or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or
action; provided, however, that the Company and such Group 1 Selling
Securityholders will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement or any amendment
thereto, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto or any Application in reliance upon and in
conformity with written information furnished to the Company by such
Underwriter through the Representatives specifically for use therein;
and provided, further, that the Company and such Group 1 Selling
Securityholders will not be liable to any Underwriter or any person
controlling such Underwriter with respect to any such untrue statement
or omission made in any Preliminary Prospectus that is corrected in the
Prospectus (or any amendment or supplement thereto) if the person
asserting any such loss, claim, damage or liability purchased
Securities from such Underwriter but was not sent or given a copy of
the Prospectus (as amended or supplemented) at or prior to the written
confirmation of the sale of such Securities to such person in any case
where such delivery of the Prospectus (as amended or supplemented) is
required by the Act, unless such failure to deliver the Prospectus (as
amended or supplemented) was a result of noncompliance by the Company
with Section 5(d) of this Agreement. This indemnity agreement will be
in addition to any liability which the Company and such Group 1 Selling
Securityholders may otherwise have. Neither the Company nor such Group
1 Selling Securityholders will, without the prior written consent of
the Underwriter or Underwriters purchasing, in the aggregate, more than
fifty percent (50%) of the Securities, settle or compromise or consent
to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not any such Underwriter or any person who
controls any such Underwriter within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act is a party to such claim, action,
suit or proceeding), unless such settlement, compromise or consent
includes an unconditional release of all of the Underwriters and such
controlling persons from all liability arising out of such claim,
action, suit or proceeding.
(b) Each Group 2 Selling Securityholder agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who signs the
Registration Statement, each Underwriter and each person who controls the
Company or any Underwriter within the meaning of Section 15 of the Act against
any such losses, claims, damages or liabilities to which the Company, any such
director, officer, such Underwriter or any such controlling person may become
subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon:
36
<PAGE> 37
(i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment
thereto, any Preliminary Prospectus, the Prospectus or any amendment or
suppliment thereto or any Application; or
(ii) the omission or alleged omission to state therein a
material fact required to be stated in the Registration Statement or
any amendment thereto, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto, or any Application 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 reliance upon and
in conformity with written information furnished to the Company by the
Group 2 Selling Securityholders for use therein;
provided, however, that such Group 2 Selling Securityholders
will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission
made in such registration statement or any amendment thereto, any
Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto or any Application in reliance upon and in conformity with
written information furnished to the Company by such Underwriter
through the Representatives specifically for use therein provided,
however, that the Group 2 Selling Securityholders will not be liable to
any Underwriter or any person controlling such Underwriter with respect
to any such untrue statement or omission made in any Preliminary
Prospectus that is corrected in the Prospectus (or any amendment or
supplement thereto) if the person asserting any such loss, claim,
damage or liability purchased Securities from such Underwriter but was
not sent or given a copy of the Prospectus (as amended or supplemented)
at or prior to the written confirmation of the sale of such Securities
to such person in any case where such delivery of the Prospectus (as
amended or supplemented) is required by the Act, unless such failure to
deliver the Prospectus (as amended or supplemented) was a result of
noncompliance by the Company with Section 5(a)(iv) or 5 (a)(v) of this
Agreement; and subject to the limitation set forth immediately
preceding this clause, will reimburse, as incurred, any legal or other
expenses reasonably incurred by the Company, any such director,
officer, such Underwriter or any such controlling person in connection
with investigating or defending any such loss, claim, damage, liability
or any action in respect thereof. This indemnity agreement will be in
addition to any liability which the Group 2 Selling Securityholders may
otherwise have. The Group 2 Selling Securityholders will not, without
the prior written consent of the Underwriters purchasing greater than
fifty percent of the Securities, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action, suit
or proceeding in respect of which indemnification may be sought
hereunder (whether or not such Underwriter or any person who controls
such Underwriter within the meaning of Section 15 of the Act is a party
to such claim, action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional
37
<PAGE> 38
release of the Underwriters and each such controlling person from all
liability arising out of such claim, action, suit or proceeding.
(c) Each Group 3 Selling Securityholder agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who signs the
Registration Statement, each Underwriter and each person who controls the
Company or any Underwriter within the meaning of Section 15 of the Act against
any such losses, claims, damages or liabilities to which the Company, any such
director, officer, such Underwriter or any such controlling person may become
subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment
thereto, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or any Application or
(ii) the omission or the alleged omission to state therein a
material fact required to be stated in the Registration Statement or
any amendment thereto, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto, or any Application 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 reliance upon and
in conformity with written information furnished to the Company by the
Group 3 Selling Securityholders for use therein;
PROVIDED, HOWEVER, that the Group 3 Selling Securityholders
will not be liable to any Underwriter or any person controlling such
Underwriter with respect to any such untrue statement or omission made
in any Preliminary Prospectus that is corrected in the Prospectus (or
any amendment or supplement thereto) if the person asserting any such
loss, claim, damage or liability purchased Securities from such
Underwriter but was not sent or given a copy of the Prospectus (as
amended or supplemented) at or prior to the written confirmation of the
sale of such Securities to such person in any case where such delivery
of the Prospectus (as amended or supplemented) is required by the Act,
unless such failure to deliver the Prospectus (as amended or
supplemented) was a result of noncompliance by the Company with Section
5(a)(iv) or 5 (a)(v) of this Agreement; and subject to the limitation
set forth immediately preceding this clause, will reimburse, as
incurred, any legal or other expenses reasonably incurred by the
Company, any such director, officer, such Underwriter or any such
controlling person in connection with investigating or defending any
such loss, claim, damage, liability or any action in respect thereof.
This indemnity agreement will be in addition to any liability which the
Group 3 Selling Securityholders may otherwise have. The Group 3 Selling
Securityholders will not, without the prior written consent of the
Underwriters purchasing greater than fifty percent of the Securities,
settle or compromise or consent to the entry of any judgment in
38
<PAGE> 39
any pending or threatened claim, action, suit or proceeding in respect
of which indemnification may be sought hereunder (whether or not such
Underwriter or any person who controls such Underwriter within the
meaning of Section 15 of the Act is a party to such claim, action, suit
or proceeding), unless such settlement, compromise or consent includes
an unconditional release of the Underwriters and each such controlling
person from all liability arising out of such claim, action, suit or
proceeding.
(d) Each Underwriter, severally and not jointly, will indemnify and
hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement, each Selling Securityholder and each person,
if any, who controls the Company or any Selling Securityholder within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act against any
losses, claims, damages or liabilities to which the Company, any such director
or officer of the Company, such Selling Securityholder or any such controlling
person of the Company or such Selling Securityholder may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement or any amendment thereto, any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or any Application or
(ii) the omission or the alleged omission to state therein a material fact
required to be stated in the Registration Statement or any amendment thereto,
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or any Application 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 reliance upon and in conformity with written information furnished to the
Company by such Underwriter through the Representatives specifically for use
therein; and, subject to the limitation set forth immediately preceding this
clause, will reimburse, as incurred, any legal or other expenses reasonably
incurred by the Company or any such director, officer or controlling person or
such Selling Securityholder in connection with investigating or defending any
such loss, claim, damage, liability or any action in respect thereof. This
indemnity agreement will be in addition to any liability which such Underwriter
may otherwise have.
(e) Promptly after receipt by an indemnified party under this Section 8
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 8. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party;
provided, however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties which are different from
39
<PAGE> 40
or additional to those available to the indemnifying party, the indemnifying
party shall not have the right to direct the defense of such action on behalf of
such indemnified party or parties and such indemnified party or parties shall
have the right to select separate counsel to defend such action on behalf of
such indemnified party or parties. After notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof and
approval by such indemnified party of counsel appointed to defend such action,
the indemnifying party will not be liable to such indemnified party under this
Section 8 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by the Representatives in
the case of paragraph (a) of this Section 8, representing the indemnified
parties under such paragraph (a) who are parties to such action or actions) or
(ii) the indemnifying party does not promptly retain counsel satisfactory to the
indemnified party or (iii) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the indemnifying party.
After such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the consent
of the indemnifying party.
(f) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 8 is unavailable or insufficient, for
any reason, to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Securities or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Securityholders on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total proceeds from the offering
(before deducting expenses) received by the Company and the Selling
Securityholders bear to the total underwriting discounts and commissions
received by the Underwriters. The relative fault of the parties 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, the Selling
Securityholders or the Underwriters, the parties' relative intents, knowledge,
access to information and opportunity to correct or
40
<PAGE> 41
prevent such statement or omission, and any other equitable considerations
appropriate in the circumstances. The Company, the Selling Securityholders and
the Underwriters agree that it would not be equitable if the amount of such
contribution 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
of allocation that does not take into account the equitable considerations
referred to above in this paragraph (e). Notwithstanding any other provision of
this paragraph (d), no Underwriter shall be obligated to make contributions
hereunder that in the aggregate exceed the total public offering price of the
Securities purchased by such Underwriter under this Agreement, less the
aggregate amount of any damages that such Underwriter has otherwise been
required to pay in respect of the same or any substantially similar claim, and
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 hereunder are several in proportion to their respective underwriting
obligations and not joint, and contributions among Underwriters shall be
governed by the provisions of the Prudential Securities Incorporated Master
Agreement Among Underwriters. For purposes of this paragraph (e), each person,
if any, who controls an Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act shall have the same rights to contribution as
such Underwriter, and each director of the Company, each officer of the Company
who signed the Registration Statement and each person, if any, who controls the
Company or any Selling Securityholder within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, shall have the same rights to
contribution as the Company or such Selling Securityholder, as the case may be.
(g) The liability of each Selling Securityholder under the
representations and warranties contained in Sections 2 and 3 hereof and under
the indemnity and contribution agreements contained in the provisions of this
Section 8 shall be limited to an amount equal to the initial public offering
price of the Securities to be sold by such Selling Securityholder to the
Underwriters minus the amount of the underwriting discount paid thereon to the
Underwriters by such Selling Securityholder; PROVIDED HOWEVER, that no Selling
Securityholder shall be required to provide payment under the indemnity
agreements contained in the provisions of this Section 8 until the Underwriter
or controlling person seeking indemnification shall have first made a demand for
payment on the Company with respect to any such loss, claim, damage, liability
or expense and the Company shall have failed to make such requested payment
within 30 days after receipt thereof. The Company and such Selling
Securityholder may agree, as among themselves and without limiting the rights of
the Underwriters under this Agreement, as to the respective amounts of such
liability for which they each shall be responsible.
9. DEFAULT OF UNDERWRITERS. If one or more Underwriters default in
their obligations to purchase Firm Securities or Option Securities hereunder and
the aggregate number of such Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase is ten percent or less of the
aggregate number of Firm Securities or Option Securities to be purchased by all
of the Underwriters at such time hereunder, the other Underwriters may make
arrangements satisfactory to the Representatives for the purchase of such
Securities by other persons (who may
41
<PAGE> 42
include one or more of the non-defaulting Underwriters, including the
Representatives), but if no such arrangements are made by the Firm Closing Date
or the related Option Closing Date, as the case may be, the other Underwriters
shall be obligated severally in proportion to their respective commitments
hereunder to purchase the Firm Securities or Option Securities that such
defaulting Underwriter or Underwriters agreed but failed to purchase. If one or
more Underwriters so default with respect to an aggregate number of Securities
that is more than ten percent of the aggregate number of Firm Securities or
Option Securities, as the case may be, to be purchased by all of the
Underwriters at such time hereunder, and if arrangements satisfactory to the
Representatives are not made within 36 hours after such default for the purchase
by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives) of the Securities with respect to
which such default occurs, this Agreement will terminate without liability on
the part of any non-defaulting Underwriter or the Company other than as provided
in Section 10 hereof if the default is with respect to the Firm Closing Date and
without liability for the Option Shares if such default is with respect to the
Option Closing Date. In the event of any default by one or more Underwriters as
described in this Section 9, the Representatives shall have the right to
postpone the Firm Closing Date or the Option Closing Date, as the case may be,
established as provided in Section 3 hereof for not more than seven business
days in order that any necessary changes may be made in the arrangements or
documents for the purchase and delivery of the Firm Securities or Option
Securities, as the case may be. As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 9. Nothing herein shall relieve any defaulting Underwriter from
liability for its default.
10. DEFAULT BY SELLING SECURITYHOLDERS. If on the Firm Closing Date or
Option Closing Date any Selling Securityholder fails to sell the Selling
Securityholders' Firm Securities, which such Selling Securityholder has agreed
to sell on such date as set forth herein, the Company agrees that it will sell
that number of shares of Common Stock to the Underwriters which represents the
Selling Securityholders' Firm Securities which such Selling Securityholder has
failed to so sell, or such lesser number as may be requested by you.
11. SURVIVAL. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company and its officers, the
Selling Securityholders and the several Underwriters set forth in this Agreement
or made by or on behalf of them, respectively, pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any investigation made by or
on behalf of the Company, any of its officers or directors, any Selling
Securityholders, any Underwriter or any controlling person referred to in
Section 8 hereof and (ii) delivery of and payment for the Securities. The
respective agreements, covenants, indemnities and other statements set forth in
Sections 6 and 8 hereof shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement.
12. TERMINATION.
(a) This Agreement may be terminated with respect to the Firm
Securities or any Option Securities in the sole discretion of the
Representatives by notice to the Company or the
42
<PAGE> 43
Selling Securityholders given prior to the Firm Closing Date or the related
Option Closing Date, respectively, in the event that the Company or the Selling
Securityholder shall have failed, refused or been unable to perform all
obligations and satisfy all conditions on its part to be performed or satisfied
hereunder at or prior thereto or, if at or prior to the Firm Closing Date or
such Option Closing Date, respectively,
(i) the Company or any of its subsidiaries shall have, in the
sole judgment of the Representatives, sustained any material loss or
interference with their respective businesses or properties from fire,
flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental
proceeding or there shall have been any material adverse change, or any
development involving a prospective material adverse change (including
without limitation a change in management or control of the Company),
in the condition (financial or otherwise), business prospects, net
worth or results of operations of the Company and its subsidiaries,
except in each case as described in or contemplated by the Prospectus
(exclusive of any amendment or supplement thereto);
(ii) trading in the Common Stock shall have been suspended by
the Commission or the Nasdaq Stock Market;
(iii) trading in securities generally on the New York Stock
Exchange or the Nasdaq Stock Market shall have been suspended or
minimum or maximum prices shall have been established on any such
exchange or market system;
(iv) a banking moratorium shall have been declared by New York
or United States authorities; or
(v) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or (C) any other calamity or crisis or
material adverse change in general economic, political or financial
conditions having an effect on the United States financial markets
that, in the sole judgment of the Representatives, makes it impractical
or inadvisable to proceed with the public offering or the delivery of
the Securities as contemplated by the Registration Statement, as
amended as of the date hereof.
(b) Termination of this Agreement pursuant to this Section 12 shall be
without liability of any party to any other party except as provided in Section
11 hereof.
13. INFORMATION SUPPLIED BY UNDERWRITERS. The statements set forth in
the last paragraph on the front cover page and in the first and third paragraphs
under the heading "Underwriting" in any Preliminary Prospectus or the Prospectus
(to the extent such statements relate to the Underwriters) constitute the only
information furnished by any Underwriter through
43
<PAGE> 44
the Representatives to the Company for the purposes of Sections 2(a)(ii) and 8
hereof. The Underwriters confirm that such statements (to such extent) are
correct.
14. NOTICES. All communications hereunder shall be in writing and, if
sent to any of the Underwriters, shall be delivered or sent by mail, telex or
facsimile transmission and confirmed in writing to Prudential Securities
Incorporated, One New York Plaza, New York, New York 10292, Attention: Equity
Transactions Group; if sent to the Company or Mr. Hellman, shall be delivered or
sent by mail, telex or facsimile transmission and confirmed in writing to the
Company at 2307 E. Aurora Road, Suite One, Twinsburg, Ohio 44087, Attention:
Wayne R. Hellman; if sent to the Selling Securityholders shall be delivered or
sent by mail, telex or facsimile transmission and confirmed in writing to Wayne
R. Hellman, as Attorney-in-Fact at 2307 E. Aurora Road, Suite One, Twinsburg,
Ohio 44087.
15. SUCCESSORS. This Agreement shall inure to the benefit of and shall
be binding upon the several Underwriters, the Company, the Selling
Securityholders and their respective successors and legal representatives, and
nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or claim
under or in respect of this Agreement, or any provisions herein contained, this
Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of such persons and for the benefit of
no other person except that (i) the indemnities of the Company and the Selling
Securityholders contained in Section 8 of this Agreement shall also be for the
benefit of any person or persons who control any Underwriter within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the
indemnities of the Underwriters contained in Section 8 of this Agreement shall
also be for the benefit of the directors of the Company, the officers of the
Company who have signed the Registration Statement and any person or persons who
control the Company or the Selling Securityholders within the meaning of Section
15 of the Act or Section 20 of the Exchange Act. No purchaser of Securities from
any Underwriter shall be deemed a successor because of such purchase.
16. APPLICABLE LAW. The validity and interpretation of this Agreement,
and the terms and conditions set forth herein, shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to any provisions relating to conflicts of laws.
17. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
44
<PAGE> 45
If the foregoing correctly sets forth our understanding,
please indicate your acceptance thereof in the space provided below for that
purpose, whereupon this letter shall constitute an agreement binding the Company
and each of the several Underwriters.
Very truly yours,
ADVANCED LIGHTING TECHNOLOGIES, INC.
By:
-------------------------------------
Louis S. Fisi
Chief Financial Officer, Executive
Vice President and Secretary
SELLING SECURITYHOLDERS
By:
-------------------------------------
Wayne R. Hellman, as attorney-in-fact
for the Selling Securityholders listed
in Schedule 2 attached hereto
The foregoing Agreement
is hereby confirmed and
accepted as of the date
first above written.
PRUDENTIAL SECURITIES INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.
By: PRUDENTIAL SECURITIES INCORPORATED
By:
--------------------------------------
Jean-Claude Canfin
Director
For itself and on behalf of the Representatives.
<PAGE> 46
SCHEDULE 1
UNDERWRITERS
<TABLE>
<CAPTION>
Number of Firm
Securities to
Underwriter be Purchased
- ----------- ------------
<S> <C>
Prudential Securities Incorporated ..................................................
Raymond James & Associates, Inc......................................................
Total....................................................................... 3,300,000
---------
</TABLE>
<PAGE> 47
SCHEDULE 2
SELLING SECURITYHOLDERS
<TABLE>
<CAPTION>
Number of Firm
Securities to
Selling Securityholder be Purchased
- ---------------------- ------------
<S> <C>
Group 1 Selling Securityholders
- -------------------------------
Wayne R. Hellman............................................................ 367,449
Louis S. Fisi .............................................................. 92,476
Group 2 Selling Securityholders
- -------------------------------
David L. Jennings ......................................................... .121,491
Robert S. Roller ........................................................... 58,866
James S. Sarver ............................................................ 68,231
Juris Sulcs ................................................................ 63,609
Group 3 Selling Securityholders
- -------------------------------
Christine Hellman .......................................................... 56,428
Brian Hellman .............................................................. 26,361
Lisa Hellman ............................................................... 24,829
James Schoolenberg ......................................................... 17,921
Ernest Mansour ............................................................. 2,339
--------
Total ............................................................. 900,000
========
</TABLE>
<PAGE> 1
EXHIBIT 5.1
COWDEN, HUMPHREY & SARLSON
TELEPHONE
(216) 241-2880
---------------------
TELECOPIER
(216) 241-2881
A LEGAL PROFESSIONAL ASSOCIATION
3500 TERMINAL TOWER
CLEVELAND, OHIO 44113
TENTH FLOOR
NATIONAL CITY BANK BUILDING
1 CASCADE PLAZA
AKRON, OHIO 44308
TELEPHONE (216) 376-8651
TELECOPIER (216) 762-6008
June 12, 1996
Advanced Lighting Technologies, Inc.
2307 East Aurora Road, Suite 1
Twinsburg, Ohio 44087
RE: 3,795,000 Shares of Common Stock, Par Value $0.001
per Share to be Offered Through Underwriters
Gentlemen:
Advanced Lighting Technologies, Inc., an Ohio corporation (the "Company"),
proposes to file with the Securities and Exchange Commission (the "Commission")
its Registration Statement on Form S-1 (Registration No. 333- ) (the
"Registration Statement") of which this opinion is to be a part. The
Registration Statement relates to the proposed issuance and sale by the Company
of up to 2,895,000 shares of Common Stock with a par value of $0.001 per share
(the "Company Shares"), and the proposed sale by certain selling shareholders of
900,000 shares of Common Stock with a par value of $0.001 per share (the
"Selling Shareholders' Shares") in accordance with the form of Underwriting
Agreement attached as Exhibit 1.1 to the Registration Statement (the
"Underwriting Agreement") among the Company, Prudential Securities, Inc. and
Raymond James & Associates, Inc., as representatives of the several underwriters
named in Schedule 1 thereto. Capitalized terms not otherwise defined herein
shall have the same meanings ascribed to them in the Registration Statement.
We have acted as counsel to the Company in connection with the transaction
that is the subject matter of the Registration Statement and are familiar with
the various corporate proceedings relating thereto. We have examined the
corporate records of the Company and such other instruments, documents and
certificates as we have deemed necessary to provide a basis for this opinion.
For the purposes of this opinion, we have assumed that: (a) the proposed
transaction will be carried out on the basis set forth in the Registration
Statement and in conformity with the authorizations, approvals, consents and/or
exemptions of the securities laws of the various states and of other
jurisdictions of the United States, (b) the Commission shall have issued an
order declaring the Registration Statement effective, (c) all requisite
authorizations, approvals, consents or exemptions under the securities laws of
the various states and other jurisdictions of the United States shall have been
obtained, (d) the certificates evidencing the Company Shares shall have been
duly executed and delivered in exchange for the requisite related purchase
price, and (e) the certificates evidencing the Selling Shareholders' Shares have
been duly executed and shall have been delivered in exchange for the requisite
related purchase price.
Based on the foregoing, we are of the opinion that: (i) the Company Shares,
when sold in accordance with the terms of the Registration Statement, will be
legally issued, fully paid and nonassessable and (ii) the Selling Shareholders'
Shares, when sold in accordance with the terms of the Registration Statement,
will be legally issued, fully paid and nonassessable.
<PAGE> 2
COWDEN, HUMPHREY & SARLSON
Advanced Lighting Technologies, Inc.
June 12, 1996
Page Two
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and as a part thereof, or as an exhibit to any document
that may be filed with respect to the proposed transaction under the securities
laws of the various states and other jurisdiction of the United States. We also
consent to the reference of our firm under the caption ("Legal Matters") and
elsewhere in the Prospectus which is a part of the Registration Statement.
We are admitted to practice in the State of Ohio and do not express any
opinion herein other than as to the laws of the State of Ohio and the federal
laws of the United States.
Very truly yours,
COWDEN, HUMPHREY & SARLSON CO., L.P.A.
<PAGE> 1
EXHIBIT 5.2
ULMER & BERNE P.L.L.
ATTORNEYS AT LAW
<TABLE>
<S> <C> <C>
INTERNET ADDRESS Bond Court Building COLUMBUS OFFICE
http://www.ulmer.com/ 1300 East Ninth Street, Suite 900 88 East Broad Street, Suite 1980
Cleveland, Ohio 44114-1583 Columbus, Ohio 43215-3506
Fax (216) 621-7488 Fax (614) 228-8561
(216) 621-8400 Telephone (614) 228-8400
</TABLE>
June 12, 1996
Advanced Lighting Technologies, Inc.
2307 East Aurora Road, Ste. 1
Twinsburg, Ohio 44087
Re: 3,795,000 Shares of Common Stock, Par Value
$0.001 PER SHARE TO BE OFFERED THROUGH
UNDERWRITERS
Gentlemen:
Advanced Lighting Technologies, Inc., an Ohio Corporation (the "Company"),
proposes to file with the Securities Exchange Commission (the "Commission") its
Registration Statement on Form S-1 (Registration No. 333- ) (the
"Registration Statement") of which this opinion is to be a part. The
Registration Statement relates to the proposed issuance and sale by the Company
of up to 2,895,000 shares of Common Stock with a par value of $0.001 per share
(the "Company Shares"), and the proposed sale by certain selling shareholders of
900,000 shares of Common Stock with a par value of $0.001 per share (the
"Selling Shareholders' Shares"), in accordance with the form of Underwriting
Agreement attached as Exhibit 1.1 to the Registration Statement (the
"Underwriting Agreement") among the Company, Prudential Securities, Inc. and
Raymond James & Associates, Inc., as representatives of the several underwriters
named in Schedule 1 thereto. Capitalized items not otherwise defined herein
shall have the same meanings ascribed to them in the Registration Statement.
We have acted as counsel to the Company in connection with the transaction
that is the subject matter of the Registration Statement and are familiar with
the various corporate proceedings relating thereto. We have examined the
corporate records of the Company and such other instruments, documents and
certificates as we have deemed necessary to provide a basis for this opinion. We
have also examined an opinion of Cowden, Humphrey & Sarlson Co., L.P.A., of even
date herewith relating, inter alia, to the Selling Shareholders' Shares.
For the purposes of this opinion, we have assumed that: (a) the proposed
transaction will be carried out on the basis set forth in the Registration
Statement and in conformity with the authorizations, approvals, consents and/or
exemptions of the securities laws of the various states and of other
jurisdictions of the United States, (b) the Commission shall have issued an
order declaring the Registration Statement effective, (c) all requisite
authorizations, approvals, consents or exemptions under the securities laws of
the various states and other jurisdictions of the United States shall have been
obtained, (d) the certificates evidencing the Company
<PAGE> 2
Shares shall have been duly executed and delivered in exchange for the requisite
related purchase price, and (e) the certificates evidencing the Selling
Shareholders' Shares have been duly executed and shall have been delivered in
exchange for the requisite related purchase price.
Based on the foregoing, we are of the opinion that: (i) the Company Shares,
when sold in accordance with the terms of the Registration Statement, will be
legally issued, fully paid and non-assessable; and (ii) based upon the opinion
of Cowden, Humphrey & Sarlson Co., L.P.A., counsel for the Company, the Selling
Shareholders' Shares, are, and, when sold in accordance with the terms of the
Registration Statement, will be legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and as a part thereof, or as an exhibit to any document
that may be filed with respect to the proposed transaction under the securities
laws of the various states and other jurisdictions of the United States. We also
consent to the reference of our firm under the caption ("Legal Matters") and
elsewhere in the Prospectus which is a part of the Registration Statement.
We are admitted to practice in the State of Ohio and do not express any
opinion herein other than as to the laws of the State of Ohio, and the federal
laws of the United States.
Very truly yours,
Ulmer & Berne P.L.L. Signature
Ulmer & Berne P.L.L.
<PAGE> 1
EXHIBIT 9.1
VOTING TRUST AGREEMENT
THIS VOTING TRUST AGREEMENT, made and entered into at Solon,
Ohio, as of the _____ day of October, 1995 by and between WAYNE R. HELLMAN as
voting trustee (the "Voting Trustee") of the voting trust created by this
Agreement, and such owners of common stock, $.001 par value, of ADVANCED
LIGHTING TECHNOLOGIES, INC., an Ohio corporation (the "Company") whose names are
listed on Exhibit "A" attached hereto (hereinafter sometimes separately referred
to as a "Shareholder" and collectively as the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Shareholders desire that all of their shares of
stock of the Company, now or hereafter acquired, excluding shares of stock
purchased by a Shareholder from any other holder of shares of stock of the
Company except those individuals named on Exhibit "A" (the "Shares") be subject
to the terms of this Voting Trust Agreement;
WHEREAS, the Shareholders are the owners of the number of
shares of common stock, $.001 par value, of the Company (the "Shares"), set
forth opposite their names on the counterpart signature pages to this Agreement
executed by such Shareholders;
WHEREAS, the Shareholders desire that all of the Shares be
made subject to the terms and conditions of this Agreement; and
WHEREAS, the Shareholders deem this Agreement to be in the
best interest of the Company and all of the Shareholders.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEPOSIT OF VOTING SHARES; ISSUANCE OF VOTING TRUST
CERTIFICATES.
(a) The Shareholders agree to forthwith deposit with the
Voting Trustee the certificate(s) evidencing all of the Shares owned by each
such Shareholder (the "Share Certificates"), duly endorsed for transfer to the
Voting Trustee or accompanied by proper instruments duly executed to effect the
transfer of such Shares to the Voting Trustee, and to accept in exchange
therefor a Voting Trust Certificate representing the number of Shares deposited
by such Shareholder.
(b) Upon receipt of the Share Certificates, the Voting Trustee
shall cause to be issued and delivered to each Shareholder a Voting Trust
Certificate, substantially in the form of Exhibit "B" with the blanks therein
appropriately completed, representing the number of Shares evidenced by the
Share Certificates deposited by each Shareholder. Voting Trust Certificates
issued upon the transfer of, in exchange for, or in addition to such Voting
Trust Certificates, as provided in this Agreement, shall be substantially in the
form attached hereto as Exhibit "B" with such appropriate variations, omissions,
and insertions as may be required.
2. ISSUANCE OF VOTING SHARES TO THE VOTING TRUSTEE. The Voting
Trustee shall cause all Share Certificates deposited with him pursuant to
Section 1 above to be surrendered to and cancelled by the Company, and shall
cause the Company to issue and deliver to the Voting Trustee new share
certificates representing the Shares in the name of the Voting Trustee, as
voting trustee, which shall contain a legend stating that the Share Certificates
are issued pursuant and subject to the provisions of this Agreement. The
Company's stock ledger and journal shall indicate that such share certificates
are subject to the provisions of this Agreement.
<PAGE> 2
Except as herein provided, all share certificates issued and delivered to the
Voting Trustee pursuant to this Section 2 shall at all times be and remain in
the possession of the Voting Trustee or a depository designated by the Voting
Trustee. The Voting Trustee shall not transfer any certificates representing
Shares other than as provided in this Agreement.
3. RECORDS OF VOTING TRUST CERTIFICATES.
(a) RECORDS. The Voting Trustee shall keep or cause to be kept
books of record of all Voting Trust Certificates issued pursuant to this
Agreement, and shall also fix and determine a place at which such books of
record shall be kept and at which Voting Trust Certificates may be transferred.
(b) INSPECTION OF RECORDS OF VOTING TRUST CERTIFICATES. Any
owner of a Voting Trust Certificate shall have the right to inspect the books of
record of the Voting Trust Certificates to be maintained by the Voting Trustee
pursuant to subsections (a) of this Section at the place at which such records
are kept at any reasonable time.
4. TRANSFER OF VOTING TRUST CERTIFICATES.
(a) All transfers of Voting Trust Certificates shall be
recorded on the books of record kept by the Voting Trustee. The Voting Trustee
may treat the record holder of the respective Voting Trust Certificates as the
absolute owner thereof for all purposes whatsoever and shall not be bound to
recognize any equitable interest in or claim to any such Voting Trust
Certificate or the Shares represented thereby on the part of any other party
until transferred on such books of record. The Voting Trustee shall not be
required to make any transfer of a Voting Trust Certificate upon such books of
record except upon surrender of a Voting Trust Certificate to be transferred,
properly assigned in such form as shall be acceptable to the Voting Trustee,
accompanied by such evidence as the Voting Trustee may reasonably require as to
the authority of any person other than the record holder thereof who may seek to
effect any such transfer and as to the genuineness of the appropriate
signatures. Upon each such transfer, the Voting Trust Certificates surrendered
for transfer shall be cancelled and the Voting Trustee shall issue a new Voting
Trust Certificate to the transferee and the transferee shall, by acceptance
thereof, assent to the terms and conditions of this Agreement. Any such
transferee shall be required to execute a supplemental copy of this Agreement.
(b) REPLACEMENT OF VOTING TRUST CERTIFICATES. In the event any
Voting Trust Certificate shall become mutilated, lost, or destroyed, the Voting
Trustee, under such conditions with respect to indemnity or otherwise as he, in
his discretion, may prescribe, may provide for the issuance of a new Voting
Trust Certificate in lieu of such lost or destroyed Voting Trust Certificate or
in exchange for such mutilated Voting Trust Certificate.
5. POWERS AND DUTIES OF VOTING TRUSTEE.
(a) RIGHT TO VOTE. The Voting Trustee shall be entitled to
exercise all shareholder rights of the Shareholders in respect of the Shares,
including, but not limited to, the right to exercise the voting rights of such
Shares on each matter submitted to the Company's shareholders for their vote,
consent, waiver, release, or other action and the right to take part in any
corporate or shareholders' action of the Company, whether ordinary or
extraordinary, by proxy or otherwise. The right of the Voting Trustee to
exercise the voting rights of the Shares in accordance with the terms hereof
includes, but is not limited to, the exercise of voting rights relating to
fixing the number and the election of directors of the Company, the changing of
the Company's capital structure, the amendment of the Company's Articles
of Incorporation or Code of Regulations, the reclassification of the Shares, the
purchase of assets by the Company, and the merger, consolidation, liquidation or
dissolution of the Company. The owners of Voting Trust Certificates shall not
have any right under such
- 2 -
<PAGE> 3
Voting Trust Certificates or under this Agreement or otherwise, to exercise the
voting rights of such Shares or to take part in any corporate or shareholders'
action or to do or perform any act or thing that shareholders of the Company
are now or may hereafter become entitled to do or to perform, for so long as
the Shares owned by each such Shareholder are held by the Voting Trustee,
except to receive cash dividends and distributions when declared and paid and
to review the books and records of the Company during normal business hours.
Notwithstanding anything to the contrary, the Voting Trustee shall not have the
right to sell or otherwise transfer the Shares of any Shareholder.
(b) DISCRETION OF VOTING TRUSTEE. In exercising the voting
rights of the Shares, or in doing any act with respect to the control or
management of the Company or its affairs, or otherwise acting hereunder, the
Voting Trustee shall be free to exercise his full discretion. Notwithstanding
anything to the contrary, the Voting Trustee shall not have the right to sell or
otherwise transfer the Shares of any Shareholder.
(c) ACTING AS DIRECTOR OR OFFICER. The Voting Trustee or any
representative of the Voting Trustee may act as a director, an officer or an
employee of the Company and may vote for himself as such and may have an
ownership interest in the Company. The Voting Trustee or any person with whom or
which he may be associated, or any entity of which he may be a member, or any
corporation of which he may be a shareholder, director, or officer, may contract
with the Company or otherwise have a financial interest in any matter or
transaction to which the Company may be a party or in which the Company may be
in any way concerned, as though he were not Voting Trustee, but otherwise
subject to law.
(d) COMPENSATION. The Voting Trustee shall serve without
compensation. The Voting Trustee shall be reimbursed for all reasonable
expenses, disbursements and advances incurred or made by the Voting Trustee in
performance of his duties hereunder. The owners of the Voting Trust Certificates
agree to reimburse and indemnify the Voting Trustee for all reasonable claims,
expenses, and liabilities incurred by him in connection with the discharge of
his duties under this Agreement. Any such claims, expenses, or liabilities shall
be charged to the Voting Trust Certificate owners, pro rata, and may be deducted
from dividends or other distributions to them, or may be made a charge payable
as a condition to the delivery of Share Certificates following the surrender to
the Voting Trustee of the Voting Trust Certificates, and the Voting Trustee
shall be entitled to a lien therefor on the Shares, funds, or other property in
his possession. The Voting Trustee shall disclose in reasonable detail on an
annual basis, all reimbursements received for reasonable expenses,
disbursements, advances incurred or made by the Voting Trustee in performance of
his duties hereunder.
(e) IMMUNITIES OF THE VOTING TRUSTEE. The Voting Trustee shall
incur no responsibility in his capacity as voting trustee, as a shareholder, or
otherwise, by reason of any error of judgment or mistake of law or other
mistake, for any act or omission of any agent or attorney, for any
misconstruction of this Agreement, or for any action of any sort taken or
omitted hereunder or believed by him to be in accordance with the provisions and
intent hereof or otherwise, except solely for his own individual willful
misconduct. In the discharge of his duties hereunder, the Voting Trustee shall
be fully protected in acting in reliance upon any instrument, document, or paper
believed by him to be genuine and to have been executed by the proper parties;
and, shall likewise be fully protected in issuing any Voting Trust Certificate
or in taking or refraining from taking any action hereunder in reliance upon any
certificate or certificates purporting to be duly signed, as to the existence or
non-existence of any fact or facts or the performance or non-performance of any
act or acts, and may accept as conclusive any statement made in any such
certificate. The Voting Trustee shall not be required to give bond or security
for the discharge of his duties under this Agreement. The Voting Trustee, may
in his discretion, consult with counsel to be selected by him and shall incur
no liability in respect of any action taken on the advice of any such counsel.
- 3 -
<PAGE> 4
(f) DIVIDENDS. The record owner of each Voting Trust
Certificate shall be entitled to receive his pro rata share of any dividends
paid or distributed by the Company upon the Shares represented by the Voting
Trust Certificates and all other corporate distributions made by the Company in
respect of such Voting Shares; provided, however, that, if any such dividend or
distribution includes shares of capital stock of the Company with voting rights,
the certificates representing such shares of stock shall be deposited with the
Voting Trustee subject to the terms of this Agreement, and the owner of the
Voting Trust Certificate evidencing the Shares upon which such dividend or
distribution is made shall be entitled to receive new Voting Trust Certificates
representing such newly-deposited shares of capital stock with voting rights.
The record date fixed by the Company for the purpose of the
payment of any dividend or for the making of any other distribution shall be the
record date for the purpose of payment or distribution to the owners of Voting
Trust Certificates, and whenever any such record date shall be fixed, the owners
of record of Voting Trust Certificates at the date so fixed shall exclusively be
entitled to participate in the payment or distribution. Upon receipt by the
Voting Trustee of any dividend or other distribution in respect of any Shares
held by the Voting Trustee, the Voting Trustee shall promptly distribute the
funds or property so received by him to the owners of Voting Trust Certificates
to whom such funds or property should have been distributed by the Company if
the foregoing provisions hereof had been observed.
Notwithstanding the foregoing provisions of this Section 5, if
the Company shall reclassify its Shares, reorganize, sell all or substantially
all of its assets with or without dissolution, consolidate with or merge into
another corporation, or if another corporation shall merge into the Company, the
shares of capital stock into which the Shares then on deposit hereunder shall be
reclassified and any shares of capital stock issued in exchange or substitution
for the Shares then on deposit hereunder shall, if they are non-voting shares,
be distributed in accordance with the provisions of this Agreement directly to
the record owners of outstanding Voting Trust Certificates, issued in respect of
such Shares; or, if they are voting shares, they shall become subject to the
terms and conditions of this Agreement as if such voting shares had been
originally deposited hereunder, and shall be deposited with the Voting Trustee,
and the owner of outstanding Voting Trust Certificates shall be entitled to
receive new Voting Trust Certificates representing such newly deposited shares
of capital stock with voting rights.
(g) DEDUCTIONS FOR DISTRIBUTIONS. There shall be deducted and
withheld from every distribution of every kind under this Agreement any taxes,
assessments, or other charges that may be required by law to be deducted or
withheld, as well as expenses and charges incurred pursuant to Section 5(e), to
the extent that the expenses and charges remain unpaid or unreimbursed.
6. RESIGNATION OF VOTING TRUSTEE.
(a) RESIGNATION OF VOTING TRUSTEE. The Voting Trustee may at
any time resign by delivering to the owners of the Voting Trust Certificates his
resignation in writing, to take effect not less than ten (10) days after
delivery. Upon the resignation of the Voting Trustee, this Agreement shall
terminate.
(b) DEATH OR DISABILITY OF VOTING TRUSTEE. The rights and
duties of the Voting Trustee shall terminate on his death or disability and no
interest in any of the property owned or held hereunder nor any of the rights or
duties of the Voting Trustee may be transferred by will, devise, succession, or
in any manner, except as provided in this Agreement. The heirs, administrators,
and executors of the Voting Trustee shall, however, have the right and absolute
duty to convey any property held by the Voting Trustee to the Shareholders
promptly upon termination of this Agreement. For purposes of this Agreement,
disability shall mean the inability of the Voting Trustee to perform
satisfactorily his duties hereunder for a period of 120 days in the aggregate
out of 150 consecutive days as a result of a physical or mental illness or other
disability, which,
- 4 -
<PAGE> 5
in the written opinion of a physician resident of recognized ability and
reputation, makes it highly likely that such illness or disability will
continue for a significant period of time.
(c) SHARE OWNERSHIP OF VOTING TRUSTEE; EXECUTIVE OFFICER. The
rights and duties of the Voting Trustee shall terminate in the event that the
Voting Trustee (i) no longer owns at least ten percent of the issued and
outstanding shares of stock of the Company or (ii) is no longer an executive
officer and director of the Company.
7. TERMINATION.
(a) DURATION. Except as otherwise provided in Sections 6(a),
(b) and (c), 7(b) and (c), this Agreement shall terminate on the earlier of: (i)
September 30, 2005; or (ii) the date upon which all of the Shares are acquired
by the Company and/or any shareholders of the Company that are not a party to
this Agreement.
(b) TERMINATION BY VOTING TRUSTEE. This Agreement may, at any
time, be terminated by the Voting Trustee. Written notice of such termination
shall be given by the Voting Trustee to all of the owners of the outstanding
Voting Trust Certificates pursuant to the provisions of Section 7 of this
Agreement. Such notice shall specify the time and manner of delivery of
certificates representing Shares following the surrender and cancellation of the
respective Voting Trust Certificates as described in Section 7(d) below.
(c) TERMINATION BY SHAREHOLDER. In the event a Shareholder
desires to transfer his Shares, this Agreement may be terminated with respect to
such Shares and such Shares shall not be subject to the restrictions contained
herein provided such shares to be transferred are either registered or are
exempt from registration under the Securities Act of 1933, as amended, and such
transfer is made in accordance with any agreements entered into by the Company
or the Shareholder with any underwriters which may restrict the transfer of such
shares for certain periods of time.
(d) OBLIGATIONS OF VOTING TRUSTEE UPON TERMINATION. Upon the
termination of this Agreement, the owners of the Voting Trust Certificates shall
surrender their respective Voting Trust Certificates to the Voting Trustee or,
upon the Voting Trustee's death or disability, the Secretary of the Company who
shall deliver to the Company the certificates representing Shares, and the
Secretary of the Company shall then issue certificates representing the Shares
to the appropriate respective owners of the Voting Trust Certificates. If, at
the expiration of four months after termination of this Agreement, any Voting
Trust Certificate shall not have been surrendered to the Voting Trustee he may,
in his discretion, and if acceptable to the Secretary of the Company, deliver
the certificates representing such Shares to the Secretary of the Company to be
held by the Company for the owners of any such Voting Trust Certificates to be
delivered to such owners upon surrender of their respective Voting Trust
Certificates, whereupon all responsibilities of the Voting Trustee with respect
thereto shall cease; provided, however, if the Voting Trustee shall have died or
become disabled, the shares shall be held by the Company for the owners of any
such Voting Trust Certificates to be delivered to such owners upon surrender of
their respective Voting Trust Certificates whereupon all responsibilities of
the Company with respect thereto shall cease. Notwithstanding the termination
of this Agreement, the Voting Trustee or upon the Voting Trustee's death or
disability, the Secretary shall thereafter have the power to take or cause to
be taken such further and other action as he may deem necessary or desirable to
conclude promptly the duties imposed upon him in this Agreement; provided
however, that after the termination of this Agreement, he shall have no
authority to exercise any voting rights of the Shares.
- 5 -
<PAGE> 6
8. NOTICE.
(a) NOTICE TO OWNERS OF VOTING TRUST CERTIFICATES. All notices
to be given to owners of Voting Trust Certificates may be given by personally
delivering or mailing the same to such record owners at the last addresses
furnished in writing by such owners to the Voting Trustee, and any notice when
so delivered or mailed shall be considered as served on the respective owners of
Voting Trust Certificates.
(b) NOTICE TO VOTING TRUSTEE. Any notice required or permitted
to be given hereunder to the Voting Trustee shall be given by personally
delivering or mailing the same to Wayne R. Hellman, 2307 E. Aurora Road, Suite
One, Twinsburg, Ohio 44087 or such other address as shall be furnished in
writing by the Voting Trustee to the owners of Voting Trust Certificates.
9. PAYMENT OF TAXES. If at any time any tax is payable by the
Voting Trustee in respect of the ownership of the Voting Shares held by him or
in respect of any dividends, distributions, or other rights in respect of the
Shares, the tax may be paid out of any assets of the Voting Trust created by
this Agreement or any dividends or distributions received by the Voting Trustee;
provided, however, that the Voting Trustee shall be fully reimbursed by the
Shareholders, on a pro rata basis based upon Share ownership, for any such
payments by the Voting Trustee not satisfied out of the assets of the Voting
Trust or dividends or distributions received by the Voting Trustee.
10. AMENDMENT. If, at any time, the Voting Trustee shall deem
it desirable to amend this Agreement in any respect he shall submit such
amendment to the owners of the outstanding Voting Trust Certificates for their
approval at a meeting of such holders which shall be called for that purpose.
The notice, which shall be in writing and be given at least fifteen (15) days
prior to the proposed meeting, shall state that the purpose of the meeting is to
consider the amendment of this Agreement and shall be accompanied by a copy of
the proposed amendment. If at such meeting the proposed amendment or any
modification thereof shall be approved by the owners of a majority in interest
of the outstanding Voting Trust Certificates based on the number of Shares
represented by such Voting Trust Certificates, a certificate to that effect
shall be made and verified by a Secretary elected at such meeting and filed with
the Voting Trustee. Upon such approval and the filing of said certificate with
the books of record kept by the Voting Trustee, the proposed amendment or
modification thereof shall become a part of this Agreement with like force and
effect as if originally incorporated herein. In the event that any Shareholder
acquires additional shares of the Company (excluding shares of stock purchased
by a Shareholder from any other holder of shares of stock of the Company except
those individuals named on Exhibit "A") subsequent to the date hereof, the
Voting Trustee shall be authorized to modify.
11. MISCELLANEOUS.
(a) ACCEPTANCE BY VOTING TRUSTEE. The Voting Trustee
accepts the trust hereunder and agrees to perform the same upon the terms and
conditions hereof.
(b) PARTIES TO AGREEMENT. This Agreement shall be binding upon
and shall operate for the benefit of the Shareholders and the Voting Trustee and
their respective heirs, estates, personal representatives, successors and
permitted assigns, and shall be binding upon any transferee of Shares or Voting
Trust Certificates from a Shareholder. Subject to the terms of Section 7(c), the
name of any transferee of Shares or Voting Trust Certificates from a Shareholder
shall be added or be deemed to be added to the attached Exhibit "A" and such
persons shall be considered Shareholders for purposes of this Agreement.
(c) ENTIRE AGREEMENT. This Agreement contains the entire
understanding among the parties and supersedes any prior understanding and
agreements between them respecting the within subject matter
- 6 -
<PAGE> 7
hereof. There are no representations, agreements, arrangements, or
understandings, oral or written, between or among the parties hereto relating
to the subject matter of this Agreement which are not fully expressed herein.
(d) SURVIVAL. This Agreement shall be binding upon and inure
to the benefit of the heirs, executors, administrators successors, and assigns
of the parties hereto.
(e) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, and such
counterparts shall together constitute one and the same instrument. The
execution by any one party of any counterpart shall be sufficient execution by
that party, whether or not the same counterpart has been executed by any other
party.
(f) FRACTIONAL SHARES. Whenever necessary, the Voting Trustee
may issue Voting Trust Certificates for fractional Shares.
(g) GENDER; NUMBER. Whenever the context of this Agreement
requires, the masculine gender includes the neuter or feminine, and the singular
number includes the plural.
(h) EFFECTIVENESS OF AGREEMENT. This Agreement shall become
effective when it shall be signed by the Voting Trustee and on behalf of each
Shareholder.
(i) GOVERNING LAW. The validity of this Agreement or any part
hereof, and the interpretation and enforcement of all provisions hereof, shall
be governed by and construed and enforced in accordance with the laws of the
State of Ohio.
(j) INVALIDITY. The invalidity of any term or provisions of
this Agreement shall not affect the validity of the remainder of this Agreement
and this Agreement shall be enforced to the greatest extent permitted by law.
(k) HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have signed the
attached counterpart signature pages of this Agreement as of the day and year
first above written.
(Agreement and Signature Lines Continue on Following Pages)
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on October___, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
VOTING TRUSTEE:
--------------------------------------
WAYNE R. HELLMAN
- 7 -
<PAGE> 8
Date: October ___, 1995
- 8 -
<PAGE> 9
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on October___, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
SHAREHOLDER:
--------------------------------------
LOUIS S. FISI
Date: October___, 1995
- 9 -
<PAGE> 10
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on October __, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
SHAREHOLDER:
--------------------------------------
DAVID L. JENNINGS
Date: October __, 1995
- 10 -
<PAGE> 11
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on October___, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
SHAREHOLDER:
--------------------------------------
JURIS SULCS
Date: October___, 1995
- 11 -
<PAGE> 12
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on October___, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
SHAREHOLDER:
--------------------------------------
ROBERT S. ROLLER
Date: October___, 1995
- 12 -
<PAGE> 13
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on October___, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
SHAREHOLDER:
--------------------------------------
BRIAN A. HELLMAN
Date: October___, 1995
- 13 -
<PAGE> 14
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on October___, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
SHAREHOLDER:
--------------------------------------
LISA B. HELLMAN
Date: October___, 1995
- 14 -
<PAGE> 15
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on October___, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
SHAREHOLDER:
--------------------------------------
JAMES F. SARVER
Date: October___, 1995
- 15 -
<PAGE> 16
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on October 10, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
THE LISA MARIE ROLLER LONG TERM TRUST
DATED SEPTEMBER 24, 1995
By: ______________________________________
ROBERT S. ROLLER, as Co-Trustee of
THE LISA MARIE ROLLER LONG TERM
TRUST DATED SEPTEMBER 24, 1995
By: ______________________________________
PATRICIA M. ROLLER, as Co-Trustee of
THE LISA MARIE ROLLER LONG TERM
TRUST DATED SEPTEMBER 24, 1995
Date: October 10, 1995
- 16 -
<PAGE> 17
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on October 10, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
THE JENNIFER LYNN JARRETT LONG TERM TRUST
DATED SEPTEMBER 24, 1995
By: _____________________________________
ROBERT S. ROLLER, as Co-Trustee of
THE JENNIFER LYNN JARRETT LONG TERM
TRUST DATED SEPTEMBER 24, 1995
By: _____________________________________
PATRICIA M. ROLLER, as Co-Trustee of
THE JENNIFER LYNN JARRETT LONG TERM
TRUST DATED SEPTEMBER 24, 1995
Date: October 10, 1995
- 17 -
<PAGE> 18
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on October 10, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
THE KIMBERLEY JOY ROLLER LONG TERM TRUST
DATED SEPTEMBER 24, 1995
By: ______________________________________
ROBERT S. ROLLER, as Co-Trustee of
THE KIMBERLEY JOY ROLLER LONG TERM
TRUST DATED SEPTEMBER 24, 1995
By: ______________________________________
PATRICIA M. ROLLER, as Co-Trustee of
THE KIMBERLEY JOY ROLLER LONG TERM
TRUST DATED SEPTEMBER 24, 1995
Date: October 10, 1995
- 18 -
<PAGE> 19
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on October 10, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
THE LISA MARIE ROLLER TRUST DATED
AUGUST 24, 1995
By: ______________________________________
ROBERT S. ROLLER, as Co-Trustee of
THE LISA MARIE ROLLER LONG TERM
TRUST DATED AUGUST 24, 1995
By: ______________________________________
PATRICIA M. ROLLER, as Co-Trustee of
THE LISA MARIE ROLLER LONG TERM
TRUST DATED AUGUST 24, 1995
Date: October 10, 1995
- 19 -
<PAGE> 20
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on October 10, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
THE JENNIFER LYNN JARRETT TRUST
DATED AUGUST 24, 1995
By: ______________________________________
ROBERT S. ROLLER, as Co-Trustee of
THE JENNIFER LYNN JARRETT TRUST
DATED AUGUST 24, 1995
By: ______________________________________
PATRICIA M. ROLLER, as Co-Trustee of
THE JENNIFER LYNN JARRETT TRUST
DATED AUGUST 24, 1995
Date: October 10, 1995
- 20 -
<PAGE> 21
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on October 10, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
THE KIMBERLEY JOY ROLLER LONG TERM TRUST
DATED AUGUST 24, 1995
By: ______________________________________
ROBERT S. ROLLER, as Co-Trustee of
THE KIMBERLEY JOY ROLLER LONG TERM
TRUST DATED AUGUST 24, 1995
By: ______________________________________
PATRICIA M. ROLLER, as Co-Trustee of
THE KIMBERLEY JOY ROLLER LONG TERM
TRUST DATED AUGUST 24, 1995
Date: October 10, 1995
- 21 -
<PAGE> 22
EXHIBIT "A"
<TABLE>
<CAPTION>
SHAREHOLDERS NUMBER OF SHARES
---------------------------------- ----------------
<S> <C>
David L. Jennings 858,145
Robert S. Roller 500,668
James F. Sarver 459,485
Louis S. Fisi 657,112
Juris Sulcs 449,299
Brian A. Hellman 177,523
Lisa B. Hellman 167,206
Lisa Marie Roller Trust
dated August 24, 1995 9,708
Jennifer Lynn Jarrett Trust
dated August 24, 1995 9,708
Kimberly Joy Roller Trust
dated August 24, 1995 9,708
Lisa Marie Roller Trust
dated September 24, 1995 17,261
Jennifer Lynn Jarrett Trust
dated September 24, 1995 17,261
Kimberly Joy Roller Trust
dated September 24, 1995 17,268
</TABLE>
- 22 -
<PAGE> 23
EXHIBIT "B"
VOTING TRUST CERTIFICATE
ADVANCED LIGHTING TECHNOLOGIES, INC.
------------------------------------
No. _______________ _____ Shares of
Common Stock
WAYNE R. HELLMAN, the Voting Trustee under an Voting Trust
Agreement dated October___, 1995 (the "Agreement"), having received certain
shares of common stock of Advanced Lighting Technologies, Inc., an Ohio
corporation (the "Company") pursuant to the Agreement, hereby certifies that
_________________________ will be entitled to receive a certificate for
__________ fully paid shares of common stock, without par value, of the Company,
on the expiration or termination of the Agreement.
IN WITNESS WHEREOF, the Trustee has executed this Certificate
this ____ day of __________, 1995.
- ------------------------------------- --------------------------------
WAYNE R. HELLMAN, Voting Trustee
Name:________________________________
- -------------------------------------
Name:________________________________
STATE OF OHIO )
) SS:
COUNTY OF ______ )
The foregoing instrument was acknowledged before me this _____
day of September, 1995, by _____________________, an individual, as his free act
and deed.
--------------------------------------
Notary Public
- 23 -
<PAGE> 24
AMENDMENT NO. 1 TO
VOTING TRUST AGREEMENT
THIS AMENDMENT NO. 1 TO VOTING TRUST AGREEMENT, made and
entered into at Solon, Ohio, as of the 20th day of December, 1995 by and between
WAYNE R. HELLMAN as voting trustee (the "Voting Trustee") of the voting trust
created by this Agreement, and such owners of common stock, $.001 par value, of
ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio corporation (the "Company") whose
names are listed on Exhibit "A" attached hereto (hereinafter sometimes
separately referred to as a "Shareholder" and collectively as the
"Shareholders").
W I T N E S E T H:
------------------
WHEREAS, the Shareholders are the owners of shares of common
stock, $.001 par value, of the Company (the "Shares") subject to the terms of a
certain Voting Trust Agreement dated October 10, 1995 executed by such
Shareholders; and
WHEREAS, the Shareholders may desire to borrow funds and to
secure such loans ("Loans") by pledging a portion of their Shares.
NOW, THEREFORE, the parties hereto agree as follows:
1. AMENDMENT TO SECTION 7. Section 7(e) shall be added to
Section 7 of the Voting Trust Agreement and shall provide as follows:
(e) PLEDGING OF SHARES. The Shareholders may pledge
any portion of their Shares ("Pledged Shares") to secure the
Loans and such Pledged Shares shall not be subject to the
restrictions contained herein. Upon the repayment of such
Loans and the cancellation of such pledge, the Pledged Shares
shall again be subject to the terms of this Agreement and the
restrictions contained herein. In connection with the pledging
of Shares, the owners of the Voting Trust Certificates shall
surrender their Voting Trust Certificates to the Voting
Trustee or, upon the Voting Trustee's death or disability, the
Secretary of the Company, who shall deliver to the Company the
certificates representing the Pledged Shares, and the
Secretary of the Company shall cause the transfer agent of the
Company to issue certificates representing the Pledged Shares
to the appropriate respective owners of the Voting Trust
Certificates to be delivered to such owners upon surrender of
their respective Voting Trust Certificates. Upon repayment of
the Loans and the cancellation of such pledge and the return
of the Pledged Shares to the Shareholder, such Shareholder
shall immediately deliver the Pledged Shares to the Voting
Trustee in accordance with Section 1 of this Agreement. The
Voting Trustee or upon the Voting Trustee's death or
disability, the Secretary shall have the power to take or
cause to be taken such further and other action as he may deem
necessary or desirable to conclude promptly the duties imposed
upon him in this Section; provided however, he shall have no
authority to exercise any voting rights of the Shares.
2. PARTIES TO AGREEMENT. This Amendment shall be binding upon and shall
operate for the benefit of the Shareholders and the Voting Trustee and their
respective heirs, estates, personal representatives,
<PAGE> 25
successors and permitted assigns, and shall be binding upon any transferee of
Shares or Voting Trust Certificates from a Shareholder.
3. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, and such
counterparts shall together constitute one and the same instrument. The
execution by any one party of any counterpart shall be sufficient execution by
that party, whether or not the same counterpart has been executed by any other
party.
4. EFFECTIVENESS OF AGREEMENT. This Amendment shall become effective
when it shall be signed by the Voting Trustee and on behalf of each Shareholder.
5. GOVERNING LAW. The validity of this Agreement or any part hereof,
and the interpretation and enforcement of all provisions hereof, shall be
governed by and construed and enforced in accordance with the laws of the State
of Ohio.
6. INVALIDITY. The invalidity of any term or provisions of this
Agreement shall not affect the validity of the remainder of this Agreement and
this Agreement shall be enforced to the greatest extent permitted by law.
IN WITNESS WHEREOF, the parties hereto have signed the
attached counterpart signature pages of this Amendment No. 1 to Voting Trust
Agreement as of the day and year first above written.
(Agreement and Signature Lines Continue on Following Pages)
- 2 -
<PAGE> 26
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on December 20, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
VOTING TRUSTEE:
--------------------------------------
WAYNE R. HELLMAN
Date: December 20, 1995
- 3 -
<PAGE> 27
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on December 20, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
SHAREHOLDER:
--------------------------------------
LOUIS S. FISI
Date: December 20, 1995
- 4 -
<PAGE> 28
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on December 20, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
SHAREHOLDER:
--------------------------------------
DAVID L. JENNINGS
Date: December 20, 1995
- 5 -
<PAGE> 29
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on December 20, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
SHAREHOLDER:
--------------------------------------
JURIS SULCS
Date: December 20, 1995
- 6 -
<PAGE> 30
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on December 20, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
SHAREHOLDER:
--------------------------------------
ROBERT S. ROLLER
Date: December 20, 1995
- 7 -
<PAGE> 31
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on December 20, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
SHAREHOLDER:
--------------------------------------
BRIAN A. HELLMAN
Date: December 20, 1995
- 8 -
<PAGE> 32
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on December 20, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
SHAREHOLDER:
--------------------------------------
LISA B. HELLMAN
Date: December 20, 1995
- 9 -
<PAGE> 33
This page constitutes a counterpart signature page to the
Voting Trust Agreement made and entered into by and among Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and certain
Shareholders of the Company on December 20, 1995. The undersigned parties hereby
agree to be bound by the terms thereof.
SHAREHOLDER:
--------------------------------------
JAMES F. SARVER
Date: December 20, 1995
- 10 -
<PAGE> 34
This page constitutes a counterpart signature page to the
Voting Trust Agreement (Amendment No. 1) made and entered into by and among
Advanced Lighting Technologies, Inc., an Ohio corporation (the "Company"), and
certain Shareholders of the Company on December 20, 1995. The undersigned
parties hereby agree to be bound by the terms thereof.
SHAREHOLDER:
THE LISA MARIE ROLLER LONG TERM TRUST
DATED SEPTEMBER 24, 1995
By: ______________________________________
ROBERT S. ROLLER, as Co-Trustee of
THE LISA MARIE ROLLER LONG TERM
TRUST DATED SEPTEMBER 24, 1995
By: ______________________________________
PATRICIA M. ROLLER, as Co-Trustee of
THE LISA MARIE ROLLER LONG TERM
TRUST DATED SEPTEMBER 24, 1995
Date: December 20, 1995
- 11 -
<PAGE> 35
This page constitutes a counterpart signature page to the
Voting Trust Agreement (Amendment No. 1) made and entered into by and among
Advanced Lighting Technologies, Inc., an Ohio corporation (the "Company"), and
certain Shareholders of the Company on December 20, 1995. The undersigned
parties hereby agree to be bound by the terms thereof.
SHAREHOLDER:
THE JENNIFER LYNN JARRETT LONG TERM
TRUST DATED SEPTEMBER 24, 1995
By: _____________________________________
ROBERT S. ROLLER, as Co-Trustee of
THE JENNIFER LYNN JARRETT LONG TERM
TRUST DATED SEPTEMBER 24, 1995
By: _____________________________________
PATRICIA M. ROLLER, as Co-Trustee of
THE JENNIFER LYNN JARRETT LONG TERM
TRUST DATED SEPTEMBER 24, 1995
Date: December 20, 1995
- 12 -
<PAGE> 36
This page constitutes a counterpart signature page to the
Voting Trust Agreement (Amendment No. 1) made and entered into by and among
Advanced Lighting Technologies, Inc., an Ohio corporation (the "Company"), and
certain Shareholders of the Company on December 20, 1995. The undersigned
parties hereby agree to be bound by the terms thereof.
SHAREHOLDER:
THE KIMBERLEY JOY ROLLER LONG TERM TRUST
DATED SEPTEMBER 24, 1995
By: ______________________________________
ROBERT S. ROLLER, as Co-Trustee of
THE KIMBERLEY JOY ROLLER LONG TERM
TRUST DATED SEPTEMBER 24, 1995
By: ______________________________________
PATRICIA M. ROLLER, as Co-Trustee of
THE KIMBERLEY JOY ROLLER LONG TERM
TRUST DATED SEPTEMBER 24, 1995
Date: December 20, 1995
- 13 -
<PAGE> 37
This page constitutes a counterpart signature page to the
Voting Trust Agreement (Amendment No. 1) made and entered into by and among
Advanced Lighting Technologies, Inc., an Ohio corporation (the "Company"), and
certain Shareholders of the Company on December 20, 1995. The undersigned
parties hereby agree to be bound by the terms thereof.
SHAREHOLDER:
THE LISA MARIE ROLLER TRUST DATED
AUGUST 24, 1995
By: ______________________________________
ROBERT S. ROLLER, as Co-Trustee of
THE LISA MARIE ROLLER LONG TERM
TRUST DATED AUGUST 24, 1995
By: ______________________________________
PATRICIA M. ROLLER, as Co-Trustee of
THE LISA MARIE ROLLER LONG TERM
TRUST DATED AUGUST 24, 1995
Date: December 20, 1995
- 14 -
<PAGE> 38
This page constitutes a counterpart signature page to the
Voting Trust Agreement (Amendment No. 1) made and entered into by and among
Advanced Lighting Technologies, Inc., an Ohio corporation (the "Company"), and
certain Shareholders of the Company on December 20, 1995. The undersigned
parties hereby agree to be bound by the terms thereof.
SHAREHOLDER:
THE JENNIFER LYNN JARRETT TRUST
DATED AUGUST 24, 1995
By: ______________________________________
ROBERT S. ROLLER, as Co-Trustee of
THE JENNIFER LYNN JARRETT TRUST
DATED AUGUST 24, 1995
By: ______________________________________
PATRICIA M. ROLLER, as Co-Trustee of
THE JENNIFER LYNN JARRETT TRUST
DATED AUGUST 24, 1995
Date: December 20, 1995
- 15 -
<PAGE> 39
This page constitutes a counterpart signature page to the
Voting Trust Agreement (Amendment No. 1) made and entered into by and among
Advanced Lighting Technologies, Inc., an Ohio corporation (the "Company"), and
certain Shareholders of the Company on December 20, 1995. The undersigned
parties hereby agree to be bound by the terms thereof.
SHAREHOLDER:
THE KIMBERLEY JOY ROLLER LONG TERM TRUST
DATED AUGUST 24, 1995
By: ______________________________________
ROBERT S. ROLLER, as Co-Trustee of
THE KIMBERLEY JOY ROLLER LONG TERM
TRUST DATED AUGUST 24, 1995
By: ______________________________________
PATRICIA M. ROLLER, as Co-Trustee of
THE KIMBERLEY JOY ROLLER LONG TERM
TRUST DATED AUGUST 24, 1995
Date: December 20, 1995
- 16 -
<PAGE> 40
EXHIBIT "A"
Louis S. Fisi
Lisa B. Hellman
Brian A. Hellman
David L. Jennings
Robert S. Roller
James F. Sarver
Juris Sulcs
Lisa Marie Roller Trust
dated August 24, 1995
Jennifer Lynn Jarrett Trust
dated August 24, 1995
Kimberly Joy Roller Trust
dated August 24, 1995
Lisa Marie Roller Trust
dated September 24, 1995
Jennifer Lynn Jarrett Trust
dated September 24, 1995
Kimberly Joy Roller Trust
dated September 24, 1995
- 17 -
<PAGE> 1
Exhibit 9.2
IRREVOCABLE PROXY
1. The undersigned shareholder ("Shareholder"), holder of the number of
shares of common stock of Advanced Lighting Technologies, Inc., an Ohio
corporation (the "Company") indicated opposite his signature, hereby
irrevocably appoints and constitutes WAYNE R. HELLMAN ("Proxy Holder")
as his attorney and proxy to exercise all shareholder rights of the
Shareholder in respect of the Shares, including, but not limited to,
the right to exercise the voting rights of such Shares on each matter
submitted to the Company's shareholders for their vote, consent,
waiver, release, or other action and the right to take part in any
corporate or shareholders' action of the Company, whether ordinary or
extraordinary, by proxy or otherwise. The right of the Proxy Holder to
exercise the voting rights of the Shares in accordance with the terms
hereof includes, but is not limited to, the exercise of voting rights
relating to fixing the number and election of directors of the Company,
the changing of the Company's capital structure, the amendment of the
Company's Articles of Incorporation or Code of Regulations, the
reclassification of the Shares, the purchase of assets by the Company,
and the merger, consolidation, liquidation or dissolution of the
Company. The Shareholder shall not have any right to exercise the
voting rights of such Shares or to take part in any corporate or
shareholders' action or to do or perform any act or thing that
shareholders of the Company are now or may hereafter become entitled to
do or to perform, for so long as the Shares owned by such Shareholder
are subject to this Irrevocable Proxy pursuant to Section 3 hereof,
except to receive cash dividends and distributions when declared and
paid and to review the books and records of the Company during normal
business hours. Notwithstanding anything to the contrary, the Proxy
Holder shall not have the right to sell or otherwise transfer the
Shares of the Shareholder. The power and duties of the Proxy Holder
shall be identical to the power and duties of the Proxy Holder in his
capacity as Voting Trustee under a certain Voting Trust Agreement
dated October 10, 1995 as amended by Amendment No. 1 to Voting Trust
Agreement, dated December 20, 1995 ("Voting Trust Agreement") as set
forth in Sections 5 and 6 of the Voting Trust Agreement, which are
hereby incorporated by reference.
2. In exercising the voting rights of the Shares, or in doing any act with
respect to the control or management of the Company or its affairs, or
otherwise acting hereunder, the Proxy Holder shall be free to exercise
his full discretion. Notwithstanding anything to the contrary, the
Proxy Holder shall not have the right to sell or otherwise transfer the
Shares of the Shareholder.
3. In compliance with Ohio Revised Code, Section 1701.48 this Irrevocable
Proxy is made irrevocable and executed in consideration of the release
of the Shares from the Voting Trust Agreement to permit Shareholder to
obtain a margin loan from Prudential Securities Incorporated ("Margin
Loan") provided, however, upon repayment of the Margin Loan, the Shares
shall again become subject to the Voting Trust Agreement. This proxy is
made irrevocable so as to secure the Proxy Holder's right as Voting
Trustee under the Voting Trust Agreement to vote the Shares upon the
release of the Shares from the Voting Trust Agreement and to secure
Shareholder's agreement that the Shares shall again become subject to
the Voting Trust Agreement upon repayment of the Margin Loan.
4. Any additional shares issued to the Shareholder shall be subject to
this Irrevocable Proxy only to the extent such additional shares would
be subject to the Voting Trust Agreement.
5. This Proxy for all or a portion of the Shares shall terminate upon the
earlier to occur of (a) Prudential Securities Incorporated has
exercised its rights upon an event of default under the Margin Loan,
(b) the repayment of the Margin Loan, and the Shares becoming subject
to the Voting Trust Agreement or (c) the termination of the Voting
Trust Agreement pursuant to Section 7 of the Voting Trust Agreement.
<PAGE> 2
6. In the event of a dispute or controversy arising out of or relating to
this Irrevocable Proxy, or performance hereof, Proxy Holder shall be
entitled to vote the shares pursuant to this Irrevocable Proxy during
the pendency of such dispute.
This Irrevocable Proxy may be executed in one or more counterparts, each of
which shall constitute an original document, but all of which together shall be
one and same Irrevocable Proxy.
SHAREHOLDER:
No. of Shares Subject to
this Irrevocable Proxy: ______
______________________________
______________________________
Dated: _______ __, 1996
ACCEPTED AND AGREED TO:
PROXY HOLDER
______________________________
Wayne R. Hellman
Dated: _______ __, 1996
<PAGE> 1
EXHIBIT 11.1
ADVANCED LIGHTING TECHNOLOGIES, INC.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31
--------------------------------------------------------
1995 1996
--------------------------- ---------------------------
SHARES AMOUNT EPS SHARES AMOUNT EPS
------ ------- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary charges....... $2,068 $ 958
Less: Preferred stock dividends........... (58 ) --
Increase in warrants value.......... (1,728 ) (1,350 )
------- -------
INCOME (LOSS) BEFORE EXTRAORDINARY CHARGES
ATTRIBUTABLE TO COMMON SHAREHOLDERS..... $ 282 $ (392 )
======= =======
Net income................................ $1,815 $ 823
Less: Preferred stock dividends........... (58 ) --
Increase in warrants value.......... (1,728 ) (1,350 )
------- -------
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON SHAREHOLDERS..................... $ 29 $ (527 )
======= =======
Sharebase:
Shares deemed outstanding at beginning
of period............................ 7,282 7,282
Weighted average shares issued pursuant
to initial public offering........... -- 1,171
Weighted average shares issued upon
warrant conversion................... -- 216
Weighted average common share
equivalents.......................... 536 320
Weighted average shares issued during
the period........................... -- 9
Weighted average contingent shares
issuable............................. -- 1
------ ------
7,818 8,999
====== ======
Income (loss) per share:
Income (loss) before extraordinary
charges.............................. $ 0.03 $(0.04)
Extraordinary charges................... (0.03) (0.02)
------ ------
NET INCOME (LOSS) PER SHARE............... $(0.00) $(0.06)
====== ======
</TABLE>
<PAGE> 1
EXHIBIT 21.0
The following is a list of the direct and indirect subsidiaries of Advanced
Lighting Technologies, Inc., all of which are organized under the laws of the
State of Ohio, except where indicated:
APL Engineered Materials, Inc.
Venture Lighting International, Inc.
Specialty Discharge Lighting, Inc.
Lighting Resources International, Inc.
Metal Halide Technologies, Inc.
Energy-Wise Lighting, Inc.
The Light Source, Inc.
Bio Light, Inc.
HID Direct, Inc.
Bright Ideas Advertising and Design, Inc.
High Intensity Technologies, Inc.
Energy Efficient Products, Inc.
Metal Halide Controls, Inc.
MICROSUN Technologies, Inc.
HID Recycling, Inc.
Advanced Lighting Technologies Australia, Inc.
Venture Lighting International, Ltd.
(organized under the laws of the United Kingdom)
Pacific Lighting, Inc.
(organized under the laws of the British Virgin Islands)
Spectro Electric, Inc.
a/k/a/ Advanced Lighting Technologies Canada, Inc.
(organized under the laws of Ontario)
Advanced Lighting Technologies Ltd.
(organized under the laws of the United Kingdom)
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated October 5, 1995, in the Registration Statement (Form
S-1 No. 333- ) and related Prospectus of Advanced Lighting
Technologies, Inc. for the registration of 3,795,000 shares of its Common Stock.
ERNST & YOUNG LLP
Cleveland, Ohio
June 11, 1996
<PAGE> 1
EXHIBIT 23.4
CONSENT OF DOANE RAYMOND, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 14, 1996, except as to Note 16, which is as
of May 1, 1996 in the Registration Statement (Form S-1 No. 333- ) and
related Prospectus of Advanced Lighting Technologies, Inc. for the registration
of 3,795,000 shares of its common stock.
/s/ Doane Raymond
Chartered Accountants
Markham, Canada
June 11, 1996