<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - -------- EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1998
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - -------- EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission File Number: 0-27202
ADVANCED LIGHTING TECHNOLOGIES, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 34-1803229
- - --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
32000 AURORA ROAD, SOLON, OHIO 44139
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
440 / 519-0500
- - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
There were 20,226,257 shares of the Registrant's Common Stock, $.001 par value
per share, outstanding as of January 31, 1999.
<PAGE> 2
INDEX
ADVANCED LIGHTING TECHNOLOGIES, INC.
<TABLE>
<CAPTION>
PAGE NO.
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - December 31, 1998
and June 30, 1998........................................................ 2
Condensed Consolidated Statements of Operations -- Three months
and six months ended December 31, 1998 and 1997 ......................... 3
Condensed Statement of Consolidated Shareholders' Equity --
Six months ended December 31, 1998....................................... 4
Condensed Consolidated Statements of Cash Flows -
Six months ended December 31, 1998 and 1997.............................. 5
Notes to Condensed Consolidated Financial Statements.......................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................. 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk........................ 27
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............................... 28
Item 6. Exhibits and Reports on Form 8-K.................................................. 29
SIGNATURES.......................................................................................... 30
EXHIBIT INDEX....................................................................................... 31
</TABLE>
<PAGE> 3
ADVANCED LIGHTING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
DECEMBER 31, JUNE 30,
1998 1998
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,656 $ 21,917
Short-term investments 350 350
Trade receivables, less allowances of $553 and $397 29,552 40,779
Receivables from related parties 1,697 1,034
Inventories:
Finished goods 29,862 29,556
Raw materials and work-in-process 21,151 15,184
--------- ---------
51,013 44,740
Prepaid expenses 3,778 3,200
Deferred taxes - 2,192
--------- ---------
Total current assets 97,046 114,212
Property, plant and equipment:
Land and buildings 38,269 31,429
Production machinery and equipment 59,435 52,235
Other equipment 6,413 -
Furniture and fixtures 18,501 18,316
--------- ---------
122,618 101,980
Less accumulated depreciation 14,494 11,952
--------- ---------
108,124 90,028
Deferred taxes 3,171 2,892
Receivables from related parties 4,919 3,157
Net assets associated with discontinued operations 278 5,193
Investments in affiliates 22,109 20,591
Other assets 7,750 8,878
Intangible assets 33,610 34,377
Excess of cost over net assets of businesses acquired, net 53,089 32,524
--------- ---------
$ 330,096 $ 311,852
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt $ 1,953 $ 1,960
Accounts payable 19,842 14,967
Payables to related parties 1,653 618
Employee-related liabilities 4,620 3,259
Accrued income and other taxes 664 2,729
Other accrued expenses 14,512 13,042
--------- ---------
Total current liabilities 43,244 36,575
Long-term debt 160,499 117,332
Other liabilities 465 766
Deferred taxes 3,171 3,059
Shareholders' equity
Preferred stock, $.001 par value, 1,000 shares authorized, no shares issued - -
Common stock, $.001 par value, 80,000 shares authorized, 20,226 shares
issued and outstanding as of December 31, 1998 and 20,189 shares issued
and outstanding as of June 30, 1998 20 20
Paid-in-capital 190,295 172,900
Accumulated other comprehensive income 54 -
Loan receivable from officer (9,168) -
Retained earnings (deficit) (58,484) (18,800)
--------- ---------
122,717 154,120
--------- ---------
$ 330,096 $ 311,852
========= =========
</TABLE>
See notes to condensed consolidated financial statements
2
<PAGE> 4
ADVANCED LIGHTING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share dollar amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------- -------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 37,944 $ 31,879 $ 88,302 $ 61,816
Costs and expenses:
Cost of sales 30,073 18,467 59,709 35,793
Marketing and selling 10,283 4,915 19,142 9,331
Research and development 5,405 1,822 9,153 3,221
General and administrative 5,129 2,006 9,450 4,220
Fiber optic joint venture formation costs - - - 212
Special charges 13,292 - 13,292 -
Amortization of intangible assets 678 211 1,237 425
-------- -------- -------- --------
Income (loss) from operations (26,916) 4,458 (23,681) 8,614
Other income (expense):
Interest expense (3,431) - (6,158) (327)
Interest income 328 281 566 808
Loss from equity investments (272) - (461) -
-------- -------- -------- --------
Income (loss) from continuing operations
before income taxes (30,291) 4,739 (29,734) 9,095
Income taxes 3,515 1,706 3,784 3,274
-------- -------- -------- --------
Income (loss) from continuing operations (33,806) 3,033 (33,518) 5,821
Discontinued operations
Loss from operations of discontinued business
(net of income tax benefits of $135 and $303 for the
three month and six month periods, respectively) - (241) - (539)
Loss on disposal of discontinued business,
including provision of $1,166 for operating
losses during phase-out period (6,166) - (6,166) -
-------- -------- -------- --------
Net income (loss) $(39,972) $ 2,792 $(39,684) $ 5,282
======== ======== ======== ========
Earnings per share -- Basic:
Income (loss) from continuing operations $ (1.67) $ .18 $ (1.66) $ .36
Loss from discontinued operations (.31) (.01) (.30) (.04)
-------- -------- -------- --------
Earnings (loss) per share -- Basic $ (1.98) $ .17 $ (1.96) $ .32
======== ======== ======== ========
Earnings per share -- Diluted:
Income (loss) from continuing operations $ (1.67) $ .18 $ (1.66) $ .35
Loss from discontinued operations (.31) (.01) (.30) (.03)
-------- -------- -------- --------
Earnings (loss) per share -- Diluted $ (1.98) $ .17 $ (1.96) $ .32
======== ======== ======== ========
Weighted average shares outstanding:
Basic 20,222 16,506 20,215 16,378
======== ======== ======== ========
Diluted 20,222 16,778 20,215 16,702
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
ADVANCED LIGHTING TECHNOLOGIES, INC.
CONDENSED STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1998
---------------------------------------------------------------------------------------------------
ACCUMULATED LOAN
COMMON STOCK OTHER RECEIVABLE RETAINED
------------------------ PAID-IN COMPREHENSIVE FROM EARNINGS
SHARES PAR VALUE CAPITAL INCOME OFFICER (DEFICIT) TOTAL
---------- ----------- ------------ ---------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1998 20,189 $ 20 $ 172,900 $ - $ - $ (18,800) $ 154,120
Net loss (39,684) (39,684)
Foreign currency
translation adjustment 54 54
Loan to officer (9,168) (9,168)
Valuation adjustment of
shares issued in connection
with the purchase of
Ruud Lighting, Inc. 16,928 16,928
Issuance of shares in
connection with the
purchase of a business 2 - 29 29
Stock options exercised 17 - 279 279
Stock purchases
by employees 18 - 159 159
---------- ----------- ------------ ---------------- ----------- ------------- -------------
BALANCE AT
DECEMBER 31, 1998 20,226 $ 20 $190,295 $ 54 $ (9,168) $ (58,484) $122,717
========== =========== ============ ================ =========== ============= =============
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE> 6
ADVANCED LIGHTING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
---------------------------------
1998 1997
------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Income (loss) from continuing operations $ (33,518) $ 5,821
Adjustments to reconcile income (loss) from continuing
operations to net cash used in operating activities:
Depreciation 3,235 1,403
Amortization 1,237 425
Deferred income taxes 3,429 868
Special charges and terminated equipment contracts 22,116 -
Changes in operating assets and liabilities, excluding effects of
acquisitions and discontinued operations:
Trade receivables (4,038) (2,289)
Inventories (5,543) (4,335)
Prepaids and other assets (1,427) (2,496)
Accounts payable and accrued expenses 1,336 (2,551)
Other (266) -
------------- --------------
Net cash used in operating activities (13,439) (3,154)
INVESTING ACTIVITIES
Capital expenditures (17,803) (1,836)
Purchases of businesses (5,024) -
Investments in affiliates (2,837) (3,252)
Use of net proceeds from public offering:
Capital expenditures - (8,329)
Investments in affiliates - (4,835)
------------- --------------
Net cash used in investing activities (25,664) (18,252)
FINANCING ACTIVITIES
Proceeds from revolving credit facility 156,624 35,010
Payments of revolving credit facility (113,724) (35,485)
Proceeds from long-term debt 868 3,165
Payments of long-term debt and capital leases (2,674) (2,103)
Issuance of common stock 438 532
Loan to officer (9,000) -
Net proceeds from public offering - 69,320
Use of net proceeds from public offering:
Payment of long-term debt and revolving credit facility - (33,000)
------------- --------------
Net cash provided by financing activities 32,532 37,439
Net cash used in discontinued operations (4,690) (3,723)
------------- --------------
Increase (Decrease) in cash and cash equivalents (11,261) 12,310
Cash and cash equivalents, beginning of period 21,917 4,198
------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 10,656 $ 16,508
============= ==============
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 5,070 $ 587
Income taxes paid 211 1,077
Capitalized interest 458 416
Noncash transactions
Equipment acquired through capital leases - 376
Stock issued for purchase of business 29 -
Detail of acquisitions:
Assets acquired $ 9,688 -
Liabilities assumed (4,570) -
Stock issued for purchase of business (29) -
------------- --------------
Cash paid 5,089 -
Less cash acquired (65) -
------------- --------------
Net cash paid for acquisitions $ 5,024 -
============= ==============
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE> 7
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1998
(Dollar amounts in thousands)
A. ORGANIZATION
Advanced Lighting Technologies, Inc. (the "Company" or "ADLT") is an
innovation-driven designer, manufacturer and marketer of metal halide lighting
products, including materials, system components, systems and production
equipment.
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 the information and
disclosures required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the financial statements
include all material adjustments necessary for a fair presentation, including
adjustments of a normal and recurring nature as well as the special charges
described in Note G. For further information, refer to the consolidated
financial statements and notes thereto included in the Company's annual report
on Form 10-K for the year ended June 30, 1998. Operating results for the three
months and six months ended December 31, 1998 are not necessarily indicative of
the results that may be expected for the full-year ending June 30, 1999.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts and related disclosures. Actual results could differ
from those estimates.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 provides authoritative guidance on accounting for and
financial reporting of start-up costs and organization costs. The Company is
required to adopt the SOP on July 1, 1999 and, upon adoption, expense all
previously capitalized start-up costs and organization costs as a cumulative
effect of a change in accounting principle. Management is reviewing its
capitalization policies and determining the impact that the adoption of this SOP
is expected to have on its consolidated results of operations and financial
position. At December 31, 1998, the Company estimates that it had approximately
$2,650 of start-up costs included in its consolidated balance sheet.
C. COMPREHENSIVE INCOME
During the first quarter of fiscal 1999, the Company adopted Statement of
Financial Accounting Standards (FAS) No. 130, "Reporting Comprehensive Income,"
which requires disclosure of comprehensive income and its components. FAS No.
130 requires companies to report, in addition to net income, other components of
comprehensive income, which for the Company includes foreign currency
translation adjustments.
6
<PAGE> 8
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1998
(Dollar amounts in thousands)
C. COMPREHENSIVE INCOME (CONTINUED)
The Company had a comprehensive loss of $40,184 for the three months ended
December 31, 1998 and comprehensive income of $2,792 for the three months ended
December 31, 1997. The Company had a comprehensive loss of $39,630 for the six
months ended December 31, 1998 and comprehensive income of $5,282 for the six
months ended December 31, 1997. The Company's adoption of FAS No. 130 had no
effect on the Company's reported results of operations or financial position.
D. REVOLVING BANK CREDIT FACILITY
On October 19, 1998, the Company voluntarily reduced the maximum committed
availability under its revolving credit facility ("Credit Facility") provided by
several North American financial institutions (the "Lenders") to $65,000 from
$85,000. In February 1999, the Company and the Lenders amended the Credit
Facility to provide for future borrowing under an arrangement pursuant to which
the availability of borrowing is determined by the Company's eligible accounts
receivable, eligible inventories and certain other assets. Borrowings under the
Credit Facility are limited to $55,000 with additional borrowings subject to the
approval of all Lenders. Based on the amended terms of the Credit Facility, the
Company would have had $6,400 in available borrowings as of December 31, 1998.
The Credit Facility has a term expiring April 1, 2000. The Company is
actively seeking alternative financing sources and intends to replace the
existing Credit Facility.
Interest rates on loans outstanding are based on the agent bank's prime rate
plus 1% to May 31, 1999 and plus 2% thereafter. The Company is also obligated
to pay a facility fee of .375% on the amount of the facility. The facility
contains certain affirmative and negative covenants customary for this type of
agreement, prohibits cash dividends, and includes financial covenants with
respect to income levels, cash availability and net worth. The principal
security for the facility is substantially all of the personal property of the
Company and each of its North American and United Kingdom subsidiaries, certain
real estate and a pledge of stock of each of the Company's principal
subsidiaries.
E. SENIOR NOTES OFFERING
On March 13, 1998, the Company sold $100,000 of Senior Notes due March 15, 2008,
resulting in net proceeds of approximately $96,150. The Notes have an annual
coupon rate of 8% and interest is payable semiannually on March 15 and September
15. There are no sinking fund requirements.
7
<PAGE> 9
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1998
(Dollar amounts in thousands)
E. SENIOR NOTES OFFERING (CONTINUED)
Until completion of a registered exchange offer to existing noteholders, the
Senior Notes bear interest at 8.5%. The offer is expected to be completed within
45 days following the effectiveness of the Company's related registration
statement.
The Indenture contains covenants that, among other things, limit the ability of
the Company and its Restricted Subsidiaries (as defined therein) to incur
indebtedness, pay dividends, prepay subordinated indebtedness, repurchase
capital stock, make investments, create liens, engage in transactions with
stockholders and affiliates, sell assets and, with respect to the Company,
engage in mergers and consolidations.
F. RELATED PARTY TRANSACTIONS
Pursuant to a loan agreement dated October 8, 1998, between the Company and its
Chairman and Chief Executive Officer ("the CEO"), the Company has loaned $9,000
to its CEO for a one-year term at an interest rate of 8%. The loan was made
following approval by the Company's Board of Directors. The proceeds of the loan
were used by the Company's CEO to reduce the outstanding principal balance of a
margin account loan, which is secured by 2,053,070 shares of the Company's
Common Stock owned by the CEO and a related entity. In connection with the loan,
the Company's Board of Directors asked for and received the CEO's agreement to
extend the term of his employment agreement to December 31, 2003. The loan
agreement prohibits the CEO from encumbering his shares of the Company's Common
Stock in any manner except pursuant to the existing agreements governing the
CEO's margin account, without the consent of the Company's Board of Directors.
As of December 31, 1998, $168 of interest was accrued on the loan.
In connection with the actions described in Note G, the Company recognized $374
in cost of sales for the write-down of specialty inventory and $764 in research
and development expenses related to transactions with affiliates.
G. SPECIAL CHARGES AND TERMINATED EQUIPMENT CONTRACTS
During the quarter ended December 31, 1998, the Company recorded special charges
related to significant changes in its operations, which are intended to
accelerate and intensify the Company's focus on its metal halide products and
significantly reduce its use of cash resources.
The special charges principally relate to the execution of the Company's shift
in strategic direction and include: limiting Pacific Rim expansion; changing
global lamp manufacturing strategy; restructuring marketing operations in North
America and Europe; accelerating an exit from noncore product lines; reducing
excess overhead including staffing reductions; consolidating an equipment
manufacturing operation into the Company's Solon, Ohio facility and
significantly reducing the size of the operation; and, reducing capital
expenditures.
The special charges were determined in accordance with formal plans developed by
the Company's management and approved by the Company's Board of Directors using
the best information available to it at the time. Actions associated with
closing facilities began in the second quarter and are expected to be completed
in the third quarter of fiscal 1999. Employees were terminated enterprise-wide
from almost all areas and units of the Company. Substantially all of the 241
terminated employees left the Company
8
<PAGE> 10
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1998
(Dollar amounts in thousands)
G. SPECIAL CHARGES AND TERMINATED EQUIPMENT CONTRACTS (CONTINUED)
before December 31, 1998, with the remainder scheduled to leave by March 31,
1999. Assets that are no longer in use have been sold or were written-down to
their estimated fair values at December 31, 1998. The amounts the Company will
ultimately incur may change as the plans are executed.
Details of the actions and related special charges recorded during the quarter
ended December 31, 1998 are summarized as follows:
<TABLE>
<CAPTION>
CHARGED TO CHARGES BALANCE AS OF
DESCRIPTION CASH/NONCASH OPERATIONS UTILIZED DECEMBER 31, 1998
- - ------------------------------------ ------------------ -------------- ------------ -----------------
<S> <C> <C> <C> <C>
Limit Pacific Rim Expansion
Severance Cash $ 489 $ 277 $ 212
Lease/contract cancelations Cash/Noncash 779 229 550
Write-down of assets Noncash 1,700 1,700 -
Shut-down costs of facilities Cash 197 - 197
Change in Global Manufacturing Strategy
Severance Cash 328 218 110
Write-down of assets Noncash 3,237 3,237 -
Shut-down costs of facilities Cash 224 208 16
Restructure Marketing Operations in North America and Europe
Severance Cash 264 101 163
Lease/contract cancelations Cash 293 20 273
Write-down of assets Noncash 1,723 1,723 -
Shut-down costs of facilities Cash 238 - 238
Reduce Staffing Requirements Cash/Noncash 1,913 688 1,225
Exit Noncore Inventory Products Noncash 261 261 -
Write-off Long-Lived Assets Cash/Noncash 2,201 2,009 192
Other Cash 253 12 241
-------------- ------------ -----------------
$ 14,100 $ 10,683 $ 3,417
============== ============ =================
</TABLE>
The special charges of $14,100 are classified in the condensed consolidated
statement of operations as cost of goods sold ($808) and special charges
($13,292). The Company incurred additional costs of $374 and $764, as described
in Note F, related to the above actions.
In addition to the special charges recorded during the quarter ended December
31, 1998, the Company anticipates that, in completing the actions required by
the plans, additional pretax charges estimated to be $2,000 will be incurred
during the third and fourth quarters of fiscal 1999. All actions required by the
plans are expected to be completed by September 30, 1999.
9
<PAGE> 11
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1998
(Dollar amounts in thousands)
G. SPECIAL CHARGES AND TERMINATED EQUIPMENT CONTRACTS (CONTINUED)
In conjunction with limiting its Pacific Rim expansion, the Company terminated
production equipment contracts related to the completion of four lamp
manufacturing equipment groups. Accordingly, in the quarter ended December 31,
1998, the Company reversed previously recognized sales of $14,961 and cost of
sales of $6,413 related to these contracts, which were accounted for under the
percentage-of-completion method.
During the fiscal year ended June 30, 1998, the Company recorded special charges
related to an assessment of the Company's global power supply operations. The
special charges of $17,984 principally related to the Company's decision to
refocus and restructure its recently acquired global power supply operations to
concentrate exclusively on opportunities in metal halide. With the January 1998
acquisition of Ruud Lighting, Inc., the Company accelerated the rationalization
of its existing power supply manufacturing operations and distribution
activities in order to capitalize on new opportunities not previously available.
This assessment resulted in the discontinuance of certain power supply products
at the Company's power supply facilities and the write-down of certain
intangible, fixed and other assets. The actions required by the plans related to
the global power supply operations are expected to be completed by March 31,
1999.
Details of the activity related to the fiscal 1998 special charges for the six
months ended December 31, 1998 are summarized as follows:
<TABLE>
<CAPTION>
BALANCE AS OF CHARGES BALANCE AS OF
DESCRIPTION CASH/NONCASH JUNE 30, 1998 UTILIZED DECEMBER 31, 1998
- - ------------------------------------ ------------------ ------------------------------ -----------------
<S> <C> <C> <C> <C>
Severance Cash $ 460 $ 417 $ 43
Lease/contract cancelations Cash 253 139 114
-------------- ------------ -----------------
$ 713 $ 556 $ 157
============== ============ =================
</TABLE>
The balances of the accruals related to the special charges as of December 31,
1998, were classified in the consolidated balance sheet as other accrued
expenses.
10
<PAGE> 12
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1998
(Dollar amounts in thousands)
H. INCOME TAXES
At June 30, 1998, the Company had net operating loss carryforwards ("NOLs") of
$1,960 available to reduce future United States federal taxable income, which
expire 2008 through 2011.
The Company also has research and development credit carryforwards for tax
purposes of approximately $850, which expire 2005 through 2013. Additionally, in
conjunction with the Alternative Minimum Tax ("AMT") rules, the Company had
available AMT credit carryforwards for tax purposes of approximately $1,000,
which may be used indefinitely to reduce regular federal income taxes.
Also, at June 30, 1998, the Company had foreign net operating loss carryforwards
for tax purposes totaling $2,000 that expire in 2006 and $403 that have no
expiration dates.
For the six months ended December 31, 1998, the Company reported a pretax loss
from continuing operations, including special charges, of $29,734 and a pretax
loss on the discontinued operations of the Microsun business of $6,166, which
created $35,900 of operating losses and future tax deductions for financial
reporting purposes. Accordingly, at December 31, 1998, the Company recorded a
valuation allowance for deferred tax assets of $15,503 related to all NOLs, tax
credits and net deductible tax differences.
I. DISCONTINUED OPERATIONS, MICROSUN BUSINESS
In March 1998, the Company approved a plan to distribute to its shareholders, as
a tax-free spin-off transaction estimated to be completed by December 31, 1998,
all of the ownership of Microsun Technologies, Inc., the subsidiary primarily
responsible for development, design, assembly and marketing of metal halide
portable fixtures for hospitality and residential uses. As a result, the
consolidated financial statements of ADLT were reclassified to reflect the
results of operations of Microsun as a discontinued operation in accordance with
generally accepted accounting principles.
Because of deterioration of the capital markets subsequent to June 30, 1998 and
the inability to raise capital necessary to spin-off the Microsun business, the
Company revised its plan for the disposition of Microsun. During December 1998,
the Company concluded that it would wind-down the operations, close the
manufacturing facilities and liquidate the assets of Microsun.
11
<PAGE> 13
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1998
(Dollar amounts in thousands)
I. DISCONTINUED OPERATIONS, MICROSUN BUSINESS (CONTINUED)
As of December 31, 1998, the wind-down of the business was nearing completion.
In doing so, a provision for disposal of $5,000 was recorded for the write-down
of assets to net realizable value and costs related to shut-down and severance.
Summary operating information for Microsun for the three-month and six-month
periods ended December 31, 1998 and 1997, is presented below for informational
purposes only and does not necessarily reflect what the results of operations
would have been had Microsun operated as a stand-alone entity.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
---------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Sales $ 1,760 $ 850 $ 2,689 $ 1,155
Costs and expenses 3,653 1,226 5,878 1,997
------------ ------------ ------------- -------------
Loss before income taxes 1,893 376 3,189 842
Income tax:
Benefit 644 135 1,085 303
Valuation allowance (396) - (396) -
------------ ------------ ------------- -------------
Net loss $ 1,645 $ 241 $ 2,500 $ 539
============ ============ ============= =============
</TABLE>
Operating losses from the measurement date (March 31, 1998) through the date of
disposal (December 31, 1998) were $10,266 ($6,784, net of income tax benefits of
$3,482). At March 31, 1998, the Company estimated operating losses through the
date of disposal of $9,100 ($6,014, net of income tax benefits of $3,086) based
on losses expected to be incurred through the date of spin-off of the business.
Actual operating losses through the completed disposal date of December 31, 1998
exceeded the estimate by $1,166, given the change in the manner in which the
business was disposed. At December 31, 1998, as further discussed in Note H, a
valuation allowance was recorded for the income tax benefits arising from the
Microsun discontinued operations.
At December 31, 1998, the net assets of the disposed business of $278, consisted
of approximately $3,688 of current assets, $3,529 of current liabilities, $548
of noncurrent assets and $429 of noncurrent liabilities.
12
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
(In thousands, except per share amounts)
This report on Form 10-Q may contain forward-looking statements. For this
purpose, any statement contained herein that is not a statement of historical
fact may be deemed to be a forward-looking statement. Without limiting the
foregoing, the words "believes," "anticipates," "plans," "expects," and similar
expressions are intended to identify forward-looking statements. There are a
number of factors that could cause the Company's actual results to differ
materially from those indicated by such forward-looking statements. Such factors
are detailed in the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1998 filed with the Securities and Exchange Commission.
The following is management's discussion and analysis of certain significant
factors which have affected the results of operations and should be read in
conjunction with the accompanying unaudited Condensed Consolidated Financial
Statements and notes thereto.
GENERAL
The Company designs, manufactures and markets metal halide lighting products,
including materials, systems and components. Metal halide lighting is currently
used primarily in commercial and industrial applications such as factories and
warehouses, outdoor site and landscape lighting, sports facilities and large
retail spaces such as superstores. With the January 1998 acquisition of
Deposition Sciences, Inc., the Company also manufactures and markets turnkey
deposition equipment to produce thin film coatings for a variety of
applications. Systems, components and materials revenue is recognized when
products are shipped, and production equipment revenue is recognized under the
percentage of completion method.
Consistent with the Company's strategy for new product introductions, the
Company invests substantial resources in research and development to engineer
materials and system components to be included in customers' specialized
lighting systems. Over the last three fiscal years, the Company has spent an
aggregate of $17,310 on research and development, representing 5.7% of aggregate
net sales from continuing operations over that period. During the six months
ended December 31, 1998, the Company spent $9,153 on research and development,
representing 10.4% of net sales for that period. Such expenditures have enabled
the Company to develop new applications for metal halide lighting, improve the
quality of its materials, and introduce new specialized products, such as the
Uni-Form(R) pulse start products. Uni-Form(R) pulse start products are a new
generation of metal halide systems which permit (a) increased light output with
lower power utilization, (b) faster starting, (c) a quicker restart of lamps
which have been recently turned off, and (d) better color uniformity. The
Company expects to continue to make substantial expenditures on research and
development to enhance its position as the leading innovator in the metal halide
lighting industry.
The Company also has invested substantial resources in acquisitions and
strategic investments. In January 1998, the Company acquired Ruud Lighting, Inc.
and Deposition Sciences, Inc. These acquisitions enabled the Company to complete
the assembly of the necessary operations to take a leadership role in the
development, manufacturing and marketing of new and better products in the
growing metal halide lighting industry.
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<PAGE> 15
RECENT DEVELOPMENTS
PLANS ANNOUNCED IN THE SECOND QUARTER-The Company has implemented plans
resulting in changes to its operations intended to accelerate and intensify the
Company's focus on its metal halide products, insulate it from deteriorating
international markets and the anticipated decline of non-core products,
integrate fully its core and acquired U.S. operations to produce profitable
growth, and reduce and redirect its use of cash resources. This comes in
response to a reduction in the Company's revenues in the first quarter of fiscal
1999 as compared to the fourth quarter of fiscal 1998 and due to economic
conditions in general, especially outside the United States. To implement this
strategy, the Company has taken or is taking the following actions:
- Limiting Pacific Rim Expansion. In recognition of the near-term
effects of the crisis in Asian capital markets, the Company
modified its expansion plans in the Pacific Rim and is acting to
limit its exposure by limiting further investment in Pacific Rim
ventures. The Company has retained several lamp manufacturing
equipment groups, which were originally expected to be shipped to
Asia pursuant to equipment contracts with Pacific Rim companies,
and has moved the equipment to its Solon, Ohio facility.
- Changing Global Lamp Manufacturing Strategy. The Company is
revising its current global lamp manufacturing strategy to reduce
the overall cost of its lamps, including consideration of moving
some production to the manufacturing facilities of foreign joint
ventures. In addition, to reduce costs related to its lamp
production activities, the Company has consolidated its Bellevue,
Ohio specialty lamp manufacturing operations into its Solon lamp
manufacturing facility.
- Restructuring Marketing Operations in North America and Europe.
The Company is restructuring its marketing operations in Canada to
eliminate certain distribution channels and centers. Warehouses in
Toronto and Vancouver will be closed. OEM and plant growth sales
channels will be retained and serviced out of Solon, Ohio.
Aftermarket lamp sales will be serviced through a distributor,
which the Company is currently seeking.
The Company is also restructuring its marketing operations in
Europe and the U.K. to make them more cost efficient. Sales
offices in France, Italy and Germany will be closed and future
sales in those locations will be handled by commissioned sales
agents. Actions in the U.K. include consolidation of locations and
other related cost reduction activities.
- Accelerating Exit from Noncore Products Lines. The Company has
eliminated the remaining non-metal halide product lines being sold
by its Canadian operations. The Company has sold these product
lines and inventory to a third party.
- Consolidating Equipment Manufacturing Operation into Solon, Ohio
Facility. The Company's equipment manufacturing operation in
Bellevue, Ohio has been closed. Machinery, equipment and research
and development facilities necessary to allow the Company to
continue manufacturing and support of lamp production equipment,
at reduced levels, has been moved to the Company's Solon, Ohio
facility. The Company has temporarily ceased the manufacturing and
sale of turnkey lamp production equipment groups.
14
<PAGE> 16
- Reducing Corporate and Administrative Overhead. The Company was
increasing its corporate and administrative staff levels to
support its aggressive growth goals. In light of its focus on
internal growth, instead of continued acquisitions and joint
ventures, the Company has reduced its corporate overhead,
including a significant reduction in staff levels.
- Reducing Capital Expenditures. Previously announced plans to spend
approximately $20 million on capital expansion, primarily
production equipment, and approximately $14.5 million on
facilities improvements in fiscal 1999 have been substantially
reduced. Capital expenditures for the last two quarters of fiscal
1999 are estimated to be $4.0 million.
The decision to terminate the foreign equipment contracts resulted in a reversal
of sales of $14,961 and cost of sales of $6,413 in the second quarter, which
were previously recorded under the percentage of completion method. This
reversal reduced operating income by $8,548 ($0.42 per share). Had the sales
related to the terminated equipment contracts not been reversed, reported sales
and cost of sales would have been as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 DECEMBER 31, 1998
---------------------------- -----------------------------
SALES COST OF SALES SALES COST OF SALES
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
As reported $ 37,944 $ 30,073 $ 88,302 $ 59,709
Pro forma 52,905 36,486 103,263 66,122
</TABLE>
The remaining actions noted above resulted in $14,100 in special charges ($0.70
per share) during the second quarter. The charges are classified in the
condensed consolidated statement of operations as cost of goods sold ($808) and
special charges ($13,292). In connection with the above actions, the Company
incurred additional costs of $374 and $764 related to cost of sales and
research and development expense for transactions with affiliates. The Company
anticipates that an additional $2,000 per quarter, related to these actions,
will be incurred during the third and fourth quarters of fiscal 1999.
REVOLVING BANK CREDIT FACILITY-On October 19, 1998, the Company voluntarily
reduced the maximum committed availability under its revolving credit facility
("Credit Facility") provided by several North American financial institutions
(the "Lenders") to $65,000 from $85,000. In February 1999, the Company and the
Lenders amended the Credit Facility to provide for future borrowing under an
arrangement pursuant to which the availability of borrowing is determined by the
Company's eligible accounts receivable, eligible inventories and certain other
assets. Borrowings under the Credit Facility are limited to $55,000 with
additional borrowings subject to the approval of all Lenders. Based on the
amended terms of the Credit Facility, the Company would have had $6,400 in
available borrowings as of December 31, 1998.
The Credit Facility has a term expiring April 1, 2000. The Company is
actively seeking alternative financing sources and intends to replace the
existing Credit Facility.
DISCONTINUED OPERATIONS, MICROSUN BUSINESS
In March 1998, the Company approved a plan to distribute to its shareholders, as
a tax-free spin-off transaction estimated to be completed by December 31, 1998,
all of the ownership of Microsun Technologies, Inc., the subsidiary primarily
responsible for development, design, assembly and marketing of metal halide
portable fixtures for hospitality and residential uses. As a result, the
consolidated financial statements of ADLT were reclassified to reflect the
results of operations of Microsun as a discontinued operation in accordance with
generally accepted accounting principles.
Because of deterioration of the capital markets subsequent to June 30, 1998 and
the inability to raise capital necessary to spin-off the Microsun business, the
Company revised its plan for the disposition of Microsun. During December 1998,
the Company concluded that it would wind-down the operations, close the
manufacturing facilities and liquidate the assets of Microsun.
As of December 31, 1998, the wind-down of the business was nearing completion.
In doing so, a loss on disposal of $6,166 was recorded, which included $1,166
for operating losses during the phase-out period and $5,000 related to the
write-down of assets to net realizable value and costs related to shut-down and
severance.
15
<PAGE> 17
UPDATE ON IN-PROCESS RESEARCH AND DEVELOPMENT
In connection with the January 1998 purchase of Deposition Sciences, Inc.
("DSI"), the Company allocated $18.2 million of the $25.4 million purchase price
to in-process research and development projects. This allocation represented the
estimated fair value based on risk-adjusted cash flows related to the incomplete
research and development projects. At the date of acquisition, the development
of these projects had not yet reached technological feasibility and had no
alternative future uses. Accordingly, these costs were expensed as of the
acquisition date.
DSI's in-process research and development value is comprised of five primary
research and development programs, which were in-process at the time of the
acquisition. At December 31, 1998, significant progress had been achieved on
each of the primary in-process research and development efforts that were
underway at DSI as of the acquisition date (January 28, 1998). In general, the
Company believes that DSI's research and development efforts are on track with
management's plans at the time the transaction occurred. DSI is continuing to
invest heavily in the development of new technologies and projects that were
underway at the consummation of the transaction. Through December 31, 1998, no
significant adjustments have been made in the economic assumptions or
expectations which underlie the Company's acquisition decision and related
purchase accounting. All of the cited in-process research and development
projects are active, and DSI is advancing the science and technology at a rate
consistent with both DSI and ADLT expectations.
RESULTS OF OPERATIONS - SELECTED ITEMS AS A PERCENTAGE OF NET SALES
The following table sets forth, as a percentage of net sales, certain items in
the Company's Condensed Consolidated Statements of Operations for the indicated
periods:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
--------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net sales 100% 100% 100% 100%
Costs and expenses:
Cost of sales 79.3 57.9 67.6 57.9
Marketing and selling 27.1 15.4 21.7 15.1
Research and development 14.2 5.7 10.4 5.2
General and administrative 13.5 6.3 10.7 6.8
Fiber optic joint venture formation costs - - - 0.4
Special charges 35.0 - 15.0 -
Amortization of intangible assets 1.8 0.7 1.4 0.7
------ ----- ----- -----
Income (loss) from operations (70.9) 14.0 (26.8) 13.9
Other income (expense):
Interest expense (9.1) - (7.0) (0.5)
Interest income 0.9 0.9 0.6 1.3
Loss from equity investments (0.7) - (0.5) -
------ ----- ----- -----
Income (loss) from continuing operations
before income taxes (79.8) 14.9 (33.7) 14.7
Income taxes 9.3 5.4 4.3 5.3
------ ----- ----- -----
Income from (loss) continuing operations (89.1) 9.5 (38.0) 9.4
Loss from discontinued operations,
net of income tax benefits (16.2) (0.7) (6.9) (0.9)
------ ----- ----- -----
Net income (loss) (105.3)% 8.8% (44.9)% 8.5%
====== ===== ===== =====
</TABLE>
Factors which have affected the results of operations for the second quarter and
first six months of fiscal 1999 as compared to the second quarter and first six
months of fiscal 1998 are discussed below.
16
<PAGE> 18
QUARTER ENDED DECEMBER 31, 1998 COMPARED WITH QUARTER ENDED DECEMBER 31, 1997
Net sales. Net sales increased 66.0% to $52,905 for the second quarter of fiscal
1999 from $31,879 for the second quarter of fiscal 1998, excluding the
terminated equipment contracts noted above. Net sales, excluding lamp equipment
sales and terminated equipment contracts, rose $23,688 or 82.2% to $52,488 for
the second quarter of fiscal 1999 from $28,800 for the second quarter of fiscal
1998. Ruud Lighting and Deposition Sciences, acquired by the Company in January
1998, contributed $21,254 of this increase.
Fiscal 1999 second quarter sales reflect continued growth in the sales and
earnings of the Company's core U.S. metal halide operations, which was offset by
reductions in overseas sales and in non-metal halide products. The Company's
metal halide sales increased 18% (29% increase in the United States) from the
year ago period, excluding acquisitions and equipment sales and sales reversals.
Metal halide sales grew to 83% of total sales from 76.5% a year earlier. The
Company's core metal halide materials business, a key indicator of industry
trends, was up 21% from the prior year's quarter. Geographically, these sales
grew approximately 21% in the U.S. and 22% outside the U.S.
Sales outside the United States declined 16%, excluding acquisitions. The
Company attributes the soft overseas market to the current international
economic environment. Sales of non-metal halide products, an area where the
Company has been strategically reducing its presence, declined 30% excluding
acquisitions.
Costs and Expenses. The Company's restructuring efforts in the second quarter
resulted in a significant disruption of the ongoing business of the Company, and
as a result, a significant increase in its costs and expenses. The biggest
single area of increased costs occurred as a result of the consolidation of the
lamp and equipment operations. Three manufacturing sites were consolidated into
one, which together with employee terminations, resulted in severe workforce
disruption. Simultaneously, the Company attempted to accelerate production of
new products such as Uni-Form(R) pulse start and began the implementation of
extensive, new information systems. Largely as a result of these initiatives,
the Company incurred significantly higher costs related to quality, rework and
productivity issues, which are estimated to be $5,500, but which are not
classified as special charges.
The Company believes that quality, rework and productivity challenges will
likely be encountered over the next several quarters as the Company seeks to
fully-integrate its operations and continues the aggressive launch of the
Uni-Form(R) pulse start line. It estimates that its higher than normal expenses
in this regard will approximate $3,500 in the third quarter, $2,500 in the
fourth quarter and $1,000 in the first quarter of fiscal 2000.
Cost of Sales. Cost of sales increased 98.0% to $35,678 in the second quarter of
fiscal 1999 from $18,467 in the second quarter of fiscal 1998, excluding the
$6,413 reduction in cost of sales related to the terminated equipment contracts
discussed above and $808 in inventory write-downs related to special charges.
The increase was primarily attributable to higher sales levels and to the
disruption caused by the Company's restructuring activities noted above. As a
percentage of net sales, excluding the terminated equipment contracts and
inventory write-downs, cost of sales increased to 67.4% in the second quarter of
fiscal 1999 from 57.9% in the second quarter of fiscal 1998. The Company
believes that the benefit of its restructuring actions, together with its
ongoing efforts to cut costs, should begin to gradually reduce the Company's
cost of sales as a percentage of sales to approximately 60% within the next
twelve months.
17
<PAGE> 19
Marketing and Selling Expenses. Marketing and selling expenses increased 109.2%
to $10,283 in the second quarter of fiscal 1999 from $4,915 in the second
quarter of fiscal 1998. As a percentage of net sales, excluding the equipment
sales reversal, marketing and selling expenses increased to 19.4% in the second
quarter of fiscal 1999 from 15.4% in the second quarter of fiscal 1998. This
increase is primarily a result of increased expenses incurred in connection with
the launch of the Company's Uni-Form(R) pulse start products. The Company
anticipates the sales of these products to increase and that the level of
marketing and selling expenses will decline gradually over the next several
quarters to approximately 16.5% of sales.
Research and Development Expenses. Research and development expenses increased
196.7% to $5,405 in the second quarter of fiscal 1999 from $1,822 in the second
quarter of fiscal 1998. This increase arose from increased spending for the: (i)
expansion of the new line of Uni-Form(R) pulse start products (with improved
energy efficiency, quicker starting and restarting and a more compact arc
source, which improves the light and reduces material costs) intended to replace
many first generation metal halide lamps in industrial and commercial
applications; (ii) development and testing of electronic power supply systems;
(iii) development of new materials for the world's major lighting manufacturers;
and (iv) research and development efforts aimed at improving the coating process
of optical thin-films to broaden the applications, developing new thin-film
materials, and using coatings to develop improvements to lighting and
telecommunications technologies. As a percentage of net sales, excluding the
terminated equipment contracts, research and development expenses increased to
10.2% in the second quarter of fiscal 1999 from 5.7% in the second quarter of
fiscal 1998. The Company anticipates this level of expense to decline gradually
over the next several quarters to approximately 6.0%.
General and Administrative Expenses. General and administrative expenses
increased 155.7% to $5,129 in the second quarter of fiscal 1999 from $2,006 in
the second quarter of fiscal 1998. The increase in general and administrative
expenses of $3,123 relates to an overall increase in the size and complexity of
the Company and relates in part to fully-integrating its core and acquired U.S.
operations and the implementation of extensive, new information systems. Expense
increases primarily reflect travel, personnel and related costs, equipment
depreciation and rent, legal and consultant fees, and communications costs. As a
percentage of net sales, excluding the terminated equipment contracts, general
and administrative expenses increased to 9.7% in the second quarter of fiscal
1999 from 6.3% in the second quarter of fiscal 1998.
Special Charges. See discussion of special charges under "Recent Developments"
and Note G of "Notes to Condensed Consolidated Financial Statements (Unaudited)"
for further discussion.
Amortization of Intangible Assets. Amortization expense increased to $678 in the
second quarter of fiscal 1999 from $211 in the second quarter of fiscal 1998 due
to the amortization of goodwill and other intangible assets related to the
acquisitions of Ruud Lighting and Deposition Sciences which were completed in
January 1998.
Income (Loss) from Operations. As a result of the aforementioned factors, during
the second quarter of fiscal 1999, the Company incurred a loss from operations
of $26,916, as compared to income from operations of $4,458 during the second
quarter of fiscal 1998. Excluding the special charges and terminated equipment
contracts mentioned above, the loss from operations was $4,268.
Interest Expense. Interest expense amounted to $3,431 in the second quarter of
fiscal 1999, as compared to no expense in the second quarter of fiscal 1998.
This increase was the result of the
18
<PAGE> 20
higher average debt outstanding and a reduction in capitalized interest on
self-constructed assets during the second quarter of fiscal 1999 as compared to
the second quarter of fiscal 1998.
Interest Income. Interest income increased to $328 in the second quarter of
fiscal 1999 from $281 earned in the second quarter of fiscal 1998. This increase
is attributable to lower average cash equivalents and short-term investments in
the second quarter of fiscal 1999 as compared to the second quarter of fiscal
1998, offset by $168 in interest earnings from the loan to an officer in the
second quarter of fiscal 1999.
Loss from Equity Investment. The loss from equity investments represents $30 of
earnings from the Company's investment in Fiberstars, Inc., a marketer and
distributor of fiber optic lighting products, offset by a $302 loss from the
Company's investment in Venture Lighting Japan, a manufacturer and marketer of
metal halide lamps in Japan.
Income (Loss) from Continuing Operations before Income Taxes. As a result of the
aforementioned factors, during the second quarter of fiscal 1999, the Company
incurred a loss from continuing operations before income taxes of $30,291, as
compared to income from continuing operations before income taxes of $4,739
during the second quarter of fiscal 1998. Excluding the total special charges
and terminated equipment contracts mentioned above, the Company incurred a loss
from continuing operations before income taxes of $7,643.
Income Taxes. At June 30, 1998, the Company had net operating loss carryforwards
("NOLs") of $1,960 available to reduce future United States federal taxable
income, which expire 2008 through 2011.
The Company also has research and development credit carryforwards for tax
purposes of approximately $850, which expire 2005 through 2013. Additionally, in
conjunction with the Alternative Minimum Tax ("AMT") rules, the Company had
available AMT credit carryforwards for tax purposes of approximately $1,000,
which may be used indefinitely to reduce regular federal income taxes.
Also, at June 30, 1998, the Company had foreign net operating loss carryforwards
for tax purposes totaling $2,000 that expire in 2006 and $403 that have no
expiration dates.
For the three months ended December 31, 1998, the Company reported a pretax loss
from continuing operations, including special charges, of $30,291 and a pretax
loss on the discontinued operations of the Microsun business of $6,166, which
created $36,457 of operating losses and future tax deductions for financial
reporting purposes. Accordingly, at December 31, 1998, the Company recorded a
valuation allowance for deferred tax assets related to all NOLs, tax credits and
net deductible tax differences at December 31, 1998 in the amount of $15,503.
Loss from Discontinued Operations. See discussion of loss from discontinued
operations under "Discontinued Operations, Microsun Business" and Note I of
"Notes to Condensed Consolidated Financial Statements (Unaudited)" for further
discussion.
SIX MONTHS ENDED DECEMBER 31, 1998 COMPARED WITH SIX MONTHS ENDED DECEMBER 31,
1997
Net sales. Net sales increased 67.0% to $103,263 for the first six months of
fiscal 1999 from $61,816 for the first six months of fiscal 1998, excluding the
terminated equipment contracts noted above. Net sales, excluding lamp equipment
sales and terminated equipment contracts, rose
19
<PAGE> 21
83.1% to $100,292 for the first six months of fiscal 1999 from $54,770 for the
first six months of fiscal 1998. Ruud Lighting and Deposition Sciences, acquired
by the Company in January 1998, contributed $40,903 of this increase.
Results for the first six months of fiscal 1999 reflect continued growth in the
sales and earnings of the Company's core U.S. metal halide operations, which was
offset by reductions in overseas sales and in non-metal halide products. The
Company's metal halide sales increased 16% (26% increase in the United States)
from the year ago period, excluding acquisitions and equipment sales and sales
reversals. Metal halide sales grew to 83% of total sales from 76% a year
earlier.
Sales outside the U.S. declined 12%, excluding acquisitions. The Company
attributes the soft overseas market to the current international economic
environment. Sales of non-metal halide products, an area where the Company has
been strategically reducing its presence, declined 33% excluding acquisitions.
Costs and Expenses. The Company's restructuring efforts in the second quarter
resulted in a significant disruption of the ongoing business of the Company, and
as a result, a significant increase in its costs and expenses. The biggest
single area of increased costs occurred as a result of the consolidation of the
lamp and equipment operations. Three manufacturing sites were consolidated into
one, which together with employee terminations, resulted in severe workforce
disruption. Simultaneously, the Company attempted to accelerate production of
new products such as Uni-Form(R) pulse start and began the implementation of
extensive, new information systems. Largely as a result of these initiatives,
the Company incurred significantly higher costs related to quality, rework and
productivity issues, which are estimated to be in the range of $5,500, but which
are not included within the special charges classification.
The Company believes that quality, rework and productivity challenges will
likely be encountered over the next several quarters as the Company seeks to
fully-integrate its operations and continues the aggressive launch of the
Uni-Form(R) pulse start line. It estimates that its higher than normal expenses
in this regard will approximate $3,500 in the third quarter, $2,500 in the
fourth quarter and $1,000 in the first quarter of fiscal 2000.
Cost of Sales. Cost of sales increased 82.5% to $65,314 in the first six months
of fiscal 1999 from $35,793 in the first six months of fiscal 1998, excluding
the $6,413 reduction in cost of sales related to the terminated equipment
contracts discussed and $808 in inventory write-downs related to special
charges. The increase was primarily attributable to higher sales levels and to
the disruption caused by the Company's restructuring activities noted above. As
a percentage of net sales, excluding the terminated equipment contracts and
inventory write-downs, cost of sales increased to 63.3% in the first six months
of fiscal 1999 from 57.9% in the first six months of fiscal 1998. The Company
believes that the benefit of its restructuring actions, together with its
ongoing efforts to cut costs, should begin to gradually reduce the Company's
cost of sales as a percentage of sales to approximately 60% within the next
twelve months.
Marketing and Selling Expenses. Marketing and selling expenses increased 105.1%
to $19,142 in the first six months of fiscal 1999 from $9,331 in the first six
months of fiscal 1998. As a percentage of net sales, excluding the terminated
equipment contracts, marketing and selling expenses increased to 18.5% in the
first six months of fiscal 1999 from 15.1% in the first six months of fiscal
1998. This increase is primarily a result of increased expenses incurred in
connection with the launch of the Company's Uni-Form(R) pulse start products.
The Company
20
<PAGE> 22
anticipates the sales of these products to increase and that the level of
marketing and selling expenses will decline gradually over the next several
quarters to approximately 16.5% of sales.
Research and Development Expenses. Research and development expenses increased
184.2% to $9,153 in the first six months of fiscal 1999 from $3,221 in the first
six months of fiscal 1998. This increase arose from increased spending for the:
(i) expansion of the new line of Uni-Form(R) pulse start products (with improved
energy efficiency, quicker starting and restarting and a more compact arc
source, which improves the light and reduces material costs) intended to replace
many first generation metal halide lamps in industrial and commercial
applications; (ii) development and testing of electronic power supply systems;
(iii) development of new materials for the world's major lighting manufacturers;
and (iv) research and development efforts aimed at improving the coating process
of optical thin-films to broaden the applications, developing new thin-film
materials, and using coatings to develop improvements to lighting and
telecommunications technologies. As a percentage of net sales, excluding the
terminated equipment contracts, research and development expenses increased to
8.9% in the first six months of fiscal 1999 from 5.2% in the first six months of
fiscal 1998. The Company anticipates this level of expense to decline gradually
over the next several quarters to approximately 6.0%.
General and Administrative Expenses. General and administrative expenses
increased 123.9% to $9,450 in the first six months of fiscal 1999 from $4,220 in
the first six months of fiscal 1998. The increase in general and administrative
expenses of $5,230 relates to an overall increase in the size and complexity of
the company and relates in part to fully-integrating its core and acquired U.S.
operations and the implementation of extensive, new information systems. Expense
increases primarily reflect travel, personnel and related costs, equipment
depreciation and rent, communications costs, and legal and consultant fees. As a
percentage of net sales, excluding the terminated equipment contracts, general
and administrative expenses increased to 9.2% in the first six months of fiscal
1999 from 6.8% in the second quarter of fiscal 1998.
Special Charges. See discussion of special charges under "Recent Developments"
and Note G of "Notes to Condensed Consolidated Financial Statements (Unaudited)"
for further discussion.
Amortization of Intangible Assets. Amortization expense increased to $1,237 in
the first six months of fiscal 1999 from $425 in the first six months of fiscal
1998 due to the amortization of goodwill and other intangible assets related to
the acquisitions of Ruud Lighting and Deposition Sciences which were completed
in January 1998.
Income (Loss) from Operations. As a result of the aforementioned factors, during
the first six months of fiscal 1999, the Company incurred a loss from operations
of $23,681, as compared to income from operations of $8,614 during the first six
months of fiscal 1998. Excluding the special charges and terminated equipment
contracts mentioned above, the Company had a loss from operations of $1,033.
Interest Expense. Interest expense increased to $6,158 in the first six months
of fiscal 1999, as compared to $327 in the first six months of fiscal 1998. This
increase was primarily the result of the higher average debt outstanding.
Interest Income. Interest income decreased to $566 in the first six months of
fiscal 1999 from $808 earned in the first six months of fiscal 1998. This
decrease is attributable to lower average cash equivalents and short-term
investments in the first six months of fiscal 1999 as compared to the first six
months of fiscal 1998, partially offset by $168 in interest earnings from the
loan to an officer in the second quarter of fiscal 1999.
21
<PAGE> 23
Loss from Equity Investment. The loss from equity investments represents $83 of
earnings from the Company's investment in Fiberstars, Inc., a marketer and
distributor of fiber optic lighting products, offset by a $544 loss from the
Company's investment in Venture Lighting Japan, a manufacturer and marketer of
metal halide lamps in Japan.
Income (Loss) from Continuing Operations before Income Taxes. As a result of the
aforementioned factors, during the first six months of fiscal 1999, the Company
incurred a loss from continuing operations before income taxes of $29,734, as
compared to income from continuing operations before income taxes of $9,095
during the first six months of fiscal 1998. Excluding the total special charges
and terminated equipment contracts mentioned above, the Company incurred a loss
from continuing operations before income taxes of $7,806.
Income Taxes. At June 30, 1998, the Company had net operating loss carryforwards
("NOLs") of $1,960 available to reduce future United States federal taxable
income, which expire 2008 through 2011.
The Company also has research and development credit carryforwards for tax
purposes of approximately $850, which expire 2005 through 2013. Additionally, in
conjunction with the Alternative Minimum Tax ("AMT") rules, the Company had
available AMT credit carryforwards for tax purposes of approximately $1,000,
which may be used indefinitely to reduce regular federal income taxes.
Also, at June 30, 1998, the Company had foreign net operating loss carryforwards
for tax purposes totaling $2,000 that expire in 2006 and $403 that have no
expiration dates.
For the six months ended December 31, 1998, the Company reported a pretax loss
from continuing operations, including special charges, of $29,734 and a pretax
loss on the discontinued operations of the Microsun business of $6,166, which
created $35,900 of operating losses and future tax deductions for financial
reporting purposes. Accordingly, at December 31, 1998, the Company recorded a
valuation allowance for deferred tax assets of $15,503 related to all NOLs, tax
credits and net deductible tax differences.
Loss from Discontinued Operations. See discussion of loss from discontinued
operations under "Discontinued Operations, Microsun Business" and Note I of
"Notes to Condensed Consolidated Financial Statements (Unaudited)" for further
discussion.
LIQUIDITY AND CAPITAL RESOURCES
Cash decreased $11,261 during the six months ended December 31, 1998. Uses of
cash consisted of $13,439 used in operating activities, $25,664 used in
investing activities and $4,690 used in discontinued operations. These uses of
cash were offset by net financing activities of $32,532.
Net cash used in operating activities. Net cash used in operating activities
totaled $13,439 in the first six months of fiscal 1999 as compared to $3,154 in
the first six months of fiscal 1998.
Trade receivables increased $4,038 and inventories increased $5,543, excluding
the effect of acquisitions, dispositions, noncash special charges and terminated
equipment contracts. The increase in receivables includes an increase of
approximately $1,800 in accounts receivable related to thin-film deposition
equipment contracts. These contracts affect cash flow because deposition
equipment
22
<PAGE> 24
revenues are recognized under the percentage of completion method of accounting
while cash payments are received in accordance with contract terms. The
remaining increase in receivables resulted from an increase in days sales
outstanding as compared to fiscal 1998's fourth quarter.
Inventory levels increased as a result of the Company's efforts to introduce new
products which are accepted slowly into the marketplace, but must be initially
stocked. Also, during the second quarter, certain inventory was put on
quality-hold and additional product had to be produced due to the workforce
disruption resulting from the consolidation of factories and employee
terminations. This quality-hold product will be reworked, if necessary, during
the next two quarters.
Net cash provided by operating activities totaled $178 in the three months
ended December 31, 1998, an approximate $14,000 improvement from the first
quarter. The Company intends to manage its cash resources to generate positive
cash flow in the quarter ended June 30, 1999 and beyond.
Net cash used in investment activities. During the six months ended December 31,
1998, investing activities used $25,664 of cash including $17,803 for capital
expenditures, $5,024 related to the purchases of businesses and $2,837 related
to investments in affiliates.
Capital expenditures, primarily for production equipment and leasehold and
facility improvements, totaled $17,803 in the first six months of fiscal 1999 as
compared to $10,165 in the first six months of fiscal 1998. Capital expenditures
in fiscal 1999 related to facilities enhancements, primarily at the Company's
headquarters in Solon, Ohio, and at several of its subsidiaries, and additional
machinery and equipment to improve production processes, which should result in
increased productivity and capacity in the production of lamps, power supplies
and other lighting system products.
The Company has modified its current growth and capital expansion plans due to
the present availability of cash resources. Specifically, the Company will limit
its capital expenditures for at least the next twelve months and, as a result,
the Company has postponed certain capital equipment and, for all practical
purposes, facilities expenditures have been completed.
As a result of the Company's decision to terminate joint venture equipment
contracts, approximately $6,500 of new production equipment is available for use
at the Company's Solon, Ohio lamp manufacturing facility. Total capital
expenditures for the remainder of fiscal 1999 are estimated to be $4,000, and
the Company estimates its maintenance level for capital expenditures will
approximate $8,000 over the next twelve months. Future capital expenditures
beyond this level will be discretionary, as the Company presently has sufficient
capacities to support several years of sales growth at its historical rates.
To expand the Company's ability to develop and market new metal halide products
and systems, the Company has made a number of acquisitions and strategic
investments, the most notable of which, completed in fiscal 1998, are described
below.
On January 28, 1998, the Company completed the acquisition of Deposition
Sciences, Inc. ("DSI"), of Santa Rosa, California. DSI is a leader in the
development of sophisticated thin film deposition systems and coatings for
lighting applications, with particular emphasis on coatings for metal halide
lighting systems, and other applications, including aerospace, defense and
automotive applications. The stock of DSI was acquired in a privately-negotiated
transaction. The purchase price consisted of 599,717 shares of the Company's
Common Stock and approximately $14.5 million in cash.
On January 2, 1998, the Company acquired all of the capital stock outstanding of
Ruud Lighting (the "Ruud Stock"), located in Racine, Wisconsin. Ruud Lighting
manufactures and directly markets HID lighting systems, principally focusing on
metal halide installations for commercial,
23
<PAGE> 25
industrial and outdoor lighting applications. The Ruud Stock was acquired from
the five shareholders of Ruud Lighting in a privately negotiated purchase
transaction. The purchase price for the Ruud Stock consisted of three million
shares of the Company's Common Stock and approximately $35.5 million in cash.
Net cash provided by financing activities. During the six months ended December
31, 1998, net financing activities provided cash of $32,532, which included
$42,900 of cash provided from net borrowings under the Credit Facility, payments
of long-term debt and capital leases of $2,674 and a loan to an officer of
$9,000.
On January 2, 1998, the Company replaced its then existing loan agreement and
other borrowings in North America with the Credit Facility described below.
Proceeds from this facility were used to finance the $35,500 cash portion of the
Ruud Lighting acquisition and the $14,500 cash portion of the Deposition
Sciences acquisition. Proceeds were also used to repay $19,200 of existing and
outstanding North American bank borrowings of ADLT, Ruud Lighting and DSI.
During the six months ended December 31, 1998, the net proceeds borrowed under
the Credit Facility were $42,900. In February 1999, the Credit Facility was
amended as discussed below.
On March 13, 1998, the Company sold $100,000 of 8% Senior Notes due March 15,
2008, resulting in net proceeds of $96,150. Approximately $76,300 of the net
proceeds of the Senior Notes were used to repay amounts outstanding under the
Credit Facility, thereby lengthening the average term of the Company's debt,
most of which had been incurred to finance the acquisitions of Ruud Lighting and
DSI. From September 14, 1998 until completion of a registered exchange offer to
existing noteholders, the Senior Notes bear interest at 8.5%. The offer is
expected to be completed within 45 days following effectiveness of the Company's
related registration statement.
Pursuant to a loan agreement dated October 8, 1998, between the Company and its
Chairman and Chief Executive Officer ("the CEO"), the Company has loaned $9,000
to its CEO for a one-year term at an interest rate of 8%. The loan was made
following approval by the Company's Board of Directors. The proceeds of the loan
were used by the Company's CEO to reduce the outstanding principal balance of a
margin account loan, which is secured by 2,053,070 shares of the Company's
Common Stock owned by the CEO and a related entity. In connection with the loan,
the Company's Board of Directors asked for and received the CEO's agreement to
extend the term of his employment agreement to December 31, 2003. The loan
agreement prohibits the CEO from encumbering his shares of the Company's Common
Stock in any manner except pursuant to the existing agreements governing the
CEO's margin account, without the consent of the Company's Board of Directors.
Ability to advance future operations. The Company has begun to implement, and
will continue to implement, changes in its operations and investment activities
intended to reduce the use of its cash resources to a level at or below the cash
flow generated by its operations and investments.
The Company's working capital (current assets less current liabilities) at
December 31, 1998 was $53,802, resulting in a working capital ratio of current
assets to current liabilities of 2.2 to 1.0, as compared to $77,637 or 3.1 to
1.0 at June 30, 1998. As of December 31, 1998, the Company had $11,006 in cash
and cash equivalents and short-term investments and approximately $6,400
available to it under its Credit Facility, as amended in February 1999.
As of December 31, 1998, the interest-bearing obligations of the Company totaled
$162,452 and primarily consisted of: $48,275 of borrowings under the Credit
Facility; $100,000 of 8% Senior Notes; mortgages of $7,436; a promissory note
due to an affiliate of $3,000; borrowing of a foreign subsidiary of $1,872;
capital leases of $1,373; and, other obligations of $353.
24
<PAGE> 26
On October 19, 1998, the Company voluntarily reduced the maximum committed
availability under its revolving credit facility ("Credit Facility") provided by
several North American financial institutions (the "Lenders") to $65,000 from
$85,000. In February 1999, the Company and the Lenders amended the Credit
Facility to provide for future borrowing under an arrangement pursuant to which
the availability of borrowing is determined by the Company's eligible accounts
receivable, eligible inventories and certain other assets. Borrowings under the
Credit Facility are limited to $55,000 with additional borrowings subject to the
approval of all lenders. Based on the amended terms of the Credit Facility, the
Company would have had $6,400 in available borrowings as of December 31, 1998.
On February 12, 1999, the availability under the Credit Facility was $1,000
based on the $55,000 limitation with an additional $4,800 availability subject
to approval of all Lenders.
The Credit Facility has a term expiring April 1, 2000. The Company is
actively seeking alternative financing sources and intends to replace the
existing Credit Facility, although the Company can provide no assurance as to
whether, when and upon what terms it will obtain such financing.
Interest rates on loans outstanding are based on the agent bank's prime rate
plus 1% to May 31, 1999 and plus 2% thereafter. The Company is also obligated
to pay a facility fee of .375% on the amount of the facility. The facility
contains certain affirmative and negative covenants customary for this type of
agreement, prohibits cash dividends, and includes financial covenants with
respect to income levels, cash availability and net worth. The principal
security for the facility is substantially all of the personal property of the
Company and each of its North American and United Kingdom subsidiaries, certain
real estate and a pledge of stock of each of the Company's principal
subsidiaries.
The Company's implementation of the cost reduction and cash flow enhancement
initiatives including consolidation of equipment and lamp-making operations,
reductions in facilities expenditures, consolidation of international
operations, reduction of corporate expenses, and workforce reductions should
favorably impact the future cash flow of the Company. The Company intends to
manage its expenditures to generate positive cash flow in the quarter ended June
30, 1999 and beyond.
The Company believes that the available cash, cash flow from operations, and the
initiatives outlined above, along with alternative financing to replace its
existing Credit Facility, will enable the Company to fund its operations for at
least the next 12 months.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued FAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information". The
statement requires a "management" approach to reporting financial and
descriptive information about a Company's operating segments. The Company must
adopt this statement in the annual financial statements for fiscal 1999, however
FAS No. 131 need not be applied to interim financial statements in the initial
year of application. Management is currently studying the potential effect of
adopting this statement.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position
25
<PAGE> 27
("SOP") 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5 provides
authoritative guidance on accounting for and financial reporting of start-up
costs and organization costs. The Company is required to adopt the SOP on July
1, 1999 and, upon adoption, expense all previously capitalized start-up costs
and organization costs as a cumulative effect of a change in accounting
principle. Management is reviewing its capitalization policies and determining
the impact that the adoption of this SOP is expected to have on its consolidated
results of operations and financial position. At December 31, 1998, the Company
estimates that it had approximately $2,650 of start-up costs included in its
consolidated balance sheet.
YEAR 2000 READINESS
State of Readiness. During the past two fiscal years, the Company has been
actively involved in finding and correcting Year 2000 problems within its
information technology structure. The information system correction process is
essentially complete. The Company maintains its critical information technology
systems in close cooperation with its suppliers. The Company is not currently
operating any legacy systems which are no longer being supported by the original
supplier.
The most critical non-information technology systems, such as robots and other
numerically controlled equipment, are relatively new and are being upgraded and
maintained with the help of the Company's various suppliers. To date, the
Company's investigation of these systems has not revealed any Year 2000
problems; however, investigation in this area continues.
Each operating unit's purchasing and production control departments are in the
process of analyzing the unit's key third-party dependencies and working with
each of these key suppliers to determine the suppliers' Year 2000 status. Since
the Company's key suppliers are in the process of conducting similar
investigations with their key suppliers, and so on, the Company has had limited
success in obtaining reliable Year 2000 compliance certifications.
Costs. The Company has had only limited expenditures related to Year 2000
issues, consisting principally of personnel costs incurred in the scope of
normal operations. In addition, software replacements and upgrades in the
ordinary course of business have enhanced the Company's Year 2000 readiness
without incremental costs. The Company does not anticipate that the future Year
2000 costs related to information technology that are beyond the scope of normal
operations will be significant.
The Company is in the process of developing contingency plans to protect it from
Year 2000 failures. These plans will likely result in some expenditures,
primarily increased inventory costs to assure adequate supplies, the exact
amount of which is not known at this time.
Risks. In the early weeks of 2000, the Company may experience some random supply
chain disruptions that may affect its ability to produce and distribute key
products. These disruptions will be material if the U.S. experiences significant
interruptions in basic services, such as the electric power grid, telephone
service or the banking system.
Contingency Plans. The Company, through its various purchasing and production
control departments, is in the early stages of developing contingency plans at
each of its worldwide operations. These plans will be particularly focused on
preparing the operation for the inability of key third-party suppliers to
perform their normal functions. Of critical importance will be the
26
<PAGE> 28
development of alternative suppliers, the enhancements of on-hand materials and
the augmentation of the most critical finished goods.
Completion. Based on management's assessment of current progress, the Company
believes it will complete necessary Year 2000 modifications and contingency
plans by mid-1999. The Company can give no assurance that the Company's Year
2000 preparations will prevent disruptions in its business resulting from Year
2000 problems of the Company, its suppliers or its customers or that the costs
to the Company of its preparations or any disruptions will not be material.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the six months ended December 31, 1998, there have been no material
changes in the reported market risks presented in the Company's Annual Report on
Form 10-K for the year ended June 30, 1998.
27
<PAGE> 29
PART II. OTHER INFORMATION
Except as noted below, the items in Part II are inapplicable or, if applicable,
would be answered in the negative. These items have been omitted and no other
reference is made thereto.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An annual meeting of shareholders was held on November 19, 1998. The following
sets forth the actions considered and the results of the voting with respect to
each action:
<TABLE>
<CAPTION>
Abstained/
Broker
For Against Nonvotes
--- ------- --------
<S> <C> <C> <C>
1. Nominees for director for the term
expiring in 2001 -- All elected
Wayne R. Hellman 17,923,170 589,376 -0-
Theodore A. Filson 17,897,309 615,237 -0-
2. Ratify and approve 1998 Incentive
Award Plan - Passed 8,785,586 2,767,923 6,958,037
3. Ratify appointment of Ernst & Young LLP
as independent auditors -- Passed 18,461,561 11,349 39,636
</TABLE>
28
<PAGE> 30
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
SEQUENTIAL
PAGE NUMBER/
EXHIBIT INCORPORATED
NUMBER TITLE BY REFERENCE
- - ------ ----- ------------
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporation. *
3.2 Code of Regulations. **
10.1 Loan Agreement dated as of October 8, 1998 between Advanced
Lighting Technologies, Inc. and Wayne R. Hellman ___
10.2 Secured Promissory Note of Wayne R. Hellman dated as of
October 8, 1998 in the amount of $9,000,000 to Advanced Lighting
Technologies, Inc. at the rate of 8% per annum ___
10.3 Letter Amendment dated as of December 22, 1998 amending the
Credit Agreement dated January 2, 1998, amount Advanced Lighting
Technologies, Inc., National City Bank, and other financial institutions ___
10.4 Amended and Restated Employment Agreement between
Wayne R. Hellman and Advanced Lighting Technologies, Inc.
dated as of October 8, 1998 ___
11 Statement Re: Computation of Earnings Per Share ___
12 Statement Re: Computation of Ratio of Earnings to Fixed Charges ___
27 Financial Data Schedule ___
</TABLE>
* Incorporated by reference to Exhibit of same number in Company's
Quarterly Report on Form 10-Q for the Quarterly Period ended December 31,
1996.
** Incorporated by reference to Company's Registration Statement on Form S-1,
Registration No. 33-97902, effective December 11, 1995.
(b) Reports on Form 8-K.
During the quarter ended December 31, 1998, the Company filed one Report on Form
8-K. The Report on Form 8-K was filed on December 23, 1998, reporting under Item
5 certain financial and other information which was included in the Company's
registration statement on Form S-4 (Registration No. 333-58609) relating the
Company's proposed exchange offer of 8% Senior Notes due 2008. The Form 8-K
included the following financial statements:
Pro Forma Condensed Combined Statements of Operations for the Company
and Ruud Lighting, Inc. for the year ended June 30, 1998.
29
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 16, 1999 ADVANCED LIGHTING TECHNOLOGIES, INC.
By: /s/ Wayne R. Hellman
--------------------
Wayne R. Hellman
Chief Executive Officer
By: /s/ Nicholas R. Sucic
---------------------
Nicholas R. Sucic
Chief Financial Officer
30
<PAGE> 32
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
PAGE NO.
--------
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporation. *
3.2 Code of Regulations. **
10.1 Loan Agreement dated as of October 8, 1998 between Advanced
Lighting Technologies, Inc. and Wayne R. Hellman ___
10.2 Secured Promissory Note of Wayne R. Hellman dated as of
October 8, 1998 in the amount of $9,000,000 to Advanced Lighting
Technologies, Inc. at the rate of 8% per annum ___
10.3 Letter Amendment dated as of December 22, 1998 amending the
Credit Agreement dated January 2, 1998, amount Advanced Lighting
Technologies, Inc., National City Bank, and other financial institutions ___
10.4 Amended and Restated Employment Agreement between
Wayne R. Hellman and Advanced Lighting Technologies, Inc.
dated as of October 8, 1998 ___
11 Statement Re: Computation of Earnings Per Share ___
12 Statement Re: Computation of Ratio of Earnings to Fixed Charges ___
27 Financial Data Schedule ___
</TABLE>
* Incorporated by reference to Exhibit of same number in Company's
Quarterly Report on Form 10-Q for the Quarterly Period ended December 31,
1996.
** Incorporated by reference to Company's Registration Statement on Form
S-1, Registration No. 33-97902, effective December 11, 1995.
31
<PAGE> 1
EXHIBIT 10.1
================================================================================
LOAN AGREEMENT
BY AND BETWEEN
ADVANCED LIGHTING TECHNOLOGIES, INC.
AND
WAYNE R. HELLMAN
-----------------------
$9,000,000
-----------------------
DATED
AS OF
OCTOBER 8, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
(The Table of Contents is not a part of the Loan Agreement
and is included only for convenience of reference.)
<TABLE>
<CAPTION>
ARTICLE I
<S> <C>
DEFINITIONS..........................................................................2
Section 1.1. USE OF DEFINED TERMS...............................................2
Section 1.2. DEFINITIONS........................................................2
ARTICLE II
REPRESENTATIONS......................................................................3
Section 2.1. REPRESENTATIONS WITH RESPECT TO BORROWER...........................3
ARTICLE III
LOAN; CONDITIONS TO CLOSING..........................................................5
Section 3.1. LOAN AND REPAYMENT.................................................5
Section 3.2. Intentionally Left Blank...........................................6
Section 3.3. INSPECTIONS........................................................6
Section 3.4. BORROWER REQUIRED TO PAY MARGIN CALLS..............................6
Section 3.5. Intentionally Left Blank...........................................6
Section 3.6. CONDITIONS TO DISBURSEMENT.........................................6
Section 3.7. Intentionally Left Blank...........................................7
Section 3.8. DISBURSEMENT OF LOAN...............................................7
Section 3.9. PAYMENT OF COSTS; INDEMNIFICATION..................................7
ARTICLE IV
ADDITIONAL COVENANTS AND AGREEMENTS..................................................7
Section 4.1. EMPLOYMENT. .......................................................8
Section 4.2. AFFIRMATIVE COVENANTS OF BORROWER..................................8
Section 4.3. ENVIRONMENTAL MATTERS..............................................9
Section 4.4. NEGATIVE COVENANTS OF BORROWER.....................................9
ARTICLE V
EVENTS OF DEFAULT AND REMEDIES; TERMINATION..........................................9
Section 5.1. EVENTS OF DEFAULT..................................................9
Section 5.2. REMEDIES ON DEFAULT...............................................11
Section 5.3. NO REMEDY EXCLUSIVE...............................................11
Section 5.4. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES.....................11
Section 5.5. NO WAIVER.........................................................12
ARTICLE VI
MISCELLANEOUS.......................................................................12
Section 6.1. TERM OF AGREEMENT.................................................12
Section 6.2. NOTICES...........................................................12
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 6.3. EXTENT OF COVENANTS OF LENDER; NO PERSONAL LIABILITY..............12
Section 6.4. BINDING EFFECT....................................................12
Section 6.5. AMENDMENTS AND SUPPLEMENTS........................................12
Section 6.6. EXECUTION COUNTERPARTS............................................13
Section 6.7. SEVERABILITY......................................................13
Section 6.8. CAPTIONS..........................................................13
Section 6.9. GOVERNING LAW.....................................................13
</TABLE>
<PAGE> 4
LOAN AGREEMENT
THIS LOAN AGREEMENT (this Agreement") is made and entered into as of
October 8, 1998, by and between ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio
corporation with its offices at 2307 East Aurora Road, Suite One, Twinsburg,
Ohio 44087 ("Lender") and WAYNE R. HELLMAN, an individual residing at 7181 Ober
Lane, Chagrin Falls, Ohio 44023 ("Borrower").
BACKGROUND
A. Borrower is the Chief Executive Officer and Chairman of Lender.
B. Borrower owns approximately ten percent (10%) of Lender's issued and
outstanding capital stock (the "Margin Shares").
C. The Margin Shares are pledged as collateral to Prudential Securities
Incorporated (the "Margin Lender") to secure a loan from the Margin Lender which
as of October 6, 1998 is in the amount of Fifteen Million Forty Nine Thousand
One Hundred Ninety Five Dollars ($15,049,195) (the "Margin Loan").
D. Pursuant to Borrower's agreement with the Margin Lender, at October
6, 1998 the Margin Loan was under collateralized by Eight Million Three Hundred
Twenty Seven Thousand Three Hundred Thirteen Dollars ($8,327,313) (the "Margin
Deficit").
E. The Margin Loan must be reduced by the Margin Deficit in order to
prevent the Margin Lender from liquidating the Margin Shares.
F. Upon reports from its advisors and after discussion, Lender's
disinterested directors have determined that it is in the best interests of
Lender to prevent the liquidation of the Margin Shares in order to avoid the
adverse effect on Lender's stock price that is likely to result from the sale of
the Margin Shares in the market, and to avoid causing Borrower serious financial
stress which would adversely affect the operation and management of Lender.
-1-
<PAGE> 5
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the agreements made
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lender and Borrower agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. USE OF DEFINED TERMS. In addition to the words and terms
defined elsewhere in this Agreement or by reference to the Security Documents or
other instruments, the words and terms set forth in Section 1.2 shall have the
meanings therein set forth unless the context or use expressly indicates
different meaning or intent. Such definitions shall be equally applicable to
both the singular and plural forms, and the masculine, feminine and neuter forms
of any of the words and terms therein defined.
SECTION 1.2. DEFINITIONS. As used herein:
"Affiliate" and "Associate" means those persons that are affiliates and
associates as defined in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934 as presently in effect.
"Agreement" means this Loan Agreement, as from time to time amended or
supplemented.
"Closing Date" means the date of execution and delivery of the Loan
Documents.
"Collateral" means the property identified in EXHIBIT 1.2-A, but
specifically excludes the Margin Shares.
"Event of Default" means any of the events described as an event of
default in Section 5.1 hereof.
"Loan" means the loan by Lender to Borrower in the total sum of the
Loan Amount, to be disbursed pursuant to Section 3.8 hereof.
"Loan Amount" means Nine Million Dollars ($9,000,000).
"Loan Documents" means this Agreement and all other agreements,
certificates, instruments and other documents required by Lender to evidence or
secure, or delivered in connection with the consummation of, the Loan, as such
documents may be amended or supplemented from time to time.
-2-
<PAGE> 6
"Mortgage" means each Mortgage on the Realty (defined herein) dated as
of even date herewith from Borrower to Lender, as amended or supplemented from
time to time.
"Note" means the Secured Promissory Note, as executed in the form
attached hereto as EXHIBIT 1.2-B, evidencing the obligation of Borrower to repay
the Loan and any replacement or substitute instrument.
"Note Payment" means all required payments under the Note.
"Notice Address" means as to Lender and Borrower, the addresses first
set forth at the beginning hereof, or such additional or different address,
notice of which is given under Section 6.2 hereof.
"Person" means an individual, a partnership, a corporation, a business
trust, a joint stock company, a trust, an unincorporated association, a joint
venture, a governmental authority or any other entity of whatever nature.
"Security Documents" means, collectively, the documents identified in
EXHIBIT 1.2-C.
"Title Company" means such title companies as utilized by Lender in
connection herewith.
"UCC Financing Statements" means all financing statements filed to
perfect the security interests created under the Security Documents.
ARTICLE II
REPRESENTATIONS
SECTION 2.1. REPRESENTATIONS WITH RESPECT TO BORROWER. Borrower hereby
represents and warrants that:
(a) Borrower is an individual residing at the Notice Address.
(b) Borrower has full power and authority to execute and deliver the
Loan Documents and to carry out the transactions contemplated thereunder. Such
execution, delivery and performance do not, and will not, violate any provision
of law applicable to Borrower, and do not, and will not, conflict with or result
in a default under any agreement or instrument to which Borrower is a party or
by which Borrower or any of his property or assets is or may be bound. The Loan
Documents have been duly executed and delivered by Borrower, and all necessary
actions have been taken to constitute the Loan Documents legal as valid and
binding obligations of Borrower in accordance with their respective terms.
-3-
<PAGE> 7
(c) The Loan is required to prevent forfeiture of the Margin Loan, and
the Margin Lender's execution on the Margin Shares.
(d) There are no actions, suits or proceedings pending or threatened
against or affecting Borrower or any of his property or assets which, if
adversely determined, would individually or in the aggregate materially impair
the ability of Borrower to perform any of his obligations under the Loan or
would adversely affect the financial condition of Borrower.
(e) Except for the Margin Loan, Borrower is not in default under any
agreement with any Person, or in the payment of any indebtedness for borrowed
money or under any agreement or instrument evidencing any such indebtedness, and
no event has occurred which, by notice, the passage of time or otherwise, would
constitute any such default.
(f) Except as set forth in SCHEDULE 2.2(f), Borrower has made no
contract or arrangement of any kind, other than the Loan Documents, which has
given rise to, or the performance of which by the other party thereto would give
rise to, a lien or claim of lien on the Collateral.
(g) No representation or warranty of Borrower contained in any of the
Loan Documents, and no statement contained in any certificate, schedule, list,
financial statement or other instrument furnished by or on behalf of Borrower to
Lender contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading.
(h) All proceeds of the Loan shall be used for the payment of the
Margin Deficit to the Margin Lender. No part of any such proceeds shall be paid
to or retained by Borrower.
(i) Except as disclosed in SCHEDULE 2.2(j), Borrower has good and
marketable title in fee simple to the Collateral, subject in all cases to no
lien, charge, easement, condition, restriction or encumbrance except as created
by the Loan Documents.
(j) To the knowledge of Borrower:
(A) the real property included in the Collateral (the
"Realty") does not currently contain and is not presently contaminated by any
hazardous substance, hazardous wastes, toxic substance or other material
substance or waste in violation of any environmental laws;
(B) (i) There are no visible signs of releases, spills,
discharges, leaks or disposal (collectively referred to as "Releases") of
hazardous substances at, upon, under or within the Realty; and (ii) there are no
underground storage tanks or polychlorinated biphenyls on the Realty;
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<PAGE> 8
(C) the Realty is not currently threatened by any activity
involving directly, or indirectly, the use, generation, treatment, storage or
disposal of any hazardous substance, hazardous wastes, toxic substance or other
material substance or waste, the exposure to which is prohibited, limited or
otherwise regulated by any environmental laws; and
(D) no "clean-up" of the Realty has occurred pursuant to any
applicable federal or state environmental laws.
(k) After giving effect to the transactions contemplated by the Loan
Documents, Borrower will be solvent, and able to pay his debts as they mature.
(l) EXHIBIT 2.2-l sets forth all amounts currently owed by Borrower on
the Margin Loan, the current amount of the Margin Deficit, and the collateral
securing the Margin Loan, including the Margin Shares. Borrower has delivered to
Lender true and complete copies of all agreements, documents and other
instruments which relate in any way to the Margin Loan.
(m) Except as set forth in EXHIBIT 2.2-m, Borrower holds his property
in his own name, not in the name of any trusts, Associates or Affiliates.
All representations and warranties contained in, or made in connection with,
this Agreement and the other Loan Documents shall survive the Closing Date and
the disbursement of the Loan and shall not be limited or otherwise affected by
any and all inspections, investigations, reviews or other inquiries (including,
without limitation, any investigation or review contemplated in Section 3.3)
made or other actions taken by Lender or any of its agents, representatives and
designees or any other person assisting any of the foregoing or acting for or on
behalf of Lender in connection with the Loan Documents or the consummation of
the Loan.
ARTICLE III
LOAN; CONDITIONS TO CLOSING
SECTION 3.1. LOAN AND REPAYMENT. On the terms and conditions of this
Agreement, Lender shall lend to Borrower the Loan Amount for payment on the
Margin Loan. The Loan shall be evidenced by this Agreement and the Note and
secured by the Security Documents and other Loan Documents, as applicable. Those
instruments shall be executed and delivered by Borrower to Lender concurrently
(or after in Lender's discretion) with the execution and delivery of this
Agreement and the delivery of all other documents and the satisfaction of all
other closing conditions required by this Agreement. Arrangements satisfactory
to Lender for the filing and recording of the Security Documents and other Loan
Documents evidencing or securing the Loan, which are to be recorded, shall be
made, or such instruments may be filed for record prior to or after the
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<PAGE> 9
disbursement of the Loan, if deemed appropriate by Lender. The Loan shall be
disbursed on the Closing Date pursuant to Section 3.8 hereof upon the
satisfaction of the conditions set forth in Section 3.6 hereof.
The terms of repayment of the Loan shall be as set forth in the Note,
and Borrower shall make all payments required to be made under the Note as and
when due.
SECTION 3.2. INTENTIONALLY LEFT BLANK.
SECTION 3.3. INSPECTIONS. In connection with the consummation of the
Loan Lender may inspect or otherwise reviewing the Collateral or Borrower's
assets. No such inspection and review shall impose any responsibility or
liability of any nature upon Lender, its agents, representatives or designees
or, without limitation, carry any warranty or representation as to the
Collateral.
SECTION 3.4. BORROWER REQUIRED TO PAY MARGIN CALLS. In the event that
the proceeds of the Loan are not sufficient to pay the Margin Deficit, or the
Margin Loan again becomes under collateralized, Borrower will, irrespective of
the cause of such deficiency, pay all margin calls on the Margin Loan in order
to prevent Margin Lender from executing on the Margin Shares.
SECTION 3.5. INTENTIONALLY LEFT BLANK.
SECTION 3.6. CONDITIONS TO DISBURSEMENT. The disbursement of the Loan
shall be made on the Closing Date, provided Lender shall have received the
following on or before the Closing Date (Lender may disburse the Loan prior to
receiving any of these items or the fulfillment of any condition hereof, or
prior to the attachment of any schedule or exhibit hereto, and in such event
Borrower shall promptly provide the required item, fulfill the condition and
deliver the required schedules and exhibits after the disbursement of the Loan):
(a) the duly executed Note;
(b) the duly executed Security Documents;
(c) duly executed financing statements to evidence and perfect the
security interests created by the Security Documents and delivery of all
Collateral which is required to be possessed by Lender to perfect its security
interest therein;
(d) a paid American Land Title Association loan policy of title
insurance issued by the Title Company, in the Loan Amount, insuring Lender's
interest created by the Security Documents at the level of priority therein
stated to be a valid lien on the Realty (including all appurtenances thereto)
free and clear of all defects and encumbrances
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<PAGE> 10
except as created by the Loan Documents, or as disclosed in such policy, with
such endorsements as Lender may require, which policy shall contain:
(i) no survey exception not theretofore approved by Lender;
(ii) affirmative insurance coverage regarding access,
compliance with respect to restrictive covenants and any other matters to which
Lender may have objection or require affirmative insurance coverage;
(e) If the disbursement date differs from the Closing date, a
certificate of Borrower that his (i) representations and warranties made in the
Loan Documents remain true, accurate and complete as of the disbursement date,
and (ii) no default or event which, by notice, the passage of time or otherwise,
would constitute a default exists under any of the Loan Documents;
(f) an opinion of Borrower's counsel, in form satisfactory to Lender's
counsel;
(g) such other certifications, documents or opinions as Lender may
reasonably request; and
(h) execution of the amendment to employment agreement provided for in
Section 4.1.
SECTION 3.7. INTENTIONALLY LEFT BLANK.
SECTION 3.8. DISBURSEMENT OF LOAN. Lender shall disburse the Loan by
delivering funds in the Loan Amount to the Margin Lender on the Closing Date for
application to the Margin Loan on Borrower's account.
SECTION 3.9. PAYMENT OF COSTS; INDEMNIFICATION. Borrower shall pay all
costs incident to the Loan, including recording and title fees, title
examination and insurance fees, escrow fees, all costs and expenses incurred by
Lender and the fees and expenses of the counsel, accountants and other
consultants, assisting in this matter at the request of Lender or its
representatives. Borrower shall defend, indemnify and hold Lender and its
directors, officers, and its and their attorneys harmless against any and all
loss, cost, expense, claims, damages or actions arising out of or connected with
the Loan, or execution and delivery of this Agreement or any other Loan
Documents and the preparation of documents relating to the disbursement of the
Loan. The provisions of this Section shall survive the termination of this
Agreement.
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<PAGE> 11
ARTICLE IV
ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 4.1. EMPLOYMENT. Borrower and Lender hereby agree that the term
of Borrower's Employment Agreement with Lender will be extended to December 31,
2003, and such agreement will be amended by separate agreement.
SECTION 4.2. AFFIRMATIVE COVENANTS OF BORROWER. Throughout the term of
this Agreement, Borrower shall:
(a) Taxes and Assessments. Pay and discharge promptly, when due and
payable, all taxes, assessments and governmental charges or levies imposed upon
him, his income or any of his property, or upon any part thereof, as well as all
claims of any kind which, if unpaid, might by law become a lien or charge upon
any of his property, other than taxes, assessments and claims being contested in
good faith by appropriate proceedings.
(b) Maintain Property. Maintain and keep the Collateral in good repair,
working order and condition, ordinary wear and tear excepted, and from time to
time make all repairs, renewals and replacements which are necessary and proper
in furtherance thereof.
(c) Maintain Insurance. Keep all of Borrower's insurable property
insured against loss or damage by fire and other risks, maintain public
liability insurance against claims for personal injury, death or property damage
suffered by others upon, in or about any and all premises owned or occupied by
Borrower; and maintain all insurance for which provision has been made in this
subsection (c) shall be maintained against such risks and in at least such
amounts as such insurance as required in the Security Documents, and all
insurance herein provided for shall be effected and maintained in force under a
policy or policies issued by insurers of recognized responsibility. Lender shall
be named as an additional insured and loss payee on all such insurance, and
certificates of insurance with such designations shall be provided to Lender and
shall provide that no insurance shall be canceled or reduced without providing
Lender with at least thirty (30) days prior notice.
(d) Furnish Information. Furnish to Lender such information on Borrower
and his assets and liabilities as Lender from time to time requests.
(e) Deliver Notice. Forthwith upon learning of any of the following,
deliver written notice thereof to Lender, describing the same and the steps
being taken by Borrower with respect thereto:
(i) the occurrence of an Event of Default or an event or
circumstance which would constitute an Event of Default, but for the requirement
that notice be given or time elapse or both, or
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<PAGE> 12
(ii) any action, suit or proceeding by or against Borrower at
law or in equity, or before any governmental instrumentality or agency,
instituted or threatened which, if adversely determined, would materially impair
the right or ability of Borrower to perform his obligations hereunder.
SECTION 4.3. ENVIRONMENTAL MATTERS. Throughout the term of this
Agreement, Borrower agrees that Borrower shall ensure that the Realty remains in
compliance with all environmental laws and will not place or permit to be placed
any hazardous or toxic substances or hazardous waste on the Realty.
SECTION 4.4. NEGATIVE COVENANTS OF BORROWER. Throughout the term of
this Agreement, Borrower agrees that he shall not:
(a) sell, transfer or otherwise dispose of any of the Collateral
without Lender's written consent;
(b) enter into any agreement containing any provision which would be
violated or breached by the performance of its obligations hereunder or under
any instrument or document delivered or to be delivered by it hereunder or in
connection herewith;
(c) pledge, assign, transfer, hypothecate or in any manner encumber any
of the Collateral; or
(d) pledge, assign, transfer, hypothecate or in any manner encumber any
of the Margin Stock, other than under the Margin Loan or with Lender's written
consent to satisfy the Loan.
ARTICLE V
EVENTS OF DEFAULT AND REMEDIES; TERMINATION
SECTION 5.1. EVENTS OF DEFAULT. Each of the following shall be an
"Event of Default":
(a) Borrower shall fail to pay any amount payable under the Note or
pursuant to this Agreement, the Security Documents or any other Loan Document on
the date on which such payment is due and payable;
(b) Borrower shall fail to observe and perform any agreement, term or
condition contained in this Agreement, the Security Documents or any other Loan
Document and such failure continues uncured for a period of thirty (30) days
after written notice of such default, or for such longer period to which Lender
may agree in writing;
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<PAGE> 13
(c) Any representation or warranty made by Borrower herein or in any
other Loan Documents, or in connection herewith or therewith shall prove to have
been incorrect in any material respect when made;
(d) Borrower shall fail to pay any of his indebtedness for borrowed
money, or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, by acceleration, on demand or otherwise) and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such indebtedness; or any other default
under any agreement or instrument relating to any such indebtedness, or any
other event, shall occur and shall continue after the applicable grace period,
if any, specified in such agreement or instrument, if the effect of such default
or event is to accelerate, or to permit the acceleration of, the maturity of
such indebtedness; or any such indebtedness shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof;
(e) Borrower commences a voluntary case concerning it under any title
of the United States Code entitled "Bankruptcy" as now or hereafter in effect,
or any successor thereto (the "Bankruptcy Code"); or an involuntary case is
commenced against Borrower under the Bankruptcy Code, and relief is ordered
against Borrower or the petition, though controverted, is not dismissed within
forty-five (45) days after the commencement of the case; or Borrower is not
generally paying its debts as such debts become due; or a custodian (as defined
in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of Borrower; or Borrower commences any other
proceeding under any reorganization, arrangement, readjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction, whether now or hereafter in effect, or there is commenced against
Borrower any such proceeding which remains undismissed for a period of sixty
(60) days; or Borrower is adjudicated insolvent or bankrupt; or Borrower fails
to controvert in a timely manner any such case under the Bankruptcy Code or any
such proceeding or any order of relief or other order approving any such case or
proceeding or in the appointment of any custodian or the like of or for it or
any substantial part of its property or suffers any such appointment to continue
undischarged or unstayed for a period of forty-five (45) days; or Borrower makes
a general assignment for the benefit of creditors; or any action is taken by
Borrower for the purpose of effecting any of the foregoing; or a receiver or
trustee or any other officer or representative of the court or of creditors, or
any court, governmental officer or agency, shall, under color of legal
authority, take and hold possession of any substantial part of the property or
assets of Borrower for a period in excess of forty-five days;
(f) A judgment or order for the payment of money in excess of Ten
Thousand Dollars ($10,000.00) shall be rendered against Borrower and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of thirty (30) consecutive
days during which a stay of
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<PAGE> 14
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(g) Borrower transfers any of the Margin Stock without Lender's written
consent.
SECTION 5.2. REMEDIES ON DEFAULT. Whenever an Event of Default shall
have occurred and be subsisting, any one or more of the following remedial steps
may be taken:
(a) If the Loan has not been disbursed, Lender may terminate any and
all of its obligations under this Agreement;
(b) Lender may declare all payments under the Note to be immediately
due and payable, whereupon the same shall become immediately due and payable;
(c) Lender may posses the Collateral; and
(d) Lender may pursue all or any combination of the remedies specified
in this Agreement, the Security Documents, the Note or any other Loan Document,
or which now or hereafter exist in statute, at law or in equity, to collect all
amounts then due and thereafter to become due under this Agreement, the Security
Documents, the Note or any other Loan Document, or to enforce the performance
and observance of any other obligation or agreement of Borrower under the Loan
Documents.
SECTION 5.3. NO REMEDY EXCLUSIVE. No remedy conferred upon or reserved
to Lender by this Agreement is intended to be exclusive of any other available
remedy or remedies, but each and every such remedy shall be cumulative and shall
be in addition to every other remedy given under this Agreement, each other Loan
Document, or now or hereafter existing at law, in equity or by statute. No delay
or omission to exercise any right or power accruing upon any default shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised from time to time and as often as may
be deemed expedient. In order to entitle Lender to exercise any remedy reserved
to it in this Article, it shall not be necessary to give any notice, other than
such notice as may be expressly provided for herein or required by law.
SECTION 5.4. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES. If an Event
of Default shall occur and Lender should incur expenses, including attorneys'
fees, in connection with the enforcement of this Agreement or any other Loan
Document, or the collection of sums due thereunder, Borrower shall reimburse
Lender for the expenses so incurred upon demand. If any such expenses are not so
reimbursed, the amount thereof, together with interest thereon from the date of
demand for payment at the Interest Rate (as defined in the Security Documents),
shall constitute indebtedness secured by the Security Documents, and in any
action brought to collect such indebtedness or to foreclose or
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<PAGE> 15
enforce the Security Documents, Lender shall be entitled to seek the recovery of
such expenses in such action.
SECTION 5.5. NO WAIVER. No failure by Lender to insist upon the strict
performance by Borrower of any provision hereof shall constitute a waiver of his
right to strict performance, and no express waiver shall be deemed to apply to
any other existing or subsequent right to enforce the failure by Borrower to
observe or comply with any provision hereof.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. TERM OF AGREEMENT. This Agreement shall be and remain in
full force and effect from the date of its delivery until (a) the termination of
this Agreement pursuant to the terms hereof or (b) such time as the Loan shall
have been fully and indefeasably repaid and all other sums payable by Borrower
under this Agreement, the Security Documents, the Note and the other Loan
Documents shall have been paid.
SECTION 6.2. NOTICES. All notices, certificates, requests or other
communications hereunder shall be in writing and shall be deemed to be
sufficiently given when mailed by registered or certified mail, postage prepaid,
and addressed to the appropriate Notice Address. Borrower or Lender may, by
notice given hereunder, designate any further or different addresses to which
subsequent notices, certificates, requests or other communications shall be
sent.
SECTION 6.3. EXTENT OF COVENANTS OF LENDER; NO PERSONAL LIABILITY. All
covenants, obligations and agreements of Lender contained in this Agreement
shall be effective only to the extent authorized and permitted by applicable
law. No such covenant, obligation or agreement shall be deemed to be a covenant,
obligation or agreement of any director, officer or agent of Lender, and no such
Person shall be personally liable or in any way personally obligated by reason
hereof.
SECTION 6.4. BINDING EFFECT. This Agreement shall inure to the benefit
of, and shall be binding in accordance with its terms upon, Lender and its
successors and assigns, and on Borrower and his heirs, estate, executors,
administrators and personal representatives.
SECTION 6.5. AMENDMENTS AND SUPPLEMENTS. This Agreement may not be
amended or supplemented except by an instrument in writing executed by Lender
and Borrower.
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<PAGE> 16
SECTION 6.6. EXECUTION COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be regarded as an original, and
all of which shall constitute but one and the same instrument.
SECTION 6.7. SEVERABILITY. If any provision of this Agreement, or any
covenant, obligation or agreement contained herein is determined by a court to
be invalid or unenforceable, such determination shall not affect any other
provision, covenant, obligation or agreement, each of which shall be construed
and enforced as if such invalid or unenforceable portion were not contained
herein. Such invalidity or unenforceability shall not affect any valid and
enforceable application thereof, and each such provision, covenant, obligation
or agreement, shall be deemed to be effective, operative, made, entered into or
taken in the manner and to the full extent permitted by law.
SECTION 6.8. CAPTIONS. The captions and headings in this Agreement
shall be solely for convenience of reference and shall in no way define, limit
or describe the scope or intent of any provisions or Sections of this Agreement.
SECTION 6.9. GOVERNING LAW. This Agreement shall be deemed to be a
contract made under the laws of the state of Ohio and for all purposes shall be
governed by and construed in accordance with the laws of Ohio without regard to
conflict of laws principals.
IN WITNESS WHEREOF, this Agreement has been executed and delivered all
as of the date hereinbefore written.
LENDER:
ADVANCED LIGHTING TECHNOLOGIES, INC.
By: /s/ Alan J. Ruud
--------------------------------
Its: Director Representative
-------------------------------
BORROWER:
/s/ Wayne R. Hellman
-----------------------------------
Wayne R. Hellman
13
<PAGE> 17
EXHIBIT 1.2-A-COLLATERAL
LOAN AGREEMENT
WAYNE R. HELLMAN / ADVANCED LIGHTING TECHNOLOGIES, INC.
I. All personal property now owned or hereinafter acquired
including, but not limited to, stocks; bonds and other
securities; investment property; contract rights; furniture;
furnishings; chattel papers; deposit accounts; documents;
choses in action; money; instruments; goods (whether covered
by a certificate of title or not); general intangibles;
foreign currency; letters of credit and advices of credit; and
II. A 1997 Regal pleasure boat, Registration Number FL1982KB, Hull
Identification Number RGMPA012G697 and all engines, fixtures
and chattels now or hereafter attached thereto or found
thereon; and
III. With respect to all of the foregoing, all (i) privileges and
appurtenances thereto, (ii) renewals or replacement thereof or
articles in substitution therefor, (iii) proceeds of any of
the foregoing or from any insurance payable with respect
thereto (from whatever source), or payments from any taking
under power of eminent domain of all or any portion thereof,
and (iv) all rents, issues, profits or other amounts due to
Debtor in respect thereof; and
IV. Notwithstanding the foregoing, the Collateral shall not
include any stock, bonds, or other securities held by Debtor
in Advanced Lighting Technologies, Inc. nor any membership
interest in Hellman, Ltd.
<PAGE> 18
EXHIBIT 1.2-B - SECURED PROMISSORY NOTE
LOAN AGREEMENT
WAYNE R. HELLMAN / ADVANCED LIGHTING TECHNOLOGIES, INC.
[DOCUMENT ATTACHED HERETO]
<PAGE> 19
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND SUCH LAWS AND
THE RESPECTIVE RULES AND REGULATIONS THEREUNDER.
SECURED PROMISSORY NOTE
$9,000,000 October 8, 1998
FOR VALUE RECEIVED, WAYNE R. HELLMAN, an individual residing at 7181
Ober Lane, Chagrin Falls, Ohio 44023 ("Maker") promises to pay to the order of
ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio corporation with its offices at
2307 East Aurora Road, Suite One, Twinsburg, Ohio 44087 ("Payee") the principal
sum of Nine Million Dollars ($9,000,000), plus interest (calculated on the basis
of a 365 day year) on the principal outstanding from time to time at eight
percent (8%) per annum. Maker acknowledges and agrees that Payee has paid the
proceeds of the Loan directly to Prudential Securities Incorporated pursuant to
the wire instructions attached hereto as EXHIBIT A, on Maker's behalf, in
payment of amounts due under the Margin Loan (as defined in the Loan Agreement
of even date herewith by and between Maker and Payee (the "Loan Agreement"))
(the Loan Agreement is by this reference incorporated herein; any initially
capitalized term used but not herein defined shall have the meaning ascribed to
it in the Loan Agreement).
1. MATURITY. All unpaid principal hereunder and all accrued but unpaid
interest thereon shall be due in full at October 6, 1999.
2. ORDER OF PAYMENT; PREPAYMENT. Each payment (and any prepayments) by
Maker to Payee hereunder shall be applied first to the costs of collection, if
any, second to accrued but unpaid interest and third to principal, regardless of
whether Maker designates a payment otherwise. Maker may, at any time he is not
in Default, prepay this Note, in whole or in part, from time to time, without
premium or penalty.
3. PAYMENTS. Payments hereunder shall be made at Payee's address set
forth above, or at such other address as Payee may direct.
4. SECURITY DOCUMENTS. This Note is secured by the Collateral pursuant
to the the terms and conditions set forth in the Security Documents and the
other Loan
$9,000,000 Secured Promissory Note
Maker - Wayne R. Hellman
Page 1 of 3
<PAGE> 20
Documents, and all of the terms and provisions thereof are by this
reference incorporated herein.
5. DEFAULT. Upon: (A) any Event of Default (as defined in the Loan
Agreement); (including the failure to pay any amount when due) after any
applicable cure period has passed; or (B) Maker no longer being employed by
Payee for any reason (any such event in (A) or (B) being a "Default"), the
unpaid principal of the Loan and the accrued but unpaid interest thereon, shall
automatically become immediately due and payable.
6. DEFAULT INTEREST. Any and all amounts owed by Maker to Payee under
the terms of this Note which are not paid when due (whether by reason of
acceleration or otherwise) shall bear interest at eighteen percent (18%) per
annum or, if less, the highest legal rate, until all of such sums are paid in
full.
7. SETOFF. Maker agrees that, in addition to, and without limitation
of, any right of setoff or counterclaim which Payee may otherwise have against
Maker, upon any Default Payee shall be entitled, at its option, to setoff
amounts owed by it to Maker or amounts held by it for the account of Maker,
against any principal, interest or other amounts owing from Maker to Payee
hereunder or under the other Loan Documents,
8. MAKER'S WAIVER. Maker waives demand, presentment for payment, notice
of dishonor, protest, notice of protest, diligence in collection, bringing suit
in connection with the delivery, acceptance, performance, default or enforcement
of this Note and any homestead exemption. Maker agrees that Payee may extend the
time for payment, accept partial payments, or exchange or release any Collateral
securing the Loan, without discharging or releasing Maker.
9. COLLECTION COSTS. Upon any Default, if this Note is placed by Payee
in the hands of any attorney for collection, through legal proceedings or
otherwise, Maker agrees to pay reasonable attorneys' fees to the holder hereof
together with reasonable costs and expenses of collection, including, without
limitation, any such attorneys' fees, costs and expenses relating to any
proceedings with respect to the bankruptcy, insolvency, or readjustment of debt
of Maker. All such amounts shall be added to principal as they are incurred.
10. AMENDMENT; WAIVER. This Note may not be amended or modified in any
manner except by written instrument executed by Payee and Maker. No delay or
omission on the part of Payee in exercising any right hereunder shall operate as
a waiver of such right or of any such other right, nor shall any such delay or
omission be deemed to bar any right hereunder on any future occasion.
$9,000,000 Secured Promissory Note
Maker - Wayne R. Hellman
Page 2 of 3
<PAGE> 21
11. SUCCESSORS. Any reference herein to Payee shall be a reference to
Payee and any subsequent holder of this Note. This Note shall be binding upon
Maker, his heirs, estate, executors, administrators and personal
representatives, and shall benefit Payee and its successors and assigns, and any
subsequent holder of this Note.
12. GENERAL. This Note shall be governed by, and construed and enforced
in accordance with, the laws of the State of Ohio, without regard to any
conflicts or choice of law rules, and shall be construed and interpreted without
any presumption or construction against the party causing this Note to be
drafted.
IN WITNESS WHEREOF, Maker has duly executed this Note on the date first
above written.
MAKER
--------------------------
Wayne R. Hellman
$9,000,000 Secured Promissory Note
Maker - Wayne R. Hellman
Page 3 of 3
<PAGE> 22
EXHIBIT A
ROETZEL ANDRESS
One Cleveland Center, Suite 1650
1375 E. 9th Street
Cleveland, Ohio 44114
(216) 623-0150
Fax (216) 623-0134
October 7, 1998
Jay R. Faeges, Esq.
Goodman Weiss Miller, LLP
100 Erieview Plaza, 27th Floor
Cleveland, Ohio 44114
RE: Wayne R. Hellman and Advanced Lighting Technologies, Inc.
Dear Jay:
Pursuant to your request, please be advised that as of the close of
business on October 6, the actual debit balance in Wayne R. Hellman's account at
Prudential Securities, Inc. was $15,049,195.00 and that the margin call was
$8,327,313.00. Please be advised that the amount of the debit balance and the
margin call will be affected by the day-to-day fluctuations in the stock price.
The money should be sent to the following by wire transfer:
Chase Manhattan Bank (Chase NYC)
ABA # 021000021
Account 066296390
Further credit to Wayne R. Hellman and
Prudential Securities Account Number JTW-001475
Sincerely,
ROETZEL & ANDRESS
/s/ Donald S. Scherzer/ajl
--------------------------
Donald S. Scherzer
DSS:ajl/16274_1
cc: Mr. Wayne R. Hellman
Gerald W. Cowden, Esq.
VIA FACSIMILE (216-363-5844)
- - ----------------------------
<PAGE> 23
EXHIBIT 1.2-C - SECURITY DOCUMENTS
LOAN AGREEMENT
WAYNE R. HELLMAN / ADVANCED LIGHTING TECHNOLOGIES, INC.
[DOCUMENTS ATTACHED HERETO]
<PAGE> 24
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of October 8,
1998, is made by WAYNE R. HELLMAN ("Debtor"), having his principal residence at
7181 Ober Lane, Chagrin Falls, Ohio 44023, in favor of ADVANCED LIGHTING
TECHNOLOGIES, INC. ("Secured Party"), an Ohio corporation having its principal
offices at 32000 Aurora Road, Solon, Ohio 44139.
BACKGROUND
A. Pursuant to the Loan Agreement dated as of even date herewith, by
and between Secured Party and Debtor (the "Agreement"), Secured Party advanced
Debtor the principal amount of Nine Million Dollars ($9,000,000) (the "Loan")
(any initially capitalized term that is used but not defined herein, has the
meaning ascribed to such term in the Agreement).
B. The Loan is evidenced by the Secured Promissory Note dated as of
even date herewith made by Debtor to the order of Secured Party (the "Note").
C. As a condition thereto, the Loan is secured by the security
interests granted by Debtor to Secured Party herein, by the mortgages and
security interests granted by Debtor to Secured Party in several Real Estate
Mortgages dated as of even date herewith (each a "Mortgage" and collectively the
"Mortgages") and by the contract rights assigned by Debtor to Secured Party in
the Collateral Assignment of Contract (the "Assignment") dated as of even date
herewith.
AGREEMENT
NOW, THEREFORE, as an inducement to and in consideration of the
foregoing, the agreements made herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1 GRANT. Debtor hereby grants, bargains, sells, conveys, mortgages, and
assigns to Secured Party a security interest in all right, title and interest of
Debtor in, to and under the property described in EXHIBIT A, together with all
other real and personal properties now owned or hereafter acquired by Debtor, of
every kind and description, wherever located, and in all (i) privileges and
appurtenances thereto, (ii) renewals or replacements thereof or articles in
substitution therefor, (iii) proceeds of any of the foregoing or from any
insurance payable with respect thereto (from whatever source), or payments from
any taking under power of eminent domain of all or any portion thereof, and (iv)
all rents, issues and profits or other amounts due to Debtor in respect thereof
(collectively, the "Collateral").
Page 1 of 10
<PAGE> 25
2 PURPOSE. The security interest granted by Debtor to Secured Party in
SECTION 1 (the "Security Interest") secures the payment of principal in the
amount of Nine Million Dollars ($9,000,000), together with all interest thereon
and any other amounts now or hereafter owing from Debtor to Secured Party
hereunder, under the Mortgages, the Note, the Agreement, the Assignment and
under all other agreements entered into by Debtor and Secured Party in
connection herewith and therewith, and the performance by Debtor of all other of
his obligations hereunder and thereunder (collectively, the "Obligations").
3 REPRESENTATIONS AND WARRANTIES OF DEBTOR. Debtor represents and
warrants to Secured Party that, except as provided in SCHEDULE 3, and other than
the Security Interest or any lien created by the Mortgages:
3.1 no mortgage, lien, encumbrance or charge on, pledge of, security
interest in or conditional sale or other title retention agreement with respect
to the Collateral or any part thereof (including, without limitation, any lien,
encumbrance or charge arising by operation of law) now exists;
3.2 Debtor has not heretofore executed any financing statement or
security agreement of any type relating to the Collateral or any part thereof,
and no such financing statement or security agreement is now on file in any
public office;
3.3 the Security Interest created hereby is a first and best lien on
the Collateral;
3.4 Debtor has good title to all now owned Collateral; and
3.5 Debtor has full right and authority to grant the Security Interest
to Secured Party as provided herein.
4 GENERAL COVENANTS.
4.1 Debtor, at his expense, shall defend the Security Interest against
all claims and demands whatsoever.
4.2 Debtor, at his expense, shall: (i) cause all financing statements,
including all necessary amendments, supplements and appropriate continuation
statements to be recorded, registered and filed, and to be kept recorded,
registered and filed, in such manner and in such places; (ii) with respect to
the Collateral or some part thereof for which any negotiable certificate of
title or similar negotiable document is at any time outstanding, promptly advise
Secured Party thereof, cause the interest of Secured Party to be properly and
promptly noted thereon, and promptly deliver to Secured Party any such
negotiable certificate or document; (iii) with respect to any of the Collateral
which is the type that the Uniform Commercial Code requires delivery to a
secured party, with powers or instruments
Page 2 of 10
<PAGE> 26
of transfer, to perfect a security interest therein, deliver such Collateral to
Secured Party, together with powers and instruments of transfer executed in
blank as required by Secured Party; and (iv) take all other actions and execute
all other instruments required, in order to perfect, and keep perfected, the
Security Interest in the Collateral granted to Secured Party herein, subject
only to Permitted Encumbrances (defined herein).
4.3 All property of every kind acquired by Debtor after the date
hereof, shall immediately upon the acquisition thereof by Debtor, and without
further action by Debtor, become subject to the Security Interest, as fully as
though now owned by Debtor and specifically described herein. Nevertheless,
Debtor shall take such actions and execute and deliver such additional
instruments as Secured Party shall reasonably require to further evidence or
confirm the subjection of such property to the Security Interest.
4.4 With the exception of Debtor's cash, money and deposit accounts,
which Debtor may continue to use throughout the duration of this Agreement,
Debtor shall not sell, rent, convey, assign or transfer the Collateral or any
part or interest therein without the prior written consent of Secured Party,
which shall not be unreasonably withheld. Debtor shall not directly or
indirectly create or permit to remain, and will promptly discharge, any
mortgage, lien, encumbrance or charge on, pledge of, security interest in or
conditional sale or other title retention agreement with respect to the
Collateral or any part thereof, or the interest of Debtor or Secured Party
therein, or any revenues, income or profit or other sums arising from the
Collateral or any part thereof, (including, without limitation, any lien,
encumbrance or charge arising by operation of law) other than: (i) the Security
Interest and any other liens or rights of Secured Party granted in any of the
Loan Documents; (ii) the lien of any mortgage lender(s) identified in SCHEDULE 3
(the "Senior Lender(s)"); (iii) liens for taxes, assessments and other
governmental charges which are not at the time required to be paid; (iv) liens
of mechanics, materialmen, suppliers or vendors or rights thereto for amounts
which at the time are not required to be paid; and (v) purchase money security
interests in property purchased on credit or with borrowed money and which
secures the repayment of such credit or borrowed money (collectively, the
"Permitted Encumbrances").
4.5 Debtor hereby authorizes and empowers Secured Party, at its option,
to do all things authorized or required to be done by Secured Party, as a
secured party, under the laws of the state of Ohio and, if different, the state
in which any of the Collateral is located, to protect and perfect its interests
in the Collateral, and in furtherance thereof, Debtor hereby grants Secured
Party the right and power to execute all financing statements and instruments of
conveyance in Debtor's name. This power is coupled with an interest and is
irrevocable.
4.6 Nothing contained in this Agreement shall constitute any request by
Secured Party, express or implied, for the performance of any labor or services
or the furnishing of any materials or other property in respect of the
Collateral or any part thereof, or be construed to give Debtor any right, power
or authority to contract for or permit the
Page 3 of 10
<PAGE> 27
performance of any labor or services or the furnishing of any materials or other
property in such fashion as would provide the basis for any claim either against
Secured Party or that any lien based on the performance of such labor or
services or the furnishing of any such materials or other property is prior to
the Security Interest.
4.7 Without affecting the liability of any other person liable for the
payment of any obligation herein mentioned, and without affecting the Security
Interest upon any portion of the Collateral not then or theretofore released as
security for the full amount of all unpaid or unperformed Obligations, Secured
Party may, from time to time and without notice, (a) release any person so
liable; (b) extend the maturity or alter any of the terms of any such
obligation; (c) grant other indulgences; (d) release or reconvey, or cause to be
released or reconveyed at any time at Secured Party's option any or all of the
Collateral; (e) take or release any other or additional security for any
Obligation; or (f) make compositions or other arrangements with debtors in
relation thereto.
4.8 Debtor shall pay promptly when due, and before penalty or interest
accrue thereon, all taxes, assessments, whether general or special, all other
governmental charges and all public or private utility charges of any kind
whatsoever foreseen or unforeseen, ordinary or extraordinary that now or may at
any time hereafter be assessed, levied or imposed against or with respect to the
Collateral or any part thereof which, if not paid, may become or be made a lien
on the Collateral, or any part thereof.
4.9 Debtor shall keep the real and personal property included in the
Collateral continuously insured with risk and liability insurance in such
amounts as Secured Party reasonably requires. All insurance shall be obtained
and maintained with generally recognized, responsible insurance companies.
Debtor shall furnish Secured Party with a certificate of insurance for each
policy setting forth the coverage, the limits of liability, the name of the
carrier, the policy number and the expiration date. Each policy of insurance
shall be written so as not to be subject to cancellation or substantial
modification which phrase shall include any reduction in the scope or limits of
coverage upon less than thirty (30) days advance written notice to Secured
Party. All policies of insurance shall name Secured Party as an additional
insured and loss payee, as applicable.
4.10 Debtor, at its expense, shall comply with all laws with respect to
the Collateral, and shall keep or cause to be kept the Collateral in good order
and condition (ordinary wear and tear excepted) and shall make or cause to be
made all necessary or appropriate repairs, replacements and renewals thereof,
ordinary and extraordinary, foreseen and unforeseen unless Secured Party
otherwise consents in writing. Debtor shall not do, or permit to be done, any
act or thing which might materially impair the value or usefulness of the
Collateral or any part thereof, shall not commit or permit any waste of the
Collateral or any part thereof, and shall not permit any unlawful use or
occupation of the Collateral or any part thereof.
Page 4 of 10
<PAGE> 28
4.11 Debtor further covenants and agrees with Secured Party that
neither Debtor nor any of its agents, employees, independent contractors,
invitees, licensees, successors, assignees, tenants or subtenants will store,
release or dispose of or permit the storage, release or disposal of any
hazardous or toxic substances or hazardous waste on any real property included
in the Collateral at any time from and after the effective date of this
Agreement.
5 CONFLICT. To the extent that the Collateral is covered by this
Agreement, any of the Mortgages or the Assignment, the provisions of all shall
apply, but in the event of a conflict, the provisions of this Agreement shall
govern as to all portions of the Collateral as constitutes personal property,
the Mortgage in question shall govern as to real property and fixtures and the
Assignment shall govern as to the contract rights set forth therein. Other than
fixtures in which Secured Party has a perfected security interest by the
Mortgages, the Collateral, and each and every part thereof, shall be and remain
personal property notwithstanding the manner in which it may be attached or
affixed to real estate. (This provision shall not affect the security interest
granted herein or the enforceability of this Agreement.)
6 INDEMNIFICATION. Debtor will protect, indemnify and save harmless
Secured Party from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses as may be limited by law or judicial
order or decision entered in any action brought to recover moneys under this
Section) imposed upon, incurred by or asserted against Secured Party by reason
of the Security Interest or any other interest of Secured Party in the
Collateral or any part thereof.
7 DAMAGE OR DESTRUCTION. In case of any damage to or destruction of the
Collateral, or any part thereof, Debtor will promptly give written notice
thereof to Secured Party generally describing the nature and extent of such
damage or destruction. Any insurance or other proceeds from any such damage or
destruction shall be paid to Secured Party unless it otherwise consents to
Debtor's use of such proceeds to repair the damage or destruction, which consent
shall not be unreasonably withheld.
8 EMINENT DOMAIN. If title to or the temporary use of the Collateral,
or any part thereof, shall be taken under the exercise of the power of eminent
domain by any governmental body or by any person, firm or corporation acting
under any governmental body or by any person, firm or corporation acting under
governmental authority, Debtor will promptly give written notice thereof to
Secured Party describing the nature and extent of such taking. Any proceeds
received from any award made in such eminent domain proceedings shall be paid to
Secured Party.
Page 5 of 10
<PAGE> 29
9 DEFAULT.
9.1 If Debtor shall fail to make any payment or perform any act
required to be made or performed hereunder or under the Agreement, any of the
Mortgages, the Note or the Assignment, Secured Party, without notice or demand
upon Debtor and without waiving or releasing any obligation or default, may, but
shall be under no obligation to, make such payment or perform such act for the
account and at the expense of Debtor and may enter upon Debtor's land or any
part thereof for such purpose and take all such action thereon as, in its sole
opinion, may be necessary or appropriate therefor. All payments so made by
Secured Party and all costs, fees and expenses incurred in connection therewith
or in connection with the performance by Secured Party of any such act, together
with interest thereon at eight percent (8%) per annum shall, together with such
interest, be additional indebtedness secured by this Agreement and shall be paid
by Debtor to Secured Party on demand. In any action brought to collect such
indebtedness, or to foreclose this Agreement, Secured Party shall be entitled to
the recovery of such expenses in such action except as limited by law or
judicial order or decision entered in such proceedings.
9.2 Any default by Debtor of any obligation hereunder, any Default
under the Note, any of the Mortgages, and the Assignment and any Event of
Default under the Agreement or any default of any of the other Obligations shall
be an "Event of Default" under this Agreement.
9.3 If an Event of Default shall have occurred and be continuing,
Secured Party, at any time, at its election, may exercise any or all or any
combination of the remedies conferred upon or reserved to it under this
Agreement, the Agreement, the Note, any of the Mortgages, the Assignment or now
or hereafter existing at law, or in equity or by statute. Without limitation,
Secured Party may (a) declare the entire unpaid principal balance of the Note
and all other indebtedness secured hereby immediately due and payable, without
notice or demand, the same being expressly waived by Debtor, subject to any cure
periods provided for in the Note for non-monetary defaults; (b) proceed at law
or equity to collect all indebtedness secured by this Agreement due hereunder,
whether at maturity or by acceleration; (c) foreclose the lien of this Agreement
as against all or any part of the Collateral; and (d) exercise any rights,
powers and remedies it may have as a secured party under the Uniform Commercial
Code, or other similar laws in effect, including, without limitation, the option
of proceeding as to both personal property and fixtures in accordance with
Secured Party's rights with respect to real property.
9.4 No failure by Secured Party to insist upon the strict performance
of any term hereof or to exercise any right, power or remedy consequent upon an
Event of Default, shall constitute a waiver of any such term or of any such
Event of Default. No waiver of any Event of Default shall affect or alter this
Agreement, which shall continue in full force, and shall not effect a waiver
with respect to any subsequent such Event of Default or to any other then
existing or subsequent breach.
Page 6 of 10
<PAGE> 30
10 WAIVER. Debtor does hereby waive to the full extent it may lawfully
do so, the benefit of all appraisement, valuation, stay and extension laws now
or hereafter in force and all rights of marshaling of assets in the event of any
sale of the Collateral, any part thereof or any interest therein and any court
having jurisdiction to foreclose the lien thereof may sell the Collateral in
part or as an entirety.
11 DISTRIBUTION. All amounts (including, without limitation, the
proceeds of any sale of the Collateral, any part thereof or any interest
therein) received by Secured Party hereunder shall be applied to amounts due to
it from Debtor hereunder and under the Note, the Agreement, any of the
Mortgages, the Assignment and the other Obligations, and shall be applied as
follows:
First: the payment of all costs incurred in the collection thereof
(including, without limitation, reasonable attorneys' fees and expenses except
as may have been limited by law or by judicial order or decision entered in any
action to foreclose this Agreement);
Second: the payment of indebtedness secured by this Agreement owing to
Secured Party, other than indebtedness with respect to the Note at the time
outstanding; and
Third: the payment to Secured Party for the payment of all amounts
payable under the Note in the order provided for therein.
12 RIGHTS AND REMEDIES OF SECURED PARTY.
12.1 Each right, power and remedy of Secured Party, provided for in
this Agreement, in the Agreement, the Note, any of the Mortgages, the Assignment
or now or hereafter existing at law or in equity or by statute or otherwise,
shall be cumulative and concurrent and shall be in addition to every other
right, power or remedy provided for in this Agreement, in the Agreement, the
Note, any of the Mortgages, the Assignment or now or hereafter existing at law
or in equity or by statute or otherwise, and the exercise or beginning of the
exercise or partial exercise by Secured Party of any one or more of such rights,
powers or remedies shall not preclude the simultaneous or later exercise by
Secured Party of any or all such other rights, powers or remedies.
12.2 All rights, powers and remedies provided herein may be exercised
only to the extent that the exercise thereof does not violate any applicable
law, and are intended to be limited to the extent necessary so that they will
not render this Agreement invalid, unenforceable or not entitled to be recorded,
registered or filed under any applicable law.
12.3 In case Secured Party shall have proceeded to enforce any right,
power or remedy under this Agreement by foreclosure, entry or otherwise, and
such proceedings shall have been discontinued or abandoned for any reason, or
shall have been determined adversely to Secured Party, then and in every case
Debtor and Secured Party shall be
Page 7 of 10
<PAGE> 31
restored to their former positions and rights hereunder, and all rights, power
and remedies of Secured Party shall continue as if no such proceeding had been
taken.
12.4 Secured Party shall have no liability for any loss, damage,
injury, cost or expense resulting from any act or omission to act by it or its
representatives whether or not negligent, which was taken or omitted pursuant to
this Agreement.
12.5 All sums payable by Debtor hereunder shall be paid without notice,
demand, counterclaims, setoff, deduction or defense, and without abatement,
suspension, deferment, diminution or reduction, and the obligations and
liabilities of Debtor hereunder shall in no way be released, discharged or
otherwise affected (except as expressly provided herein) by reason of (a) any
damage to or destruction of or any condemnation or similar taking of the
Collateral or any part thereof; (b) any restriction or prevention of or
interference with any use of the Collateral or any part thereof; (d) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to Debtor or any action taken with
respect to this Agreement by any trustee or receiver of Debtor, or by any court
in such proceeding; (e) any claim which Debtor has or might have against Secured
Party; (f) any default or failure on the part of Secured Party to perform or
comply with any of the terms hereof or of any other agreements pertaining to the
loan on the Collateral with Debtor; or (g) any other occurrence whatsoever,
whether similar or dissimilar to the foregoing, whether or not Debtor shall have
notice or knowledge of any of the foregoing. Except as expressly provided
herein, Debtor waives all rights now or hereafter conferred by statute or
otherwise to any abatement, suspension, deferment, diminution or reduction of
any sum secured hereby and payable by Debtor.
13 ADDITIONAL SECURITY. Without notice to or consent of Debtor and
without impairment of the lien and rights created by this Agreement, Secured
Party may accept from Debtor or from any other person or persons, additional
security for the indebtedness secured by this Agreement. Neither the giving of
this Agreement nor the acceptance of any such additional security shall prevent
Secured Party from resorting first to such additional security or to the
security created by this Agreement, in either case without affecting the lien
hereof and the rights conferred hereunder.
14 TERMINATION. If all sums then due and payable under this Agreement,
the Note and the Agreement by Debtor shall have been paid and Debtor shall have
complied with all the terms, conditions and requirements hereof and thereof,
then this Agreement shall be null and void and of no further force and effect.
Upon the written request and at the expense of Debtor, Secured Party will
execute and deliver such proper instruments of release and discharge as may
reasonably be requested to evidence such defeasance, release and discharge.
Page 8 of 10
<PAGE> 32
15 RIGHT OF ENTRY. Secured Party and its representatives are hereby
authorized to the Collateral at reasonable times, and so long as Secured Party
does not unreasonably interfere with Debtor's use and enjoyment of the
Collateral.
16 FEES. Debtor shall, to the extent permitted by law, immediately upon
demand pay or reimburse Secured Party for all reasonable attorneys' fees, costs
and expenses incurred by Secured Party in any proceedings involving the estate
of a decedent, an insolvent or a debtor under federal bankruptcy law, or in any
action, proceeding or dispute of any kind in which Secured Party is made a
party, or appears as an intervener or party plaintiff or defendant, affecting or
relating to the Note, this Agreement or the Agreement, any of the Mortgages, the
Assignment, Debtor or any of the Collateral, including, but not limited to, the
foreclosure of this Agreement, any condemnation action involving the Collateral,
or any action to protect the security hereof, and any such amounts paid by
Secured Party shall, except as may be limited by law or judicial order or
decision entered in any action to foreclose this Agreement, be added to the
indebtedness secured hereby and secured by the lien and security interest of
this Agreement and shall bear interest at eight percent (8%) per annum.
17 GOVERNING LAW; SEVERABILITY; HEADINGS; COUNTERPARTS. This Agreement
shall be deemed to be made under the laws of the state of Ohio and for all
purposes shall be governed by and construed in accordance with the laws of Ohio
without regard to conflict of laws principles (except to the extent the
Collateral is situated in a state other than Ohio and in that case any laws of
such state which are required to control mortgages granted on such property
shall apply) and shall inure to the benefit of and be binding upon Debtor and
his estate, heirs, executors, administrators and personal representatives,
successors and assigns and Secured Party and its successors and assigns. If any
term or provision of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity of the remaining provisions hereof shall in no way
be affected thereby. The captions or headings herein shall be solely for
convenience of reference and in no way define, limit or describe the scope or
intent of any provisions or sections of this Agreement. This Agreement may be
executed in any number of counterparts, each of which shall be regarded as an
original and all of which shall constitute but one and the same instrument; it
shall not be necessary in proving this Agreement to produce or account for more
than one such counterpart.
18 CONSENT. This Agreement may not be effectively amended, changed,
modified, altered or terminated except as provided herein without the prior
written consent of Secured Party.
19 NOTICES. All notices, certificates, requests or other communications
hereunder shall be in writing and shall be deemed to be sufficiently given when
mailed by registered or certified mail, postage prepaid, and addressed to the
addresses set forth herein. Debtor and Secured Party may, by notice given
hereunder, designate any further
Page 9 of 10
<PAGE> 33
or different addresses to which subsequent notices, certificates, requests or
other communications shall be sent.
20 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof,
and all prior and contemporaneous agreements or discussions, written or oral,
shall have no force or effect whatsoever. No amendment or any waiver of any term
of this Agreement shall be enforceable unless it is in writing and executed by
both parties hereto.
IN WITNESS WHEREOF, Debtor and Secured Party have caused this
instrument to be duly executed and delivered as of the date written below.
DEBTOR:
WAYNE R. HELLMAN
Date:
-------------------------------
SECURED PARTY:
ADVANCED LIGHTING TECHNOLOGIES, INC.
By:
--------------------------------
Its:
--------------------------------
Date:
--------------------------------
Page 10 of 10
<PAGE> 34
EXHIBIT A - COLLATERAL
SECURITY AGREEMENT
WAYNE R. HELLMAN / ADVANCED LIGHTING TECHNOLOGIES, INC.
I. All personal property now owned or hereinafter acquired
including, but not limited to, stocks; bonds and other
securities; investment property; contract rights; furniture;
furnishings; chattel papers; deposit accounts; documents;
choses in action; money; instruments; goods (whether covered
by a certificate of title or not); general intangibles;
foreign currency; letters of credit; advices of credit; and
II. A 1997 Regal pleasure boat, Registration Number FL1982KB, Hull
Identification Number RGMPA012G697 and all engines, fixtures
and chattels now or hereinafter attached thereto or found
thereon; and
III. With respect to all of the foregoing, all (i) privileges and
appurtenances thereto, (ii) renewals or replacement thereof or
articles in substitution therefor, (iii) proceeds of any of
the foregoing or from any insurance payable with respect
thereto (from whatever source), or payments from any taking
under power of eminent domain of all or any portion thereof,
and (iv) all rents, issues, profits or other amounts due to
Debtor in respect thereof; and
IV. Notwithstanding the foregoing, the Collateral shall not
include any stock, bonds, or other securities held by Debtor
in Advanced Lighting Technologies, Inc. nor any membership
interest in Hellman, Ltd.
<PAGE> 35
SCHEDULE 3
SECURITY AGREEMENT
WAYNE R. HELLMAN / ADVANCED LIGHTING TECHNOLOGIES, INC.
1. Key Bank National Association - Senior Lender on property
located at 7181 Ober Lane, Chagrin Falls, Ohio 44023-1125.
2. First Union National Bank of Florida - Senior Lender on
property located at 27261 Hidden River Court, Bonita Springs,
Florida 34134-2638.
3. Merrill Lynch Credit Corporation - Senior Lender on
property located at 735 Hardwick Drive and 740 Hardwick Drive,
Aurora, Ohio 44202
<PAGE> 36
COLLATERAL ASSIGNMENT OF CONTRACT
THIS COLLATERAL ASSIGNMENT OF CONTRACTS, (this "Assignment") dated as
of October 8, 1998, is made by and between WAYNE R. HELLMAN ("Assignor"), having
his principal residence at 7181 Ober Lane, Chagrin Falls, Ohio 44023 and
ADVANCED LIGHTING TECHNOLOGIES, INC., ("Assignee"), an Ohio corporation having
its principal offices at 32000 Aurora Road, Solon, Ohio 44139.
BACKGROUND
A. Pursuant to the Loan Agreement dated as of even date herewith by and
between Assignor and Assignee (the "Agreement"), Assignee advanced Assignor the
principal amount of Nine Million Dollars ($9,000,000) (the "Loan").
B. The Loan is evidenced by a Secured Promissory Note dated as of even
date herewith made by Assignor to the order of Assignee (the "Note").
C. As a condition thereto, the Loan is secured by the security
interests granted by Assignor to Assignee in the Security Agreement dated as of
even date herewith (the "Security Agreement") and by the mortgage and security
interests granted by Assignor to Assignee in several Real Estate Mortgages dated
as of even date herewith (each a "Mortgage" and collectively the "Mortgages").
D. As a condition to making the Loan, Assignee has required that
Assignor assign to it Assignor's contract rights set forth in EXHIBIT A, and
Assignor has agreed to the same, upon the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the Loan and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties hereto agree as follows:
1 ASSIGNMENT. Assignor hereby assigns, transfers and sets over to
Assignee all rights in, to and under, his Contracts rights set forth in EXHIBIT
A and all monies due and to become due pursuant to and all claims, demands and
causes of action that Assignor now has or which may hereafter arise against all
parties under Assignor's security interest and contract rights set forth in
EXHIBIT A (the "Contracts"); provided, however, that nothing in this Assignment
shall be construed as imposing on Assignee any of Assignor's duties or
obligations under the Contracts.
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<PAGE> 37
2 REPRESENTATIONS AND WARRANTIES OF ASSIGNOR.
2.1 Assignor represents and warrants that he has not executed any prior
sale, assignment, transfer, mortgage or pledge of his rights in the Contracts
and shall not sell, assign, transfer, mortgage or pledge his rights in the
Contracts or any proceeds arising therefrom, whether now due or hereafter to
become due, to any firm, person or corporation, except the assignment as set
forth herein.
2.2 Assignor further represents and warrants that the terms and
conditions of the Contracts have been fully set out and disclosed in the copies
thereof that have been delivered by Assignor to Assignee.
2.3 Assignor further represents and warrants that he has full right and
authority to grant this Assignment to Assignee as provided herein.
3 GENERAL COVENANTS.
3.1 Assignor shall execute and deliver to Assignee at any time or times
during which this Assignment shall be in effect such further instruments as
Assignee may deem to be necessary or appropriate to make effective this
Assignment and the covenants herein contained.
3.2 Assignor shall (i) observe and perform, or cause to be observed and
performed, in a timely manner, each and every term, covenant and provision of
the Contracts on its part thereunder to be observed and performed; (ii) send
promptly to Assignee copies of all notices of default which Assignor shall send
or receive with respect to the Contracts; (iii) enforce short of termination
thereof the observance and performance of each and every term, covenant and
provision of the Contracts on the part of any party thereunder to be observed
and performed; and (iv) to appear in and defend, at his expense, any action or
proceeding arising under or in any manner connected with the Contracts.
3.3 Assignee is granted a security interest in and to the Contracts and
all monies and claims for money due or to become due to Assignor under the
Contracts. For this purpose, Assignee shall be deemed a secured party, and
Assignor shall be deemed a debtor. Assignor agrees to take such actions as
Assignee may require to perfect the security interest granted hereby, including,
without limitation, the preparation, execution and filing of financing
statements in all appropriate offices.
3.4 At any time and from time to time, upon request of the Assignee,
Assignor will give, execute, file and record any notice, financing statement,
continuation statement, instrument, document or agreement that the Assignee may
consider necessary or desirable to create, preserve, continue, perfect or
validate any security interest granted
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<PAGE> 38
hereunder or which the Assignee may consider necessary or desirable to exercise
or enforce its rights hereunder with respect to such security interest. Without
limiting the generality of the foregoing, the Assignee is authorized to file
with respect to the Contracts one or more financing statements, continuation
statements or other documents without the signature of the Assignor and to name
therein the Assignor as debtor and the Assignee as secured party; and correct or
complete, or cause to be corrected or completed, any financing statements,
continuation statements or other such documents as have been filed naming the
Assignor as debtor and the Assignee as secured party. The Assignor hereby
appoints the Assignee as its attorney-in-fact and authorizes Assignee, on behalf
of the Assignor, to execute, acknowledge, deliver, file and record any and all
documents requiring execution by the Assignor and necessary or desirable to
effectuate or facilitate the purposes of this Assignment and the obligations or
covenants of Assignor hereunder. The power of attorney granted hereby is coupled
with an interest and is irrevocable.
4 RIGHTS OF ASSIGNOR. As long as no Event of Default (defined herein)
occurs under this Assignment, the Agreement, the Note, the Security Agreement or
any of the Mortgages, Assignor shall be entitled to collect, receive and apply
for its own account any sums due it pursuant to the Contracts and to prosecute,
compromise or take any other actions which Assignor, in its reasonable
discretion, deems appropriate with respect to all rights, claims, demands, or
causes of action which Assignor now has or which may hereafter arise pursuant to
the Contracts, except as may be expressly provided to the contrary in this
Assignment.
5 CONFLICT. To the extent that the Contracts are covered by this
Assignment, the Agreement, the Security Agreement or any of the Mortgages, the
provisions of all shall apply, but in the event of a conflict, the provisions of
this Assignment shall govern as to the Contracts.
6 INDEMNIFICATION. Assignor shall indemnify, defend and hold Assignee
harmless from and against any and all liability, loss, damage, and expense,
including attorneys' fees, which Assignee may incur under the Contracts or by
reason of this Assignment, the Agreement, the Security Agreement or any of the
Mortgages.
7 DEFAULT.
7.1 Any default by Assignor of any obligation hereunder, any Event of
Default under the Note, the Agreement, the Security Agreement or any of the
Mortgages shall be an "Event of Default" under this Assignment.
7.2 Immediately upon any Event of Default, Assignee is authorized to
exercise any and all rights of Assignor pursuant to the Contracts and to receive
for Assignor's account, and not as a lender, all sums due Assignor pursuant to
the Contracts, and Assignee is further authorized to prosecute, compromise or
take any other action which
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<PAGE> 39
Assignor might take with respect to any claim, demand or cause of action related
to the Contracts as Assignee deems appropriate, including, without limitation,
prosecution, compromise or release of such claims. It shall be an Event of
Default if the Contracts are terminated or modified without the prior written
consent of Assignee.
7.3 If an Event of Default shall have occurred and be continuing,
Assignee, at any time, at its election, may exercise any or all or any
combination of the remedies conferred upon or reserved to it under this
Assignment, the Agreement, the Note, the Security Agreement, any of the
Mortgages, or now or hereafter existing at law, or in equity or by statute.
Without limitation, Assignee may (a) declare the entire unpaid principal balance
of the Note and all other indebtedness immediately due and payable, without
notice or demand, the same being expressly waived by Assignor, subject to any
cure periods provided for in the Note for non-monetary defaults; (b) proceed at
law or equity to collect all indebtedness of Assignor to Assignee; (c) foreclose
the lien of this Assignment; and (d) exercise any rights, powers and remedies it
may have as a secured party under the Uniform Commercial Code, or other similar
laws in effect.
7.4 No failure by Assignee to insist upon the strict performance of any
term hereof or to exercise any right, power or remedy consequent upon an Event
of Default, shall constitute a waiver of any such term or of any such Event of
Default. No waiver of any Event of Default shall affect or alter this
Assignment, which shall continue in full force, and shall not effect a waiver
with respect to any subsequent such Event of Default or to any other then
existing or subsequent breach.
8 DISTRIBUTION. All amounts received by Assignee hereunder shall be
applied to amounts due to it from Assignor under the Note, the Agreement, the
Security Agreement and any of the Mortgages, and shall be applied as follows:
First: the payment of all costs incurred in the collection thereof
(including, without limitation, reasonable attorneys' fees and expenses except
as may have been limited by law or by judicial order or decision entered in any
action to enforce this Assignment);
Second: the payment of indebtedness secured by the Security Agreement
owing to Assignee, other than indebtedness with respect to the Note at the time
outstanding; and
Third: the payment to Assignee for the payment of all amounts payable
under the Note in the order provided for therein.
9 RIGHTS AND REMEDIES OF ASSIGNEE.
9.1 Each right, power and remedy of Assignee, provided for in this
Assignment, in the Agreement, the Note, the Security Agreement, any of the
Mortgages or now or hereafter existing at law or in equity or by statute or
otherwise, shall be cumulative and
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<PAGE> 40
concurrent and shall be in addition to every other right, power or remedy
provided for in this Assignment, in the Agreement, the Note, Security Agreement,
any of the Mortgages or now or hereafter existing at law or in equity or by
statute or otherwise, and the exercise or beginning of the exercise or partial
exercise by Assignee of any one or more of such rights, powers or remedies shall
not preclude the simultaneous or later exercise by Assignee of any or all such
other rights, powers or remedies.
9.2 All rights, powers and remedies provided herein may be exercised
only to the extent that the exercise thereof does not violate any applicable
law, and are intended to be limited to the extent necessary so that they will
not render this Assignment invalid, unenforceable or not entitled to be
recorded, registered or filed under any applicable law.
9.3 In case Assignee shall have proceeded to enforce any right, power
or remedy under this Assignment, and such proceedings shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely to Assignee, then and in every case Assignor and Assignee shall be
restored to their former positions and rights hereunder, and all rights, power
and remedies of Assignee shall continue as if no such proceeding had been taken.
9.4 Assignee shall have no liability for any loss, damage, injury, cost
or expense resulting from any act or omission to act by it or its
representatives whether or not negligent, which was taken or omitted pursuant to
this Assignment.
9.5 All sums and monies due and payable by Assignor hereunder shall be
paid without notice, demand, counterclaims, setoff, deduction or defense, and
without abatement, suspension, deferment, diminution or reduction, and the
obligations and liabilities of Assignor hereunder shall in no way be released,
discharged or otherwise affected (except as expressly provided herein) by reason
of (a) any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to Assignor or any
action taken with respect to this Assignment by any trustee or receiver of
Assignor, or by any court in such proceeding; (e) any claim which Assignor has
or might have against Assignee; (f) any default or failure on the part of
Assignee to perform or comply with any of the terms hereof or of any other
agreements pertaining to the Loan; or (g) any other occurrence whatsoever,
whether similar or dissimilar to the foregoing, whether or not Assignor shall
have notice or knowledge of any of the foregoing. Except as expressly provided
herein, Assignor waives all rights now or hereafter conferred by statute or
otherwise to any abatement, suspension, deferment, diminution or reduction of
any sum secured hereby and payable by Assignor.
10 TERMINATION. If all sums then due and payable under the Note and the
Agreement by Assignor shall have been paid and Assignor shall have complied with
all the terms, conditions and requirements hereof and thereof, then this
Assignment shall be null and void and of no further force and effect. Upon the
written request and at the expense
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<PAGE> 41
of Assignor, Assignee will execute and deliver such proper instruments of
release and discharge as may reasonably be requested to evidence such
defeasance, release and discharge.
11 FEES. Assignor shall, to the extent permitted by law, immediately
upon demand pay or reimburse Assignee for all reasonable attorneys' fees, costs
and expenses incurred by Assignee in any proceedings involving the estate of a
decedent, an insolvent or a debtor under federal bankruptcy law, or in any
action, proceeding or dispute of any kind in which Assignee is made a party, or
appears as an intervener or party plaintiff or defendant, affecting or relating
to the Note, this Assignment, the Agreement, the Security Agreement or any of
the Mortgages.
12 GOVERNING LAW; SEVERABILITY; HEADINGS; COUNTERPARTS. This Assignment
shall be deemed to be made under the laws of the state of Ohio and for all
purposes shall be governed by and construed in accordance with the laws of Ohio
without regard to conflict of laws principles and shall inure to the benefit of
and be binding upon Assignor and his estate, heirs, executors, administrators
and personal representatives, successors and assigns and Assignee and its
successors and assigns. If any term or provision of this Assignment shall be
held to be invalid, illegal or unenforceable, the validity of the remaining
provisions hereof shall in no way be affected thereby. The captions or headings
herein shall be solely for convenience of reference and in no way define, limit
or describe the scope or intent of any provisions or sections of this
Assignment. This Assignment may be executed in any number of counterparts, each
of which shall be regarded as an original and all of which shall constitute but
one and the same instrument; it shall not be necessary in proving this
Assignment to produce or account for more than one such counterpart.
13 CONSENT. This Assignment may not be effectively amended, changed,
modified, altered or terminated except as provided herein without the prior
written consent of Assignee.
14 NOTICES. All notices, certificates, requests or other communications
hereunder shall be in writing and shall be deemed to be sufficiently given when
mailed by registered or certified mail, postage prepaid, and addressed to the
addresses set forth herein. Assignor and Assignee may, by notice given
hereunder, designate any further or different addresses to which subsequent
notices, certificates, requests or other communications shall be sent.
15 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Assignment constitutes the
entire agreement between the parties with respect to the subject matter hereof,
and all prior and contemporaneous agreements or discussions, written or oral,
shall have no force or effect whatsoever. No amendment or any waiver of any term
of this Assignment shall be enforceable unless it is in writing and executed by
both parties.
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<PAGE> 42
IN WITNESS WHEREOF, the Assignor and Assignee have caused this
instrument to be executed as of the date written below.
ASSIGNOR:
WAYNE R. HELLMAN
_______________________________________
Date: _________________________________
ASSIGNEE:
ADVANCED LIGHTING TECHNOLOGIES, INC.
By: ___________________________________
Its: ___________________________________
Date: _________________________________
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<PAGE> 43
EXHIBIT A - CONTRACTS ASSIGNMENT
COLLATERAL ASSIGNMENT OF CONTRACTS
WAYNE R. HELLMAN / ADVANCED LIGHTING TECHNOLOGIES
All Contracts by and between Assignor and 24 Karat Street, Inc.,
including but not limited to, the following:
1. Promissory Note executed by 24 Karat Street, Inc.
and payable to Wayne R. Hellman dated May 19, 1997;
2. Security Agreement by and between 24 Karat Street, Inc. and
Wayne R. Hellman dated May 19, 1997;
3. Unconditional Guaranty executed by Ronald J. Gajewski dated
May 19, 1997;
4. Allonge No. 1 to Promissory Note executed by 24 Karat
Street, Inc. dated September 2, 1998; and
5. Confirmation of Guaranty executed by Ronald J. Gajewski dated
September 2, 1998.
<PAGE> 44
THIS AND OTHER MORTGAGES ARE GIVEN TO SECURE A MULTI-STATE LOAN OF $9,000,000
AND IS BEING RECORDED IN LEE COUNTY, FLORIDA. FLORIDA DOCUMENTARY STAMP TAXES
AND NON-RECURRING INTANGIBLE PROPERTY TAXES ARE BEING PAID IN LEE COUNTY,
FLORIDA. FLORIDA DOCUMENTARY STAMP TAXES ARE BEING PAID IN THE AMOUNT OF $2,898
BASED UPON THE $400,000 EQUITY VALUE OF THE FLORIDA REAL PROPERTY MORTGAGED
HEREBY. FLORIDA NON-RECURRING INTANGIBLE PROPERTY TAXES ARE BEING PAID IN THE
AMOUNT OF $1,656 BASED UPON THE PERCENTAGE THAT THE VALUE OF THE FLORIDA REAL
PROPERTY MORTGAGED HEREBY BEARS TO THE TOTAL VALUE OF ALL FLORIDA AND
NON-FLORIDA REAL AND PERSONAL PROPERTY COLLATERAL SECURITY FOR SUCH LOAN. AS
CONSEQUENCE, THE AGGREGATE AMOUNT OF FLORIDA NON-RECURRING INTANGIBLE PROPERTY
TAXES BEING PAID IN RESPECT OF THIS MORTGAGE IS $1,656. THE CALCULATION OF SUCH
TAXES IS SET FORTH IN EXHIBIT B HERETO.
REAL ESTATE MORTGAGE
Filed for record in ______ County, ______ on
February ____, 1999, ______ o'clock _.m., E.D.T.
No. _______________ and recorded at
Volume ______, Page _______,
______ County, ______, Mortgage Records
As an inducement to and in consideration of the loan to the
undersigned, WAYNE R. HELLMAN ("Mortgagor"), having his principal residence at
7181 Ober Lane, Chagrin Falls, Ohio 44023 by ADVANCED LIGHTING TECHNOLOGIES,
INC., ("Mortgagee"), an Ohio corporation having its principal offices at 32000
Aurora Road, Solon, Ohio 44139, pursuant to the Loan Agreement dated as of
October 8, 1998, by and between Mortgagor and Mortgagee (the "Agreement"), and
evidenced by the Secured Promissory Note dated as of October 8, 1998, with a
maturity date of October 6, 1999, made by Mortgagor to Mortgagee (the "Note"),
and further evidenced by the Security Agreement and the Collateral Assignment of
Contract both dated as of October 8, 1998, by and between Mortgagor and
Mortgagee (respectively, the "Security Agreement" and the "Assignment"), and for
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Mortgagor hereby grants, bargains, sells, conveys, mortgages,
assigns and grants a security interest in and transfers unto Mortgagee, its
successors and assigns, to have and to hold forever, all right, title and
interest of Mortgagor in and to the real property described in EXHIBIT A,
together with all other real properties now or hereafter made subject to the
lien of this Mortgage by supplemental mortgage or otherwise, and (i) in and to
the buildings and other improvements now or hereafter situated thereon; (ii) all
privileges and appurtenances thereto; (iii) all fixtures now or hereafter
attached to and used in connection therewith; (iv) all renewals or replacements
thereof or articles in substitution therefor; (v) all proceeds of any of the
foregoing or from any insurance payable with respect thereto (from whatever
source), or payments from any taking under power of eminent domain of all or any
portion thereof; and (vi) all rents, issues and profits or other amounts due
Mortgagor in respect thereof (collectively, the "Mortgaged Property"). This
Mortgage is made subject to all restrictions and easements of record, current
taxes and assessments.
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<PAGE> 45
1. This Mortgage secures the payment of principal in the amount of Nine
Million Dollars ($9,000,000), together with all interest thereon and any other
amounts now or hereafter owing from Mortgagor to Mortgagee hereunder, under the
Note or the Agreement, and under the Security Agreement and the Assignment and
all other agreements entered into by Mortgagee and Mortgagor in connection
herewith and therewith, and the performance of all other obligations of
Mortgagor hereunder and thereunder (collectively, the "Obligations").
2. Mortgagor represents and warrants to Mortgagee that Mortgagor (i) is
lawfully seized with good and marketable title, in fee simple, to the real
property included in the Mortgaged Property and has good title to all personal
property included in the Mortgaged Property, subject only to Permitted
Encumbrances (defined herein); (ii) has full right and authority to grant the
interests to Mortgagee as provided herein; and (iii) will warrant and defend to
Mortgagee such title to the Mortgaged Property and the lien and interest of
Mortgagee therein and thereon against all claims and demands whatsoever and
will, except as otherwise herein expressly provided, maintain the priority of
the lien of, and the security interest granted by, this Mortgage upon the
Mortgaged Property until Mortgagor shall be entitled to defeasance as provided
herein.
3. Mortgagor, at its expense, shall cause this Mortgage, any
instruments supplemental hereto, financing statements, including all necessary
amendments, supplements and appropriate continuation statements to be recorded,
registered and filed, and to be kept recorded, registered and filed, in such
manner and in such places as may be required in order to establish, preserve and
protect the lien of this Mortgage as a valid mortgage lien, subject only to
Permitted Encumbrances (defined herein).
4. All property of every kind acquired by Mortgagor after the date
hereof, which by the terms hereof is intended to be subject to the lien of this
Mortgage, shall immediately upon the acquisition thereof by Mortgagor, and
without further mortgage, conveyance or assignment, become subject to the lien
of this Mortgage as fully as though now owned by Mortgagor and specifically
described herein. Nevertheless, Mortgagor shall take such actions and execute
and deliver such additional instruments as Mortgagee shall reasonably require to
further evidence or confirm the subjection to the lien of this Mortgage of any
such property.
5. Mortgagor shall not sell, rent, convey, assign or transfer the
Mortgaged Property or any part or interest therein without the prior written
consent of Mortgagee, which shall not be unreasonably withheld. Mortgagor shall
not directly or indirectly create or permit to remain, and will promptly
discharge, any mortgage, lien, encumbrance or charge on, pledge of, security
interest in or conditional sale or other title retention agreement with respect
to the Mortgaged Property or any part thereof or the interest of Mortgagor or
Mortgagee therein or any revenues, income or profit or other sums arising from
the Mortgaged Property or any part thereof, (including, without limitation, any
lien, encumbrance or charge arising by operation of law) other than: (i) the
lien of this Mortgage and any other liens or rights of Mortgagee granted in any
of the Loan Documents; (ii) the
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<PAGE> 46
lien of any lender identified in EXHIBIT A (the "Senior Lender"); (iii) liens
for taxes, assessments and other governmental charges which are not at the time
required to be paid; (iv) liens of mechanics, materialmen, suppliers or vendors
or rights thereto for amounts which at the time are not required to be paid; and
(v) purchase money security interests in property purchased on credit or with
borrowed money and which secures the repayment of such credit or borrowed money
(collectively, the "Permitted Encumbrances").
6. This Mortgage is also a security agreement and creates a security
interest in and to the Mortgaged Property to secure payment and performance of
the Obligations. Mortgagor has executed and delivered to Mortgagee a Security
Agreement, dated as of even date herewith. To the extent the Mortgaged Property
is covered by both this Mortgage and said Security Agreement, the provisions of
both shall apply, but in the event of a conflict, the provisions of this
Mortgage shall govern as to all portions of the Mortgage Property as constitutes
real property and fixtures and interests therein, and the provisions of the
Security Agreement shall govern as to all portions of the Mortgaged Property as
constitutes personal property.
7. This Mortgage is intended to be effective under the Uniform
Commercial Code as a financing statement filed as a fixture filing, and, in
compliance therewith, the following information is set forth:
(a) The name and address of the record owner/debtor is:
Wayne R. Hellman
7181 Ober Lane
Chagrin Falls, Ohio 44023
(b) The name and address of the secured party is:
Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
(c) The property covered hereby is described in detail in
EXHIBIT A, attached hereto.
8. Mortgagor hereby authorizes and empowers Mortgagee, at its option,
to do all things authorized or required to be done by Mortgagee, as a mortgagee,
under the laws of the state of Florida and, if different, the state in which the
Mortgaged Property is located, to protect its interests in the Mortgaged
Property.
9. Nothing contained in this Mortgage shall constitute any request by
Mortgagee, express or implied, for the performance of any labor or services or
the furnishing of any materials or other property in respect of the Mortgaged
Property or any
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<PAGE> 47
part thereof, or be construed to give Mortgagor any right, power or authority to
contract for or permit the performance of any labor or services or the
furnishing of any materials or other property in such fashion as would provide
the basis for any claim either against Mortgagee or that any lien based on the
performance of such labor or services or the furnishing of any such materials or
other property is prior to the lien of this Mortgage.
10. Without affecting the liability of any other person liable for the
payment of any obligation herein mentioned, and without affecting the lien or
charge of this Mortgage upon any portion of the Mortgaged Property not then or
theretofore released as security for the full amount of all unpaid obligations,
Mortgagee may, from time to time and without notice, (a) release any person so
liable; (b) extend the maturity or alter any of the terms of any such
obligation; (c) grant other indulgences; (d) release or reconvey, or cause to be
released or reconveyed at any time at Mortgagee's option any parcel, portion or
all of the Mortgaged Property; (e) take or release any other or additional
security for any obligation herein mentioned; or (f) make compositions or other
arrangements with debtors in relation thereto.
11. Mortgagor shall pay promptly when due, and before penalty or
interest accrue thereon, all taxes, assessments, whether general or special, all
other governmental charges and all public or private utility charges of any kind
whatsoever foreseen or unforeseen, ordinary or extraordinary that now or may at
any time hereafter be assessed, levied or imposed against or with respect to the
Mortgaged Property or any part thereof which, if not paid, may become or be made
a lien on the Mortgaged Property, or any part thereof.
12. Mortgagor shall keep the real and personal property included in the
Mortgaged Property continuously insured with risk and liability insurance in
such amounts as Mortgagee reasonably requires. All insurance shall be obtained
and maintained either by means of policies with generally recognized,
responsible insurance companies. Mortgagor shall furnish Mortgagee with a
certificate of insurance for each policy setting forth the coverage, the limits
of liability, the name of the carrier, the policy number and the expiration
date. Each policy of insurance shall be written so as not to be subject to
cancellation or substantial modification which phrase shall include any
reduction in the scope or limits of coverage upon less than thirty (30) days
advance written notice to Mortgagee. All policies of insurance shall contain
standard mortgage clauses requiring all proceeds resulting from any claim for
loss or damage to be paid to Mortgagee.
13. Mortgagor, at its expense, shall comply with all laws with respect
to the Mortgaged Property, and shall keep (or cause to be kept) the Mortgaged
Property in good order and condition (ordinary wear and tear excepted) and shall
make or cause to be made all necessary or appropriate repairs, replacements and
renewals thereof, interior, exterior, structural and non-structural, ordinary
and extraordinary, foreseen and unforeseen unless Mortgagee otherwise consents
in writing. Mortgagor shall not do, or permit to be done, any act or thing which
might materially impair the value or usefulness of the Mortgaged Property or any
part thereof, shall not commit or permit any waste of the Mortgaged
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<PAGE> 48
Property or any part thereof, and shall not permit any unlawful use or
occupation of the Mortgaged Property or any part thereof.
14. Mortgagor further covenants and agrees with Mortgagee that neither
Mortgagor nor any of its agents, employees, independent contractors, invitees,
licensees, successors, assignees, tenants or subtenants will store, release or
dispose of or permit the storage, release or disposal of any hazardous or toxic
substances or hazardous waste on the Mortgaged Property at any time from and
after the effective date of this Mortgage ("Environmental Issues").
15. Mortgagor will protect, indemnify and save harmless Mortgagee from
and against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, reasonable attorneys'
fees and expenses as may be limited by law or judicial order or decision entered
in any action brought to recover monies under this Section) imposed upon,
incurred by or asserted against Mortgagee by reason of (a) ownership of any
interest in the Mortgaged Property or any part thereof; (b) any accident, injury
to or death of persons or loss of or damage to property occurring on or about
the Mortgaged Property or any part thereof or the adjoining sidewalks, curbs,
vaults and vault space, if any, streets or ways; (c) any use, disuse or
condition of the Mortgaged Property or any part thereof, or the adjoining
sidewalks, curbs, vaults and vault space, if any, streets or ways, including any
Environmental Issues; (d) any failure on the part of Mortgagor to perform or
comply with any of the terms hereof; (e) any necessity to defend any of the
rights, title or interest conveyed by this Mortgage; or (f) the performance of
any labor or services or the furnishing of any materials or other property in
respect of the Mortgaged Property or any part thereof.
16. In case of any damage to or destruction of any buildings, fixtures
or personal property included in the Mortgaged Property, or any part thereof,
Mortgagor will promptly give written notice thereof to Mortgagee generally
describing the nature and extent of such damage or destruction. Any insurance or
other proceeds from any such damage or destruction shall be paid to Mortgagee,
unless Mortgagee otherwise consents in writing to Mortgagor's use of such
proceeds to repair or replace the damaged or destroyed property, which consent
will not be unreasonably withheld.
17. If title to or the temporary use of the Mortgaged Property, or any
part thereof, shall be taken under the exercise of the power of eminent domain
by any governmental body or by any person, firm or corporation acting under any
governmental body or by any person, firm or corporation acting under
governmental authority, Mortgagor will promptly give written notice thereof to
Mortgagee describing the nature and extent of such taking. Any proceeds received
from any award made in such eminent domain proceedings shall be paid to
Mortgagee.
18. If Mortgagor shall fail to make any payment or perform any act
required to be made or performed hereunder or under the Agreement or the Note,
Mortgagee, without notice or demand upon Mortgagor and without waiving or
releasing any obligation or
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<PAGE> 49
default, may, but shall be under no obligation to, make such payment or perform
such act for the account and at the expense of Mortgagor and may enter upon the
Mortgaged Property or any part thereof for such purpose and take all such action
thereon as, in its sole opinion, may be necessary or appropriate therefor. All
payments so made by Mortgagee and all costs, fees and expenses incurred in
connection therewith or in connection with the performance by Mortgagee of any
such act, together with interest thereon at eight percent (8%) per annum shall,
together with such interest, be additional indebtedness secured by this Mortgage
and shall be paid by Mortgagor to Mortgagee on demand. In any action brought to
collect such indebtedness, or to foreclose this Mortgage, Mortgagee shall be
entitled to the recovery of such expenses in such action except as limited by
law or judicial order or decision entered in such proceedings.
19. Any default by Mortgagor of any obligation hereunder, any Default
under the Note, and any Event of Default under the Agreement, the Security
Agreement or the Assignment or any default of any of the other Obligations shall
be an "Event of Default" under this Mortgage.
20. If an Event of Default shall have occurred and be continuing,
Mortgagee, at any time, at its election, may exercise any or all or any
combination of the remedies conferred upon or reserved to it under this
Mortgage, the Agreement, the Note, the Security Agreement, the Assignment, or
any instrument collateral thereto, or now or hereafter existing at law, or in
equity or by statute. Without limitation, Mortgagee may (a) declare the entire
unpaid principal balance of the Note and all other indebtedness secured hereby
immediately due and payable, without notice or demand, the same being expressly
waived by Mortgagor, subject to any cure periods provided for in the Note for
non-monetary defaults; (b) proceed at law or equity to collect all indebtedness
secured by this Mortgage due hereunder, whether at maturity or by acceleration;
(c) foreclose the lien of this Mortgage as against all or any part of the
Mortgaged Property; and (d) exercise any rights, powers and remedies it may have
as a secured party under the Uniform Commercial Code, or other similar laws in
effect, including, without limitation, the option of proceeding as to both
personal property and fixtures in accordance with Mortgagee's rights with
respect to real property.
21. Mortgagor does hereby waive to the full extent it may lawfully do
so, the benefit of all appraisement, valuation, stay and extension laws now or
hereafter in force and all rights of marshaling of assets in the event of any
sale of the Mortgaged Property, any part thereof or any interest therein and any
court having jurisdiction to foreclose the lien thereof may sell the Mortgaged
Property in part or as an entirety.
22. All amounts (including, without limitation, the proceeds of any
sale of the Mortgaged Property, any part thereof or any interest therein)
received by Mortgagee hereunder shall be applied to amounts due to it from
Mortgagor hereunder and under the Note, the Agreement, the Security Agreement,
the Assignment, and the other Obligations, and shall be applied as follows:
Page 6 of 10
<PAGE> 50
First: the payment of all costs incurred in the collection thereof
(including, without limitation, reasonable attorneys' fees and expenses except
as may have been limited by law or by judicial order or decision entered in any
action to foreclose this Mortgage);
Second: the payment of indebtedness secured by this Mortgage owing to
Mortgagee, other than indebtedness with respect to the Note at the time
outstanding; and
Third: the payment to Mortgagee for the payment of all amounts payable
under the Note in the order provided for therein.
23. Each right, power and remedy of Mortgagee, provided for in this
Mortgage, in the Agreement, the Note, the Security Agreement, the Assignment, or
now or hereafter existing at law or in equity or by statute or otherwise, shall
be cumulative and concurrent and shall be in addition to every other right,
power or remedy provided for in this Mortgage, in the Agreement, the Note, the
Security Agreement, the Assignment, or now or hereafter existing at law or in
equity or by statute or otherwise, and the exercise or beginning of the exercise
or partial exercise by Mortgagee of any one or more of such rights, powers or
remedies shall not preclude the simultaneous or later exercise by Mortgagee of
any or all such other rights, powers or remedies.
24. All rights, powers and remedies provided herein may be exercised
only to the extent that the exercise thereof does not violate any applicable
law, and are intended to be limited to the extent necessary so that they will
not render this Mortgage invalid, unenforceable or not entitled to be recorded,
registered or filed under any applicable law.
25. No failure by Mortgagee to insist upon the strict performance of
any term hereof or to exercise any right, power or remedy consequent upon an
Event of Default, shall constitute a waiver of any such term or of any such
Event of Default. No waiver of any Event of Default shall affect or alter this
Mortgage, which shall continue in full force, and shall not effect a waiver with
respect to any subsequent such Event of Default or to any other then existing or
subsequent breach.
26. In case Mortgagee shall have proceeded to enforce any right, power
or remedy under this Mortgage by foreclosure, entry or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason, or shall
have been determined adversely to Mortgagee, then and in every case Mortgagor
and Mortgagee shall be restored to their former positions and rights hereunder,
and all rights, power and remedies of Mortgagee shall continue as if no such
proceeding had been taken.
27. Mortgagee shall have no liability for any loss, damage, injury,
cost or expense resulting from any act or omission to act by it or its
representatives whether or not negligent, which was taken or omitted pursuant to
this Mortgage.
28. Without notice to or consent of Mortgagor and without impairment of
the lien and rights created by this Mortgage, Mortgagee may accept from
Mortgagor or from any
Page 7 of 10
<PAGE> 51
other person or persons, additional security for the indebtedness secured by
this Mortgage. Neither the giving of this Mortgage nor the acceptance of any
such additional security shall prevent Mortgagee from resorting first to such
additional security or to the security created by this Mortgage, in either case
without affecting the lien hereof and the rights conferred hereunder.
29. If all sums then due and payable under this Mortgage, the Note and
the Agreement by Mortgagor shall have been paid and Mortgagor shall have
complied with all the terms, conditions and requirements hereof and thereof,
then this Mortgage shall be null and void and of no further force and effect.
Upon the written request and at the expense of Mortgagor, Mortgagee will execute
and deliver such proper instruments of release and discharge as may reasonably
be requested to evidence such defeasance, release and discharge.
30. Mortgagee and its representatives are hereby authorized to enter
upon and inspect the Mortgaged Property at reasonable times, and so long as
Mortgagee does not unreasonably interfere with Mortgagor's use and enjoyment of
the Mortgaged Property.
31. Mortgagor shall, to the extent permitted by law, immediately upon
demand pay or reimburse Mortgagee for all reasonable attorneys' fees, costs and
expenses incurred by Mortgagee in any proceedings involving the estate of a
decedent, an insolvent or a debtor under federal bankruptcy law, or in any
action, proceeding or dispute of any kind in which Mortgagee is made a party, or
appears as an intervener or party plaintiff or defendant, affecting or relating
to the Note, this Mortgage or the Agreement, the Security Agreement, the
Assignment, Mortgagor or any of the Mortgaged Property, including, but not
limited to, the foreclosure of this Mortgage, any condemnation action involving
the Mortgaged Property, or any action to protect the security hereof, and any
such amounts paid by Mortgagee shall, except as may be limited by law or
judicial order or decision entered in any action to foreclose this Mortgage, be
added to the indebtedness secured hereby and secured by the lien and security
interest of this Mortgage and shall bear interest at eight percent (8%) per
annum.
32. It being the desire and intention of the parties hereto that this
Mortgage and the lien created hereby do not merge in fee simple title to the
Mortgaged Property, it is hereby understood and agreed that should Mortgagee
acquire any additional or other interests in or to the Mortgaged Property or the
ownership thereof, then, unless a contrary intent is manifested by Mortgagee as
evidence by an appropriate document duly recorded, this Mortgage and the lien
hereof shall not merge in the fee simple title, toward the end that this
Mortgage may be foreclosed as if owned by a stranger to the fee simple title.
33. This Mortgage shall be deemed to be made under the laws of the
state of Ohio and for all purposes shall be governed by and construed in
accordance with the laws of Ohio without regard to conflict of laws principals
(except to the extent the Mortgaged Property is situated in a state other than
Ohio and in that case any laws of such state which are required to control
mortgages granted on such property shall apply) and shall
Page 8 of 10
<PAGE> 52
inure to the benefit of and be binding upon Mortgagor and his estate, heirs,
executors, administrators and personal representatives, successors and assigns
and Mortgagee and its successors and assigns. If any term or provision of this
Mortgage shall be held to be invalid, illegal or unenforceable, the validity of
the remaining provisions hereof shall in no way be affected thereby. The
captions or headings herein shall be solely for convenience of reference and in
no way define, limit or describe the scope or intent of any provisions or
sections of this Mortgage. This Mortgage may be executed in any number of
counterparts, each of which shall be regarded as an original and all of which
shall constitute but one and the same instrument; it shall not be necessary in
proving this Mortgage to produce or account for more than one such counterpart.
34. This Mortgage may not be effectively amended, changed, modified,
altered or terminated except as provided herein without the prior written
consent of Mortgagor and Mortgagee.
35. All sums payable by Mortgagor hereunder shall be paid without
notice, demand, counterclaims, setoff, deduction or defense, and without
abatement, suspension, deferment, diminution or reduction, and the obligations
and liabilities of Mortgagor hereunder shall in no way be released, discharged
or otherwise affected (except as expressly provided herein) by reason of (a) any
damage to or destruction of or any condemnation or similar taking of the
Mortgaged Property or any part thereof; (b) any restriction or prevention of or
interference with any use of the Mortgaged Property or any part thereof; (d) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to Mortgagor or any action taken
with respect to this Mortgage by any trustee or receiver of Mortgagor, or by any
court in such proceeding; (e) any claim which Mortgagor has or might have
against Mortgagee; (f) any default or failure on the part of Mortgagee to
perform or comply with any of the terms hereof or of any other agreements
pertaining to the loan on the Mortgaged Property with Mortgagor; or (g) any
other occurrence whatsoever, whether similar or dissimilar to the foregoing,
whether or not Mortgagor shall have notice or knowledge of any of the foregoing.
Except as expressly provided herein, Mortgagor waives all rights now or
hereafter conferred by statute or otherwise to any abatement, suspension,
deferment, diminution or reduction of any sum secured hereby and payable by
Mortgagor.
36. All notices, certificates, requests or other communications
hereunder shall be in writing and shall be deemed to be sufficiently given when
mailed by registered or certified mail, postage prepaid, and addressed to the
addresses set forth in the granting clause. Mortgagor and Mortgagee may, by
notice given hereunder, designate any further or different addresses to which
subsequent notices, certificates, requests or other communications shall be
sent.
37. In the event of litigation concerning this document or any related
document(s), all costs, charges and expenses, including reasonable attorneys'
fees, shall be awarded to the prevailing party. As used herein and all related
loan documents, attorneys' fees shall include, but not be limited to, fees
incurred in all matters of collection
Page 9 of 10
<PAGE> 53
and enforcement, construction and interpretation, before, during or after trial,
proceedings and appeals, as well as appearances connected with bankruptcy
proceedings.
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage as of the date
written below.
Signed and Acknowledged
in the Presence of: MORTGAGOR:
- - ------------------------------ --------------------------------
WAYNE R. HELLMAN
______________________________ Date:____________________________
I hereby release all of my dower rights in the Mortgaged Property.
Signed and Acknowledged
in the Presence of:
- - ------------------------------ --------------------------------
DIANE HELLMAN
______________________________ Date:____________________________
STATE OF OHIO )
) SS:
COUNTY OF CUYAHOGA )
The foregoing instrument was executed before me this ____ day of
February, 1999, by Wayne R. Hellman and Diane Hellman who are personally known
to me and who did swear that the same was done of their own free will.
-------------------------------
Notary Public
Prepared by:
Jay R. Faeges, Esq.
Goodman Weiss Miller LLP
100 Erieview Plaza, 27th Floor
Cleveland, Ohio 44114
(216) 696-3366
Page 10 of 10
<PAGE> 54
EXHIBIT A - MORTGAGED PROPERTY
REAL ESTATE MORTGAGE
WAYNE R. HELLMAN / ADVANCED LIGHTING TECHNOLOGIES, INC.
PROPERTY ADDRESS: 27261 Hidden River Court
Bonita Springs, Florida 34134-2638
PARCEL NUMBER: 47-25-32-09-0000C-003
SENIOR LENDER: First Union National Bank of Florida
LEGAL DESCRIPTION: LOT 3, BLOCK C, BONITA BAY UNIT 10, according
to the map or plat thereof, as recorded in
Plat Book 45, Pages 44 through 51,
inclusive, Public Records of Lee County,
Florida
<PAGE> 55
EXHIBIT B - TAX CALCULATION
REAL ESTATE MORTGAGE
WAYNE R. HELLMAN / ADVANCED LIGHTING TECHNOLOGIES, INC.
Loan Amount $9,000,000
Value of Florida Real Property Collateral (equity)
Owed in Fee Encumbered by this Instrument $400,000
Value of Florida Personal Property Collateral $25,000
Value of Non-Florida Real Property Collateral
(whether owned in fee or held in leasehold) $3,575,000
Value of Non-Florida Personal Property Collateral $600,000
<PAGE> 56
REAL ESTATE MORTGAGE
Filed for record in ______ County, ______ on
February ____, 1999, ______ o'clock _.m., E.D.T.
No. _______________ and recorded at
Volume ______, Page _______,
______ County, ______, Mortgage Records
As an inducement to and in consideration of the loan to the
undersigned, WAYNE R. HELLMAN ("Mortgagor"), having his principal residence at
7181 Ober Lane, Chagrin Falls, Ohio 44023 by ADVANCED LIGHTING TECHNOLOGIES,
INC., ("Mortgagee"), an Ohio corporation having its principal offices at 32000
Aurora Road, Solon, Ohio 44139, pursuant to the Loan Agreement dated as of
October 8, 1998, by and between Mortgagor and Mortgagee (the "Agreement") and
evidenced by the Secured Promissory Note dated as of October 8, 1998, with a
maturity date of October 6, 1999, made by Mortgagor to Mortgagee (the "Note"),
and further evidenced by the Security Agreement and the Collateral Assignment of
Contract, both dated as of October 8, 1998, by and between Mortgagor and
Mortgagee (respectively, the "Security Agreement" and the "Assignment"), and for
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Mortgagor hereby grants, bargains, sells, conveys, mortgages,
assigns and grants a security interest in and transfers unto Mortgagee, its
successors and assigns, to have and to hold forever, all right, title and
interest of Mortgagor in and to the real property described in EXHIBIT A,
together with all other real properties now or hereafter made subject to the
lien of this Mortgage by supplemental mortgage or otherwise, and (i) in and to
the buildings and other improvements now or hereafter situated thereon; (ii) all
privileges and appurtenances thereto; (iii) all fixtures now or hereafter
attached to and used in connection therewith; (iv) all renewals or replacements
thereof or articles in substitution therefor; (v) all proceeds of any of the
foregoing or from any insurance payable with respect thereto (from whatever
source), or payments from any taking under power of eminent domain of all or any
portion thereof; and (vi) all rents, issues and profits or other amounts due
Mortgagor in respect thereof (collectively, the "Mortgaged Property"). This
Mortgage is made subject to all restrictions and easements of record, current
taxes and assessments.
1. This Mortgage secures the payment of principal in the amount of Nine
Million Dollars ($9,000,000), together with all interest thereon and any other
amounts now or hereafter owing from Mortgagor to Mortgagee hereunder, under the
Note or the Agreement, and under the Security Agreement and the Assignment and
all other agreements entered into by Mortgagee and Mortgagor in connection
herewith and therewith, and the performance of all other obligations of
Mortgagor hereunder and thereunder (collectively, the "Obligations").
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<PAGE> 57
2. Mortgagor represents and warrants to Mortgagee that Mortgagor (i) is
lawfully seized with good and marketable title, in fee simple, to the real
property included in the Mortgaged Property and has good title to all personal
property included in the Mortgaged Property, subject only to Permitted
Encumbrances (defined herein); (ii) has full right and authority to grant the
interests to Mortgagee as provided herein; and (iii) will warrant and defend to
Mortgagee such title to the Mortgaged Property and the lien and interest of
Mortgagee therein and thereon against all claims and demands whatsoever and
will, except as otherwise herein expressly provided, maintain the priority of
the lien of, and the security interest granted by, this Mortgage upon the
Mortgaged Property until Mortgagor shall be entitled to defeasance as provided
herein.
3. Mortgagor, at its expense, shall cause this Mortgage, any
instruments supplemental hereto, financing statements, including all necessary
amendments, supplements and appropriate continuation statements to be recorded,
registered and filed, and to be kept recorded, registered and filed, in such
manner and in such places as may be required in order to establish, preserve and
protect the lien of this Mortgage as a valid mortgage lien, subject only to
Permitted Encumbrances (defined herein).
4. All property of every kind acquired by Mortgagor after the date
hereof, which by the terms hereof is intended to be subject to the lien of this
Mortgage, shall immediately upon the acquisition thereof by Mortgagor, and
without further mortgage, conveyance or assignment, become subject to the lien
of this Mortgage as fully as though now owned by Mortgagor and specifically
described herein. Nevertheless, Mortgagor shall take such actions and execute
and deliver such additional instruments as Mortgagee shall reasonably require to
further evidence or confirm the subjection to the lien of this Mortgage of any
such property.
5. Mortgagor shall not sell, rent, convey, assign or transfer the
Mortgaged Property or any part or interest therein without the prior written
consent of Mortgagee, which shall not be unreasonably withheld. Mortgagor shall
not directly or indirectly create or permit to remain, and will promptly
discharge, any mortgage, lien, encumbrance or charge on, pledge of, security
interest in or conditional sale or other title retention agreement with respect
to the Mortgaged Property or any part thereof or the interest of Mortgagor or
Mortgagee therein or any revenues, income or profit or other sums arising from
the Mortgaged Property or any part thereof, (including, without limitation, any
lien, encumbrance or charge arising by operation of law) other than: (i) the
lien of this Mortgage and any other liens or rights of Mortgagee granted in any
of the Loan Documents; (ii) the lien of any lender identified in EXHIBIT A (the
"Senior Lender"); (iii) liens for taxes, assessments and other governmental
charges which are not at the time required to be paid; (iv) liens of mechanics,
materialmen, suppliers or vendors or rights thereto for amounts which at the
time are not required to be paid; and (v) purchase money security interests in
property purchased on credit or with borrowed money and which secures the
repayment of such credit or borrowed money (collectively, the "Permitted
Encumbrances")
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<PAGE> 58
6. This Mortgage is also a security agreement and creates a security
interest in and to the Mortgaged Property to secure payment and performance of
the Obligations. Mortgagor has executed and delivered to Mortgagee a Security
Agreement, dated as of even date herewith. To the extent the Mortgaged Property
is covered by both this Mortgage and said Security Agreement, the provisions of
both shall apply, but in the event of a conflict, the provisions of this
Mortgage shall govern as to all portions of the Mortgage Property as constitutes
real property and fixtures and interests therein, and the provisions of the
Security Agreement shall govern as to all portions of the Mortgaged Property as
constitutes personal property.
7. This Mortgage is intended to be effective under the Uniform
Commercial Code as a financing statement filed as a fixture filing, and, in
compliance therewith, the following information is set forth:
(a) The name and address of the record owner/debtor is:
Wayne R. Hellman
7181 Ober Lane
Chagrin Falls, Ohio 44023
(b) The name and address of the secured party is:
Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
(c) The property covered hereby is described in detail in
EXHIBIT A, attached hereto.
8. Mortgagor hereby authorizes and empowers Mortgagee, at its option,
to do all things authorized or required to be done by Mortgagee, as a mortgagee,
under the laws of the state of Ohio and, if different, the state in which the
Mortgaged Property is located, to protect its interests in the Mortgaged
Property.
9. Nothing contained in this Mortgage shall constitute any request by
Mortgagee, express or implied, for the performance of any labor or services or
the furnishing of any materials or other property in respect of the Mortgaged
Property or any part thereof, or be construed to give Mortgagor any right, power
or authority to contract for or permit the performance of any labor or services
or the furnishing of any materials or other property in such fashion as would
provide the basis for any claim either against Mortgagee or that any lien based
on the performance of such labor or services or the furnishing of any such
materials or other property is prior to the lien of this Mortgage.
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<PAGE> 59
10. Without affecting the liability of any other person liable for the
payment of any obligation herein mentioned, and without affecting the lien or
charge of this Mortgage upon any portion of the Mortgaged Property not then or
theretofore released as security for the full amount of all unpaid obligations,
Mortgagee may, from time to time and without notice (a) release any person so
liable; (b) extend the maturity or alter any of the terms of any such
obligation; (c) grant other indulgences; (d) release or reconvey, or cause to be
released or reconveyed at any time at Mortgagee's option any parcel, portion or
all of the Mortgaged Property; (e) take or release any other or additional
security for any obligation herein mentioned; or (f) make compositions or other
arrangements with debtors in relation thereto.
11. Mortgagor shall pay promptly when due, and before penalty or
interest accrue thereon, all taxes, assessments, whether general or special, all
other governmental charges and all public or private utility charges of any kind
whatsoever foreseen or unforeseen, ordinary or extraordinary that now or may at
any time hereafter be assessed, levied or imposed against or with respect to the
Mortgaged Property or any part thereof which, if not paid, may become or be made
a lien on the Mortgaged Property, or any part thereof.
12. Mortgagor shall keep the real and personal property included in the
Mortgaged Property continuously insured with risk and liability insurance in
such amounts as Mortgagee reasonably requires. All insurance shall be obtained
and maintained either by means of policies with generally recognized,
responsible insurance companies. Mortgagor shall furnish Mortgagee with a
certificate of insurance for each policy setting forth the coverage, the limits
of liability, the name of the carrier, the policy number and the expiration
date. Each policy of insurance shall be written so as not to be subject to
cancellation or substantial modification which phrase shall include any
reduction in the scope or limits of coverage upon less than thirty (30) days
advance written notice to Mortgagee. All policies of insurance shall contain
standard mortgage clauses requiring all proceeds resulting from any claim for
loss or damage to be paid to Mortgagee.
13. Mortgagor, at its expense, shall comply with all laws with respect
to the Mortgaged Property, and shall keep (or cause to be kept) the Mortgaged
Property in good order and condition (ordinary wear and tear excepted) and shall
make or cause to be made all necessary or appropriate repairs, replacements and
renewals thereof, interior, exterior, structural and non-structural, ordinary
and extraordinary, foreseen and unforeseen unless Mortgagee otherwise consents
in writing. Mortgagor shall not do, or permit to be done, any act or thing which
might materially impair the value or usefulness of the Mortgaged Property or any
part thereof, shall not commit or permit any waste of the Mortgaged Property or
any part thereof, and shall not permit any unlawful use or occupation of the
Mortgaged Property or any part thereof.
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<PAGE> 60
14. Mortgagor further covenants and agrees with Mortgagee that neither
Mortgagor nor any of its agents, employees, independent contractors, invitees,
licensees, successors, assignees, tenants or subtenants will store, release or
dispose of or permit the storage, release or disposal of any hazardous or toxic
substances or hazardous waste on the Mortgaged Property at any time from and
after the effective date of this Mortgage ("Environmental Issues").
15. Mortgagor will protect, indemnify and save harmless Mortgagee from
and against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, reasonable attorneys'
fees and expenses as may be limited by law or judicial order or decision entered
in any action brought to recover monies under this Section) imposed upon,
incurred by or asserted against Mortgagee by reason of (a) ownership of any
interest in the Mortgaged Property or any part thereof; (b) any accident, injury
to or death of persons or loss of or damage to property occurring on or about
the Mortgaged Property or any part thereof or the adjoining sidewalks, curbs,
vaults and vault space, if any, streets or ways; (c) any use, disuse or
condition of the Mortgaged Property or any part thereof, or the adjoining
sidewalks, curbs, vaults and vault space, if any, streets or ways, including any
Environmental Issues; (d) any failure on the part of Mortgagor to perform or
comply with any of the terms hereof; (e) any necessity to defend any of the
rights, title or interest conveyed by this Mortgage; or (f) the performance of
any labor or services or the furnishing of any materials or other property in
respect of the Mortgaged Property or any part thereof.
16. In case of any damage to or destruction of any buildings, fixtures
or personal property included in the Mortgaged Property, or any part thereof,
Mortgagor will promptly give written notice thereof to Mortgagee generally
describing the nature and extent of such damage or destruction. Any insurance or
other proceeds from any such damage or destruction shall be paid to Mortgagee,
unless Mortgagee otherwise consents in writing to Mortgagor's use of such
proceeds to repair or replace the damaged or destroyed property, which consent
will not be unreasonably withheld.
17. If title to or the temporary use of the Mortgaged Property, or any
part thereof, shall be taken under the exercise of the power of eminent domain
by any governmental body or by any person, firm or corporation acting under any
governmental body or by any person, firm or corporation acting under
governmental authority, Mortgagor will promptly give written notice thereof to
Mortgagee describing the nature and extent of such taking. Any proceeds received
from any award made in such eminent domain proceedings shall be paid to
Mortgagee.
18. If Mortgagor shall fail to make any payment or perform any act
required to be made or performed hereunder or under the Agreement or the Note,
Mortgagee, without notice or demand upon Mortgagor and without waiving or
releasing any obligation or default, may, but shall be under no obligation to,
make such payment or perform such act
Page 5 of 11
<PAGE> 61
for the account and at the expense of Mortgagor and may enter upon the
Mortgaged Property or any part thereof for such purpose and take all such
action thereon as, in its sole opinion, may be necessary or appropriate
therefor. All payments so made by Mortgagee and all costs, fees and expenses
incurred in connection therewith or in connection with the performance by
Mortgagee of any such act, together with interest thereon at eight percent (8%)
per annum shall, together with such interest, be additional indebtedness
secured by this Mortgage and shall be paid by Mortgagor to Mortgagee on demand.
In any action brought to collect such indebtedness, or to foreclose this
Mortgage, Mortgagee shall be entitled to the recovery of such expenses in such
action except as limited by law or judicial order or decision entered in such
proceedings.
19. Any default by Mortgagor of any obligation hereunder, any Default
under the Note, and any Event of Default under the Agreement, the Security
Agreement or the Assignment or any default of any of the other Obligations shall
be an "Event of Default" under this Mortgage.
20. If an Event of Default shall have occurred and be continuing,
Mortgagee, at any time, at its election, may exercise any or all or any
combination of the remedies conferred upon or reserved to it under this
Mortgage, the Agreement, the Note, the Security Agreement, the Assignment or any
instrument collateral thereto, or now or hereafter existing at law, or in equity
or by statute. Without limitation, Mortgagee may (a) declare the entire unpaid
principal balance of the Note and all other indebtedness secured hereby
immediately due and payable, without notice or demand, the same being expressly
waived by Mortgagor, subject to any cure periods provided for in the Note for
non-monetary defaults; (b) proceed at law or equity to collect all indebtedness
secured by this Mortgage due hereunder, whether at maturity or by acceleration;
(c) foreclose the lien of this Mortgage as against all or any part of the
Mortgaged Property; and (d) exercise any rights, powers and remedies it may have
as a secured party under the Uniform Commercial Code, or other similar laws in
effect, including, without limitation, the option of proceeding as to both
personal property and fixtures in accordance with Mortgagee's rights with
respect to real property.
21. Mortgagor does hereby waive to the full extent it may lawfully do
so, the benefit of all appraisement, valuation, stay and extension laws now or
hereafter in force and all rights of marshaling of assets in the event of any
sale of the Mortgaged Property, any part thereof or any interest therein and any
court having jurisdiction to foreclose the lien thereof may sell the Mortgaged
Property in part or as an entirety.
22. All amounts (including, without limitation, the proceeds of any
sale of the Mortgaged Property, any part thereof or any interest therein)
received by Mortgagee hereunder shall be applied to amounts due to it from
Mortgagor hereunder and under the Note, the Agreement, the Security Agreement,
the Assignment and the other Obligations, and shall be applied as follows:
Page 6 of 11
<PAGE> 62
First: the payment of all costs incurred in the collection thereof
(including, without limitation, reasonable attorneys' fees and expenses except
as may have been limited by law or by judicial order or decision entered in any
action to foreclose this Mortgage);
Second: the payment of indebtedness secured by this Mortgage owing to
Mortgagee, other than indebtedness with respect to the Note at the time
outstanding; and
Third: the payment to Mortgagee for the payment of all amounts payable
under the Note in the order provided for therein.
23. Each right, power and remedy of Mortgagee, provided for in this
Mortgage, in the Agreement, the Note, the Security Agreement, the Assignment or
now or hereafter existing at law or in equity or by statute or otherwise, shall
be cumulative and concurrent and shall be in addition to every other right,
power or remedy provided for in this Mortgage, in the Agreement, the Note, the
Security Agreement, the Assignment or now or hereafter existing at law or in
equity or by statute or otherwise, and the exercise or beginning of the exercise
or partial exercise by Mortgagee of any one or more of such rights, powers or
remedies shall not preclude the simultaneous or later exercise by Mortgagee of
any or all such other rights, powers or remedies.
24. All rights, powers and remedies provided herein may be exercised
only to the extent that the exercise thereof does not violate any applicable
law, and are intended to be limited to the extent necessary so that they will
not render this Mortgage invalid, unenforceable or not entitled to be recorded,
registered or filed under any applicable law.
25. No failure by Mortgagee to insist upon the strict performance of
any term hereof or to exercise any right, power or remedy consequent upon an
Event of Default, shall constitute a waiver of any such term or of any such
Event of Default. No waiver of any Event of Default shall affect or alter this
Mortgage, which shall continue in full force, and shall not effect a waiver with
respect to any subsequent such Event of Default or to any other then existing or
subsequent breach.
26. In case Mortgagee shall have proceeded to enforce any right, power
or remedy under this Mortgage by foreclosure, entry or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason, or shall
have been determined adversely to Mortgagee, then and in every case Mortgagor
and Mortgagee shall be restored to their former positions and rights hereunder,
and all rights, power and remedies of Mortgagee shall continue as if no such
proceeding had been taken.
27. Mortgagee shall have no liability for any loss, damage, injury,
cost or expense resulting from any act or omission to act by it or its
representatives whether or not negligent, which was taken or omitted pursuant to
this Mortgage.
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<PAGE> 63
28. Without notice to or consent of Mortgagor and without impairment of
the lien and rights created by this Mortgage, Mortgagee may accept from
Mortgagor or from any other person or persons, additional security for the
indebtedness secured by this Mortgage. Neither the giving of this Mortgage nor
the acceptance of any such additional security shall prevent Mortgagee from
resorting first to such additional security or to the security created by this
Mortgage, in either case without affecting the lien hereof and the rights
conferred hereunder.
29. If all sums then due and payable under this Mortgage, the Note and
the Agreement by Mortgagor shall have been paid and Mortgagor shall have
complied with all the terms, conditions and requirements hereof and thereof,
then this Mortgage shall be null and void and of no further force and effect.
Upon the written request and at the expense of Mortgagor, Mortgagee will execute
and deliver such proper instruments of release and discharge as may reasonably
be requested to evidence such defeasance, release and discharge.
30. Mortgagee and its representatives are hereby authorized to enter
upon and inspect the Mortgaged Property at reasonable times, and so long as
Mortgagee does not unreasonably interfere with Mortgagor's use and enjoyment of
the Mortgaged Property.
31. Mortgagor shall, to the extent permitted by law, immediately upon
demand pay or reimburse Mortgagee for all reasonable attorneys' fees, costs and
expenses incurred by Mortgagee in any proceedings involving the estate of a
decedent, an insolvent or a debtor under federal bankruptcy law, or in any
action, proceeding or dispute of any kind in which Mortgagee is made a party, or
appears as an intervener or party plaintiff or defendant, affecting or relating
to the Note, this Mortgage or the Agreement, the Security Agreement, the
Assignment, Mortgagor or any of the Mortgaged Property, including, but not
limited to, the foreclosure of this Mortgage, any condemnation action involving
the Mortgaged Property, or any action to protect the security hereof, and any
such amounts paid by Mortgagee shall, except as may be limited by law or
judicial order or decision entered in any action to foreclose this Mortgage, be
added to the indebtedness secured hereby and secured by the lien and security
interest of this Mortgage and shall bear interest at eight percent (8%) per
annum.
32. It being the desire and intention of the parties hereto that this
Mortgage and the lien created hereby do not merge in fee simple title to the
Mortgaged Property, it is hereby understood and agreed that should Mortgagee
acquire any additional or other interests in or to the Mortgaged Property or the
ownership thereof, then, unless a contrary intent is manifested by Mortgagee as
evidence by an appropriate document duly recorded, this Mortgage and the lien
hereof shall not merge in the fee simple title, toward the end that this
Mortgage may be foreclosed as if owned by a stranger to the fee simple title.
Page 8 of 11
<PAGE> 64
33. This Mortgage shall be deemed to be made under the laws of the
state of Ohio and for all purposes shall be governed by and construed in
accordance with the laws of Ohio without regard to conflict of laws principals
(except to the extent the Mortgaged Property is situated in a state other than
Ohio and in that case any laws of such state which are required to control
mortgages granted on such property shall apply) and shall inure to the benefit
of and be binding upon Mortgagor and his estate, heirs, executors,
administrators and personal representatives, successors and assigns and
Mortgagee and its successors and assigns. If any term or provision of this
Mortgage shall be held to be invalid, illegal or unenforceable, the validity of
the remaining provisions hereof shall in no way be affected thereby. The
captions or headings herein shall be solely for convenience of reference and in
no way define, limit or describe the scope or intent of any provisions or
sections of this Mortgage. This Mortgage may be executed in any number of
counterparts, each of which shall be regarded as an original and all of which
shall constitute but one and the same instrument; it shall not be necessary in
proving this Mortgage to produce or account for more than one such counterpart.
34. This Mortgage may not be effectively amended, changed, modified,
altered or terminated except as provided herein without the prior written
consent of Mortgagor and Mortgagee.
35. All sums payable by Mortgagor hereunder shall be paid without
notice, demand, counterclaims, setoff, deduction or defense, and without
abatement, suspension, deferment, diminution or reduction, and the obligations
and liabilities of Mortgagor hereunder shall in no way be released, discharged
or otherwise affected (except as expressly provided herein) by reason of (a) any
damage to or destruction of or any condemnation or similar taking of the
Mortgaged Property or any part thereof; (b) any restriction or prevention of or
interference with any use of the Mortgaged Property or any part thereof; (d) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to Mortgagor or any action taken
with respect to this Mortgage by any trustee or receiver of Mortgagor, or by any
court in such proceeding; (e) any claim which Mortgagor has or might have
against Mortgagee; (f) any default or failure on the part of Mortgagee to
perform or comply with any of the terms hereof or of any other agreements
pertaining to the loan on the Mortgaged Property with Mortgagor; or (g) any
other occurrence whatsoever, whether similar or dissimilar to the foregoing,
whether or not Mortgagor shall have notice or knowledge of any of the foregoing.
Except as expressly provided herein, Mortgagor waives all rights now or
hereafter conferred by statute or otherwise to any abatement, suspension,
deferment, diminution or reduction of any sum secured hereby and payable by
Mortgagor.
36. All notices, certificates, requests or other communications
hereunder shall be in writing and shall be deemed to be sufficiently given when
mailed by registered or certified mail, postage prepaid, and addressed to the
addresses set forth in the granting clause. Mortgagor and Mortgagee may, by
notice given hereunder, designate any further
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<PAGE> 65
or different addresses to which subsequent notices, certificates, requests or
other communications shall be sent.
37. In the event of litigation concerning this document or any related
document(s), all costs, charges and expenses, including reasonable attorneys'
fees, shall be awarded to the prevailing party. As used herein and all related
loan documents, attorneys' fees shall include, but not be limited to, fees
incurred in all matters of collection
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Page 10 of 11
<PAGE> 66
and enforcement, construction and interpretation, before, during or after trial,
proceedings and appeals, as well as appearances connected with bankruptcy
proceedings.
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage as of the date
written below.
Signed and Acknowledged
in the Presence of: MORTGAGOR:
- - ------------------------------ --------------------------------
WAYNE R. HELLMAN
______________________________ Date:____________________________
I hereby release all of my dower rights in the Mortgaged Property.
Signed and Acknowledged
in the Presence of:
- - ------------------------------ --------------------------------
DIANE HELLMAN
______________________________ Date:____________________________
STATE OF OHIO )
) SS:
COUNTY OF CUYAHOGA )
The foregoing instrument was executed before me this ____ day of
February, 1999, by Wayne R. Hellman and Diane Hellman who are personally known
to me and who did swear that the same was done of their own free will.
-------------------------------
Notary Public
Prepared by:
Jay R. Faeges, Esq.
Goodman Weiss Miller LLP
100 Erieview Plaza, 27th Floor
Cleveland, Ohio 44114
(216) 696-3366
Page 11 of 11
<PAGE> 67
EXHIBIT A - MORTGAGED PROPERTY
REAL ESTATE MORTGAGE
WAYNE R. HELLMAN / ADVANCED LIGHTING TECHNOLOGIES, INC.
PROPERTY ADDRESS: 7181 Ober Lane
Chagrin Falls, Ohio 44023-1125
PARCEL NUMBER: 02-159150
SENIOR LENDER: Key Bank National Association
LEGAL DESCRIPTION: Situated in the Township of Bainbridge,
County of Geauga, and State of Ohio:
And known as being Sublot No. 34 in
the Stone Ridge Company's Stone
Ridge Colony Allotment of a part of
Original Bainbridge Township Lots
Nos. 39 and 48, Tract No. 1, as
shown by the recorded plat in Volume
7 of Maps, Page 49 of Geauga County
Records, be the same more or less,
but subject to all legal highways.
<PAGE> 68
REAL ESTATE MORTGAGE
Filed for record in ______ County, ______ on
February ____, 1999, ______ o'clock _.m., E.D.T.
No. _______________ and recorded at
Volume ______, Page _______,
______ County, ______, Mortgage Records
As an inducement to and in consideration of the loan to the
undersigned, WAYNE R. HELLMAN ("Mortgagor"), having his principal residence at
7181 Ober Lane, Chagrin Falls, Ohio 44023 by ADVANCED LIGHTING TECHNOLOGIES,
INC., ("Mortgagee"), an Ohio corporation having its principal offices at 32000
Aurora Road, Solon, Ohio 44139, pursuant to the Loan Agreement dated as of
October 8, 1998, by and between Mortgagor and Mortgagee (the "Agreement") and
evidenced by the Secured Promissory Note dated as of October 8, 1998, with a
maturity date of October 6, 1999, made by Mortgagor to Mortgagee (the "Note"),
and further evidenced by the Security Agreement and the Collateral Assignment of
Contract, both dated as of October 8, 1998, by and between Mortgagor and
Mortgagee (respectively, the "Security Agreement" and the "Assignment"), and for
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Mortgagor hereby grants, bargains, sells, conveys, mortgages,
assigns and grants a security interest in and transfers unto Mortgagee, its
successors and assigns, to have and to hold forever, all right, title and
interest of Mortgagor in and to the real property described in EXHIBIT A,
together with all other real properties now or hereafter made subject to the
lien of this Mortgage by supplemental mortgage or otherwise, and (i) in and to
the buildings and other improvements now or hereafter situated thereon; (ii) all
privileges and appurtenances thereto; (iii) all fixtures now or hereafter
attached to and used in connection therewith; (iv) all renewals or replacements
thereof or articles in substitution therefor; (v) all proceeds of any of the
foregoing or from any insurance payable with respect thereto (from whatever
source), or payments from any taking under power of eminent domain of all or any
portion thereof; and (vi) all rents, issues and profits or other amounts due
Mortgagor in respect thereof (collectively, the "Mortgaged Property"). This
Mortgage is made subject to all restrictions and easements of record, current
taxes and assessments.
1. This Mortgage secures the payment of principal in the amount of Nine
Million Dollars ($9,000,000), together with all interest thereon and any other
amounts now or hereafter owing from Mortgagor to Mortgagee hereunder, under the
Note or the Agreement, and under the Security Agreement and the Assignment and
all other agreements entered into by Mortgagee and Mortgagor in connection
herewith and therewith, and the performance of all other obligations of
Mortgagor hereunder and thereunder (collectively, the "Obligations").
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<PAGE> 69
2. Mortgagor represents and warrants to Mortgagee that Mortgagor (i) is
lawfully seized with good and marketable title, in fee simple, to the real
property included in the Mortgaged Property and has good title to all personal
property included in the Mortgaged Property, subject only to Permitted
Encumbrances (defined herein); (ii) has full right and authority to grant the
interests to Mortgagee as provided herein; and (iii) will warrant and defend to
Mortgagee such title to the Mortgaged Property and the lien and interest of
Mortgagee therein and thereon against all claims and demands whatsoever and
will, except as otherwise herein expressly provided, maintain the priority of
the lien of, and the security interest granted by, this Mortgage upon the
Mortgaged Property until Mortgagor shall be entitled to defeasance as provided
herein.
3. Mortgagor, at its expense, shall cause this Mortgage, any
instruments supplemental hereto, financing statements, including all necessary
amendments, supplements and appropriate continuation statements to be recorded,
registered and filed, and to be kept recorded, registered and filed, in such
manner and in such places as may be required in order to establish, preserve and
protect the lien of this Mortgage as a valid mortgage lien, subject only to
Permitted Encumbrances (defined herein).
4. All property of every kind acquired by Mortgagor after the date
hereof, which by the terms hereof is intended to be subject to the lien of this
Mortgage, shall immediately upon the acquisition thereof by Mortgagor, and
without further mortgage, conveyance or assignment, become subject to the lien
of this Mortgage as fully as though now owned by Mortgagor and specifically
described herein. Nevertheless, Mortgagor shall take such actions and execute
and deliver such additional instruments as Mortgagee shall reasonably require to
further evidence or confirm the subjection to the lien of this Mortgage of any
such property.
5. Mortgagor shall not sell, rent, convey, assign or transfer the
Mortgaged Property or any part or interest therein without the prior written
consent of Mortgagee, which shall not be unreasonably withheld. Mortgagor shall
not directly or indirectly create or permit to remain, and will promptly
discharge, any mortgage, lien, encumbrance or charge on, pledge of, security
interest in or conditional sale or other title retention agreement with respect
to the Mortgaged Property or any part thereof or the interest of Mortgagor or
Mortgagee therein or any revenues, income or profit or other sums arising from
the Mortgaged Property or any part thereof, (including, without limitation, any
lien, encumbrance or charge arising by operation of law) other than: (i) the
lien of this Mortgage and any other liens or rights of Mortgagee granted in any
of the Loan Documents; (ii) the lien of any lender identified in EXHIBIT A (the
"Senior Lender"); (iii) liens for taxes, assessments and other governmental
charges which are not at the time required to be paid; (iv) liens of mechanics,
materialmen, suppliers or vendors or rights thereto for amounts which at the
time are not required to be paid; and (v) purchase money security interests in
property purchased on credit or with borrowed money and which secures the
repayment of such credit or borrowed money (collectively, the "Permitted
Encumbrances")
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<PAGE> 70
6. This Mortgage is also a security agreement and creates a security
interest in and to the Mortgaged Property to secure payment and performance of
the Obligations. Mortgagor has executed and delivered to Mortgagee a Security
Agreement, dated as of even date herewith. To the extent the Mortgaged Property
is covered by both this Mortgage and said Security Agreement, the provisions of
both shall apply, but in the event of a conflict, the provisions of this
Mortgage shall govern as to all portions of the Mortgage Property as constitutes
real property and fixtures and interests therein, and the provisions of the
Security Agreement shall govern as to all portions of the Mortgaged Property as
constitutes personal property.
7. This Mortgage is intended to be effective under the Uniform
Commercial Code as a financing statement filed as a fixture filing, and, in
compliance therewith, the following information is set forth:
(a) The name and address of the record owner/debtor is:
Wayne R. Hellman
7181 Ober Lane
Chagrin Falls, Ohio 44023
(b) The name and address of the secured party is:
Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
(c) The property covered hereby is described in detail in
EXHIBIT A, attached hereto.
8. Mortgagor hereby authorizes and empowers Mortgagee, at its option,
to do all things authorized or required to be done by Mortgagee, as a mortgagee,
under the laws of the state of Ohio and, if different, the state in which the
Mortgaged Property is located, to protect its interests in the Mortgaged
Property.
9. Nothing contained in this Mortgage shall constitute any request by
Mortgagee, express or implied, for the performance of any labor or services or
the furnishing of any materials or other property in respect of the Mortgaged
Property or any part thereof, or be construed to give Mortgagor any right, power
or authority to contract for or permit the performance of any labor or services
or the furnishing of any materials or other property in such fashion as would
provide the basis for any claim either against Mortgagee or that any lien based
on the performance of such labor or services or the furnishing of any such
materials or other property is prior to the lien of this Mortgage.
Page 3 of 11
<PAGE> 71
10. Without affecting the liability of any other person liable for the
payment of any obligation herein mentioned, and without affecting the lien or
charge of this Mortgage upon any portion of the Mortgaged Property not then or
theretofore released as security for the full amount of all unpaid obligations,
Mortgagee may, from time to time and without notice (a) release any person so
liable; (b) extend the maturity or alter any of the terms of any such
obligation; (c) grant other indulgences; (d) release or reconvey, or cause to be
released or reconveyed at any time at Mortgagee's option any parcel, portion or
all of the Mortgaged Property; (e) take or release any other or additional
security for any obligation herein mentioned; or (f) make compositions or other
arrangements with debtors in relation thereto.
11. Mortgagor shall pay promptly when due, and before penalty or
interest accrue thereon, all taxes, assessments, whether general or special, all
other governmental charges and all public or private utility charges of any kind
whatsoever foreseen or unforeseen, ordinary or extraordinary that now or may at
any time hereafter be assessed, levied or imposed against or with respect to the
Mortgaged Property or any part thereof which, if not paid, may become or be made
a lien on the Mortgaged Property, or any part thereof.
12. Mortgagor shall keep the real and personal property included in the
Mortgaged Property continuously insured with risk and liability insurance in
such amounts as Mortgagee reasonably requires. All insurance shall be obtained
and maintained either by means of policies with generally recognized,
responsible insurance companies. Mortgagor shall furnish Mortgagee with a
certificate of insurance for each policy setting forth the coverage, the limits
of liability, the name of the carrier, the policy number and the expiration
date. Each policy of insurance shall be written so as not to be subject to
cancellation or substantial modification which phrase shall include any
reduction in the scope or limits of coverage upon less than thirty (30) days
advance written notice to Mortgagee. All policies of insurance shall contain
standard mortgage clauses requiring all proceeds resulting from any claim for
loss or damage to be paid to Mortgagee.
13. Mortgagor, at its expense, shall comply with all laws with respect
to the Mortgaged Property, and shall keep (or cause to be kept) the Mortgaged
Property in good order and condition (ordinary wear and tear excepted) and shall
make or cause to be made all necessary or appropriate repairs, replacements and
renewals thereof, interior, exterior, structural and non-structural, ordinary
and extraordinary, foreseen and unforeseen unless Mortgagee otherwise consents
in writing. Mortgagor shall not do, or permit to be done, any act or thing which
might materially impair the value or usefulness of the Mortgaged Property or any
part thereof, shall not commit or permit any waste of the Mortgaged Property or
any part thereof, and shall not permit any unlawful use or occupation of the
Mortgaged Property or any part thereof.
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<PAGE> 72
14. Mortgagor further covenants and agrees with Mortgagee that neither
Mortgagor nor any of its agents, employees, independent contractors, invitees,
licensees, successors, assignees, tenants or subtenants will store, release or
dispose of or permit the storage, release or disposal of any hazardous or toxic
substances or hazardous waste on the Mortgaged Property at any time from and
after the effective date of this Mortgage ("Environmental Issues").
15. Mortgagor will protect, indemnify and save harmless Mortgagee from
and against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, reasonable attorneys'
fees and expenses as may be limited by law or judicial order or decision entered
in any action brought to recover monies under this Section) imposed upon,
incurred by or asserted against Mortgagee by reason of (a) ownership of any
interest in the Mortgaged Property or any part thereof; (b) any accident, injury
to or death of persons or loss of or damage to property occurring on or about
the Mortgaged Property or any part thereof or the adjoining sidewalks, curbs,
vaults and vault space, if any, streets or ways; (c) any use, disuse or
condition of the Mortgaged Property or any part thereof, or the adjoining
sidewalks, curbs, vaults and vault space, if any, streets or ways, including any
Environmental Issues; (d) any failure on the part of Mortgagor to perform or
comply with any of the terms hereof; (e) any necessity to defend any of the
rights, title or interest conveyed by this Mortgage; or (f) the performance of
any labor or services or the furnishing of any materials or other property in
respect of the Mortgaged Property or any part thereof.
16. In case of any damage to or destruction of any buildings, fixtures
or personal property included in the Mortgaged Property, or any part thereof,
Mortgagor will promptly give written notice thereof to Mortgagee generally
describing the nature and extent of such damage or destruction. Any insurance or
other proceeds from any such damage or destruction shall be paid to Mortgagee,
unless Mortgagee otherwise consents in writing to Mortgagor's use of such
proceeds to repair or replace the damaged or destroyed property, which consent
will not be unreasonably withheld.
17. If title to or the temporary use of the Mortgaged Property, or any
part thereof, shall be taken under the exercise of the power of eminent domain
by any governmental body or by any person, firm or corporation acting under any
governmental body or by any person, firm or corporation acting under
governmental authority, Mortgagor will promptly give written notice thereof to
Mortgagee describing the nature and extent of such taking. Any proceeds received
from any award made in such eminent domain proceedings shall be paid to
Mortgagee.
18. If Mortgagor shall fail to make any payment or perform any act
required to be made or performed hereunder or under the Agreement or the Note,
Mortgagee, without notice or demand upon Mortgagor and without waiving or
releasing any obligation or default, may, but shall be under no obligation to,
make such payment or perform such act
Page 5 of 11
<PAGE> 73
for the account and at the expense of Mortgagor and may enter upon the Mortgaged
Property or any part thereof for such purpose and take all such action thereon
as, in its sole opinion, may be necessary or appropriate therefor. All payments
so made by Mortgagee and all costs, fees and expenses incurred in connection
therewith or in connection with the performance by Mortgagee of any such act,
together with interest thereon at eight percent (8%) per annum shall, together
with such interest, be additional indebtedness secured by this Mortgage and
shall be paid by Mortgagor to Mortgagee on demand. In any action brought to
collect such indebtedness, or to foreclose this Mortgage, Mortgagee shall be
entitled to the recovery of such expenses in such action except as limited by
law or judicial order or decision entered in such proceedings.
19. Any default by Mortgagor of any obligation hereunder, any Default
under the Note, and any Event of Default under the Agreement, the Security
Agreement or the Assignment or any default of any of the other Obligations shall
be an "Event of Default" under this Mortgage.
20. If an Event of Default shall have occurred and be continuing,
Mortgagee, at any time, at its election, may exercise any or all or any
combination of the remedies conferred upon or reserved to it under this
Mortgage, the Agreement, the Note, the Security Agreement, the Assignment or any
instrument collateral thereto, or now or hereafter existing at law, or in equity
or by statute. Without limitation, Mortgagee may (a) declare the entire unpaid
principal balance of the Note and all other indebtedness secured hereby
immediately due and payable, without notice or demand, the same being expressly
waived by Mortgagor, subject to any cure periods provided for in the Note for
non-monetary defaults; (b) proceed at law or equity to collect all indebtedness
secured by this Mortgage due hereunder, whether at maturity or by acceleration;
(c) foreclose the lien of this Mortgage as against all or any part of the
Mortgaged Property; and (d) exercise any rights, powers and remedies it may have
as a secured party under the Uniform Commercial Code, or other similar laws in
effect, including, without limitation, the option of proceeding as to both
personal property and fixtures in accordance with Mortgagee's rights with
respect to real property.
21. Mortgagor does hereby waive to the full extent it may lawfully do
so, the benefit of all appraisement, valuation, stay and extension laws now or
hereafter in force and all rights of marshaling of assets in the event of any
sale of the Mortgaged Property, any part thereof or any interest therein and any
court having jurisdiction to foreclose the lien thereof may sell the Mortgaged
Property in part or as an entirety.
22. All amounts (including, without limitation, the proceeds of any
sale of the Mortgaged Property, any part thereof or any interest therein)
received by Mortgagee hereunder shall be applied to amounts due to it from
Mortgagor hereunder and under the Note, the Agreement, the Security Agreement,
the Assignment and the other Obligations, and shall be applied as follows:
Page 6 of 11
<PAGE> 74
First: the payment of all costs incurred in the collection thereof
(including, without limitation, reasonable attorneys' fees and expenses except
as may have been limited by law or by judicial order or decision entered in any
action to foreclose this Mortgage);
Second: the payment of indebtedness secured by this Mortgage owing to
Mortgagee, other than indebtedness with respect to the Note at the time
outstanding; and
Third: the payment to Mortgagee for the payment of all amounts payable
under the Note in the order provided for therein.
23. Each right, power and remedy of Mortgagee, provided for in this
Mortgage, in the Agreement, the Note, the Security Agreement, the Assignment or
now or hereafter existing at law or in equity or by statute or otherwise, shall
be cumulative and concurrent and shall be in addition to every other right,
power or remedy provided for in this Mortgage, in the Agreement, the Note, the
Security Agreement, the Assignment or now or hereafter existing at law or in
equity or by statute or otherwise, and the exercise or beginning of the exercise
or partial exercise by Mortgagee of any one or more of such rights, powers or
remedies shall not preclude the simultaneous or later exercise by Mortgagee of
any or all such other rights, powers or remedies.
24. All rights, powers and remedies provided herein may be exercised
only to the extent that the exercise thereof does not violate any applicable
law, and are intended to be limited to the extent necessary so that they will
not render this Mortgage invalid, unenforceable or not entitled to be recorded,
registered or filed under any applicable law.
25. No failure by Mortgagee to insist upon the strict performance of
any term hereof or to exercise any right, power or remedy consequent upon an
Event of Default, shall constitute a waiver of any such term or of any such
Event of Default. No waiver of any Event of Default shall affect or alter this
Mortgage, which shall continue in full force, and shall not effect a waiver with
respect to any subsequent such Event of Default or to any other then existing or
subsequent breach.
26. In case Mortgagee shall have proceeded to enforce any right, power
or remedy under this Mortgage by foreclosure, entry or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason, or shall
have been determined adversely to Mortgagee, then and in every case Mortgagor
and Mortgagee shall be restored to their former positions and rights hereunder,
and all rights, power and remedies of Mortgagee shall continue as if no such
proceeding had been taken.
27. Mortgagee shall have no liability for any loss, damage, injury,
cost or expense resulting from any act or omission to act by it or its
representatives whether or not negligent, which was taken or omitted pursuant to
this Mortgage.
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<PAGE> 75
28. Without notice to or consent of Mortgagor and without impairment of
the lien and rights created by this Mortgage, Mortgagee may accept from
Mortgagor or from any other person or persons, additional security for the
indebtedness secured by this Mortgage. Neither the giving of this Mortgage nor
the acceptance of any such additional security shall prevent Mortgagee from
resorting first to such additional security or to the security created by this
Mortgage, in either case without affecting the lien hereof and the rights
conferred hereunder.
29. If all sums then due and payable under this Mortgage, the Note and
the Agreement by Mortgagor shall have been paid and Mortgagor shall have
complied with all the terms, conditions and requirements hereof and thereof,
then this Mortgage shall be null and void and of no further force and effect.
Upon the written request and at the expense of Mortgagor, Mortgagee will execute
and deliver such proper instruments of release and discharge as may reasonably
be requested to evidence such defeasance, release and discharge.
30. Mortgagee and its representatives are hereby authorized to enter
upon and inspect the Mortgaged Property at reasonable times, and so long as
Mortgagee does not unreasonably interfere with Mortgagor's use and enjoyment of
the Mortgaged Property.
31. Mortgagor shall, to the extent permitted by law, immediately upon
demand pay or reimburse Mortgagee for all reasonable attorneys' fees, costs and
expenses incurred by Mortgagee in any proceedings involving the estate of a
decedent, an insolvent or a debtor under federal bankruptcy law, or in any
action, proceeding or dispute of any kind in which Mortgagee is made a party, or
appears as an intervener or party plaintiff or defendant, affecting or relating
to the Note, this Mortgage or the Agreement, the Security Agreement, the
Assignment, Mortgagor or any of the Mortgaged Property, including, but not
limited to, the foreclosure of this Mortgage, any condemnation action involving
the Mortgaged Property, or any action to protect the security hereof, and any
such amounts paid by Mortgagee shall, except as may be limited by law or
judicial order or decision entered in any action to foreclose this Mortgage, be
added to the indebtedness secured hereby and secured by the lien and security
interest of this Mortgage and shall bear interest at eight percent (8%) per
annum.
32. It being the desire and intention of the parties hereto that this
Mortgage and the lien created hereby do not merge in fee simple title to the
Mortgaged Property, it is hereby understood and agreed that should Mortgagee
acquire any additional or other interests in or to the Mortgaged Property or the
ownership thereof, then, unless a contrary intent is manifested by Mortgagee as
evidence by an appropriate document duly recorded, this Mortgage and the lien
hereof shall not merge in the fee simple title, toward the end that this
Mortgage may be foreclosed as if owned by a stranger to the fee simple title.
Page 8 of 11
<PAGE> 76
33. This Mortgage shall be deemed to be made under the laws of the
state of Ohio and for all purposes shall be governed by and construed in
accordance with the laws of Ohio without regard to conflict of laws principals
(except to the extent the Mortgaged Property is situated in a state other than
Ohio and in that case any laws of such state which are required to control
mortgages granted on such property shall apply) and shall inure to the benefit
of and be binding upon Mortgagor and his estate, heirs, executors,
administrators and personal representatives, successors and assigns and
Mortgagee and its successors and assigns. If any term or provision of this
Mortgage shall be held to be invalid, illegal or unenforceable, the validity of
the remaining provisions hereof shall in no way be affected thereby. The
captions or headings herein shall be solely for convenience of reference and in
no way define, limit or describe the scope or intent of any provisions or
sections of this Mortgage. This Mortgage may be executed in any number of
counterparts, each of which shall be regarded as an original and all of which
shall constitute but one and the same instrument; it shall not be necessary in
proving this Mortgage to produce or account for more than one such counterpart.
34. This Mortgage may not be effectively amended, changed, modified,
altered or terminated except as provided herein without the prior written
consent of Mortgagor and Mortgagee.
35. All sums payable by Mortgagor hereunder shall be paid without
notice, demand, counterclaims, setoff, deduction or defense, and without
abatement, suspension, deferment, diminution or reduction, and the obligations
and liabilities of Mortgagor hereunder shall in no way be released, discharged
or otherwise affected (except as expressly provided herein) by reason of (a) any
damage to or destruction of or any condemnation or similar taking of the
Mortgaged Property or any part thereof; (b) any restriction or prevention of or
interference with any use of the Mortgaged Property or any part thereof; (d) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to Mortgagor or any action taken
with respect to this Mortgage by any trustee or receiver of Mortgagor, or by any
court in such proceeding; (e) any claim which Mortgagor has or might have
against Mortgagee; (f) any default or failure on the part of Mortgagee to
perform or comply with any of the terms hereof or of any other agreements
pertaining to the loan on the Mortgaged Property with Mortgagor; or (g) any
other occurrence whatsoever, whether similar or dissimilar to the foregoing,
whether or not Mortgagor shall have notice or knowledge of any of the foregoing.
Except as expressly provided herein, Mortgagor waives all rights now or
hereafter conferred by statute or otherwise to any abatement, suspension,
deferment, diminution or reduction of any sum secured hereby and payable by
Mortgagor.
36. All notices, certificates, requests or other communications
hereunder shall be in writing and shall be deemed to be sufficiently given when
mailed by registered or certified mail, postage prepaid, and addressed to the
addresses set forth in the granting clause. Mortgagor and Mortgagee may, by
notice given hereunder, designate any further
Page 9 of 11
<PAGE> 77
or different addresses to which subsequent notices, certificates, requests or
other communications shall be sent.
37. In the event of litigation concerning this document or any related
document(s), all costs, charges and expenses, including reasonable attorneys'
fees, shall be awarded to the prevailing party. As used herein and all related
loan documents, attorneys' fees shall include, but not be limited to, fees
incurred in all matters of collection
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Page 10 of 11
<PAGE> 78
and enforcement, construction and interpretation, before, during or after trial,
proceedings and appeals, as well as appearances connected with bankruptcy
proceedings.
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage as of the date
written below.
Signed and Acknowledged
in the Presence of: MORTGAGOR:
- - ------------------------------ --------------------------------
WAYNE R. HELLMAN
______________________________ Date:____________________________
I hereby release all of my dower rights in the Mortgaged Property.
Signed and Acknowledged
in the Presence of:
- - ------------------------------ --------------------------------
DIANE HELLMAN
______________________________ Date:____________________________
STATE OF OHIO )
) SS:
COUNTY OF CUYAHOGA )
The foregoing instrument was executed before me this ____ day of
February, 1999, by Wayne R. Hellman and Diane Hellman who are personally known
to me and who did swear that the same was done of their own free will.
-------------------------------
Notary Public
Prepared by:
Jay R. Faeges, Esq.
Goodman Weiss Miller LLP
100 Erieview Plaza, 27th Floor
Cleveland, Ohio 44114
(216) 696-3366
Page 11 of 11
<PAGE> 79
EXHIBIT A - MORTGAGED PROPERTY
REAL ESTATE MORTGAGE
WAYNE R. HELLMAN / ADVANCED LIGHTING TECHNOLOGIES, INC.
PROPERTY ADDRESS: 735 Hardwick Drive
Aurora, Ohio 44202
PARCEL NUMBER: 03-016-00-00-240-000
SENIOR LENDER: Merrill Lynch Credit Corporation
LEGAL DESCRIPTION: Sublot No. 196 in Barrington
Subdivision No. 2 being part of
original Aurora Township Lot Nos. 8,
9, 15 and 16 as shown by the
recorded Plat 94-74 of Portage
County Records (the "Sublot" or
"Sublots"), together with all rights
granted by the Master Declaration of
Covenants, Conditions, Easements and
Restrictions of Barrington, Aurora,
Ohio recorded in Volume 1116, Pages
538 through 600 of Portage County
Records.
<PAGE> 80
REAL ESTATE MORTGAGE
Filed for record in ______ County, ______ on
February ____, 1999, ______ o'clock _.m., E.D.T.
No. _______________ and recorded at
Volume ______, Page _______,
______ County, ______, Mortgage Records
As an inducement to and in consideration of the loan to the
undersigned, WAYNE R. HELLMAN ("Mortgagor"), having his principal residence at
7181 Ober Lane, Chagrin Falls, Ohio 44023 by ADVANCED LIGHTING TECHNOLOGIES,
INC., ("Mortgagee"), an Ohio corporation having its principal offices at 32000
Aurora Road, Solon, Ohio 44139, pursuant to the Loan Agreement dated as of
October 8, 1998, by and between Mortgagor and Mortgagee (the "Agreement") and
evidenced by the Secured Promissory Note dated as of October 8, 1998, with a
maturity date of October 6, 1999, made by Mortgagor to Mortgagee (the "Note"),
and further evidenced by the Security Agreement and the Collateral Assignment of
Contract, both dated as of October 8, 1998, by and between Mortgagor and
Mortgagee (respectively, the "Security Agreement" and the "Assignment"), and for
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Mortgagor hereby grants, bargains, sells, conveys, mortgages,
assigns and grants a security interest in and transfers unto Mortgagee, its
successors and assigns, to have and to hold forever, all right, title and
interest of Mortgagor in and to the real property described in EXHIBIT A,
together with all other real properties now or hereafter made subject to the
lien of this Mortgage by supplemental mortgage or otherwise, and (i) in and to
the buildings and other improvements now or hereafter situated thereon; (ii) all
privileges and appurtenances thereto; (iii) all fixtures now or hereafter
attached to and used in connection therewith; (iv) all renewals or replacements
thereof or articles in substitution therefor; (v) all proceeds of any of the
foregoing or from any insurance payable with respect thereto (from whatever
source), or payments from any taking under power of eminent domain of all or any
portion thereof; and (vi) all rents, issues and profits or other amounts due
Mortgagor in respect thereof (collectively, the "Mortgaged Property"). This
Mortgage is made subject to all restrictions and easements of record, current
taxes and assessments.
1. This Mortgage secures the payment of principal in the amount of Nine
Million Dollars ($9,000,000), together with all interest thereon and any other
amounts now or hereafter owing from Mortgagor to Mortgagee hereunder, under the
Note or the Agreement, and under the Security Agreement and the Assignment and
all other agreements entered into by Mortgagee and Mortgagor in connection
herewith and therewith, and the performance of all other obligations of
Mortgagor hereunder and thereunder (collectively, the "Obligations").
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<PAGE> 81
2. Mortgagor represents and warrants to Mortgagee that Mortgagor (i) is
lawfully seized with good and marketable title, in fee simple, to the real
property included in the Mortgaged Property and has good title to all personal
property included in the Mortgaged Property, subject only to Permitted
Encumbrances (defined herein); (ii) has full right and authority to grant the
interests to Mortgagee as provided herein; and (iii) will warrant and defend to
Mortgagee such title to the Mortgaged Property and the lien and interest of
Mortgagee therein and thereon against all claims and demands whatsoever and
will, except as otherwise herein expressly provided, maintain the priority of
the lien of, and the security interest granted by, this Mortgage upon the
Mortgaged Property until Mortgagor shall be entitled to defeasance as provided
herein.
3. Mortgagor, at its expense, shall cause this Mortgage, any
instruments supplemental hereto, financing statements, including all necessary
amendments, supplements and appropriate continuation statements to be recorded,
registered and filed, and to be kept recorded, registered and filed, in such
manner and in such places as may be required in order to establish, preserve and
protect the lien of this Mortgage as a valid mortgage lien, subject only to
Permitted Encumbrances (defined herein).
4. All property of every kind acquired by Mortgagor after the date
hereof, which by the terms hereof is intended to be subject to the lien of this
Mortgage, shall immediately upon the acquisition thereof by Mortgagor, and
without further mortgage, conveyance or assignment, become subject to the lien
of this Mortgage as fully as though now owned by Mortgagor and specifically
described herein. Nevertheless, Mortgagor shall take such actions and execute
and deliver such additional instruments as Mortgagee shall reasonably require to
further evidence or confirm the subjection to the lien of this Mortgage of any
such property.
5. Mortgagor shall not sell, rent, convey, assign or transfer the
Mortgaged Property or any part or interest therein without the prior written
consent of Mortgagee, which shall not be unreasonably withheld. Mortgagor shall
not directly or indirectly create or permit to remain, and will promptly
discharge, any mortgage, lien, encumbrance or charge on, pledge of, security
interest in or conditional sale or other title retention agreement with respect
to the Mortgaged Property or any part thereof or the interest of Mortgagor or
Mortgagee therein or any revenues, income or profit or other sums arising from
the Mortgaged Property or any part thereof, (including, without limitation, any
lien, encumbrance or charge arising by operation of law) other than: (i) the
lien of this Mortgage and any other liens or rights of Mortgagee granted in any
of the Loan Documents; (ii) the lien of any lender identified in EXHIBIT A (the
"Senior Lender"); (iii) liens for taxes, assessments and other governmental
charges which are not at the time required to be paid; (iv) liens of mechanics,
materialmen, suppliers or vendors or rights thereto for amounts which at the
time are not required to be paid; and (v) purchase money security interests in
property purchased on credit or with borrowed money and which secures the
repayment of such credit or borrowed money (collectively, the "Permitted
Encumbrances")
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<PAGE> 82
6. This Mortgage is also a security agreement and creates a security
interest in and to the Mortgaged Property to secure payment and performance of
the Obligations. Mortgagor has executed and delivered to Mortgagee a Security
Agreement, dated as of even date herewith. To the extent the Mortgaged Property
is covered by both this Mortgage and said Security Agreement, the provisions of
both shall apply, but in the event of a conflict, the provisions of this
Mortgage shall govern as to all portions of the Mortgage Property as constitutes
real property and fixtures and interests therein, and the provisions of the
Security Agreement shall govern as to all portions of the Mortgaged Property as
constitutes personal property.
7. This Mortgage is intended to be effective under the Uniform
Commercial Code as a financing statement filed as a fixture filing, and, in
compliance therewith, the following information is set forth:
(a) The name and address of the record owner/debtor is:
Wayne R. Hellman
7181 Ober Lane
Chagrin Falls, Ohio 44023
(b) The name and address of the secured party is:
Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
(c) The property covered hereby is described in detail in
EXHIBIT A, attached hereto.
8. Mortgagor hereby authorizes and empowers Mortgagee, at its option,
to do all things authorized or required to be done by Mortgagee, as a mortgagee,
under the laws of the state of Ohio and, if different, the state in which the
Mortgaged Property is located, to protect its interests in the Mortgaged
Property.
9. Nothing contained in this Mortgage shall constitute any request by
Mortgagee, express or implied, for the performance of any labor or services or
the furnishing of any materials or other property in respect of the Mortgaged
Property or any part thereof, or be construed to give Mortgagor any right, power
or authority to contract for or permit the performance of any labor or services
or the furnishing of any materials or other property in such fashion as would
provide the basis for any claim either against Mortgagee or that any lien based
on the performance of such labor or services or the furnishing of any such
materials or other property is prior to the lien of this Mortgage.
Page 3 of 11
<PAGE> 83
10. Without affecting the liability of any other person liable for the
payment of any obligation herein mentioned, and without affecting the lien or
charge of this Mortgage upon any portion of the Mortgaged Property not then or
theretofore released as security for the full amount of all unpaid obligations,
Mortgagee may, from time to time and without notice (a) release any person so
liable; (b) extend the maturity or alter any of the terms of any such
obligation; (c) grant other indulgences; (d) release or reconvey, or cause to be
released or reconveyed at any time at Mortgagee's option any parcel, portion or
all of the Mortgaged Property; (e) take or release any other or additional
security for any obligation herein mentioned; or (f) make compositions or other
arrangements with debtors in relation thereto.
11. Mortgagor shall pay promptly when due, and before penalty or
interest accrue thereon, all taxes, assessments, whether general or special, all
other governmental charges and all public or private utility charges of any kind
whatsoever foreseen or unforeseen, ordinary or extraordinary that now or may at
any time hereafter be assessed, levied or imposed against or with respect to the
Mortgaged Property or any part thereof which, if not paid, may become or be made
a lien on the Mortgaged Property, or any part thereof.
12. Mortgagor shall keep the real and personal property included in the
Mortgaged Property continuously insured with risk and liability insurance in
such amounts as Mortgagee reasonably requires. All insurance shall be obtained
and maintained either by means of policies with generally recognized,
responsible insurance companies. Mortgagor shall furnish Mortgagee with a
certificate of insurance for each policy setting forth the coverage, the limits
of liability, the name of the carrier, the policy number and the expiration
date. Each policy of insurance shall be written so as not to be subject to
cancellation or substantial modification which phrase shall include any
reduction in the scope or limits of coverage upon less than thirty (30) days
advance written notice to Mortgagee. All policies of insurance shall contain
standard mortgage clauses requiring all proceeds resulting from any claim for
loss or damage to be paid to Mortgagee.
13. Mortgagor, at its expense, shall comply with all laws with respect
to the Mortgaged Property, and shall keep (or cause to be kept) the Mortgaged
Property in good order and condition (ordinary wear and tear excepted) and shall
make or cause to be made all necessary or appropriate repairs, replacements and
renewals thereof, interior, exterior, structural and non-structural, ordinary
and extraordinary, foreseen and unforeseen unless Mortgagee otherwise consents
in writing. Mortgagor shall not do, or permit to be done, any act or thing which
might materially impair the value or usefulness of the Mortgaged Property or any
part thereof, shall not commit or permit any waste of the Mortgaged Property or
any part thereof, and shall not permit any unlawful use or occupation of the
Mortgaged Property or any part thereof.
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<PAGE> 84
14. Mortgagor further covenants and agrees with Mortgagee that neither
Mortgagor nor any of its agents, employees, independent contractors, invitees,
licensees, successors, assignees, tenants or subtenants will store, release or
dispose of or permit the storage, release or disposal of any hazardous or toxic
substances or hazardous waste on the Mortgaged Property at any time from and
after the effective date of this Mortgage ("Environmental Issues").
15. Mortgagor will protect, indemnify and save harmless Mortgagee from
and against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, reasonable attorneys'
fees and expenses as may be limited by law or judicial order or decision entered
in any action brought to recover monies under this Section) imposed upon,
incurred by or asserted against Mortgagee by reason of (a) ownership of any
interest in the Mortgaged Property or any part thereof; (b) any accident, injury
to or death of persons or loss of or damage to property occurring on or about
the Mortgaged Property or any part thereof or the adjoining sidewalks, curbs,
vaults and vault space, if any, streets or ways; (c) any use, disuse or
condition of the Mortgaged Property or any part thereof, or the adjoining
sidewalks, curbs, vaults and vault space, if any, streets or ways, including any
Environmental Issues; (d) any failure on the part of Mortgagor to perform or
comply with any of the terms hereof; (e) any necessity to defend any of the
rights, title or interest conveyed by this Mortgage; or (f) the performance of
any labor or services or the furnishing of any materials or other property in
respect of the Mortgaged Property or any part thereof.
16. In case of any damage to or destruction of any buildings, fixtures
or personal property included in the Mortgaged Property, or any part thereof,
Mortgagor will promptly give written notice thereof to Mortgagee generally
describing the nature and extent of such damage or destruction. Any insurance or
other proceeds from any such damage or destruction shall be paid to Mortgagee,
unless Mortgagee otherwise consents in writing to Mortgagor's use of such
proceeds to repair or replace the damaged or destroyed property, which consent
will not be unreasonably withheld.
17. If title to or the temporary use of the Mortgaged Property, or any
part thereof, shall be taken under the exercise of the power of eminent domain
by any governmental body or by any person, firm or corporation acting under any
governmental body or by any person, firm or corporation acting under
governmental authority, Mortgagor will promptly give written notice thereof to
Mortgagee describing the nature and extent of such taking. Any proceeds received
from any award made in such eminent domain proceedings shall be paid to
Mortgagee.
18. If Mortgagor shall fail to make any payment or perform any act
required to be made or performed hereunder or under the Agreement or the Note,
Mortgagee, without notice or demand upon Mortgagor and without waiving or
releasing any obligation or default, may, but shall be under no obligation to,
make such payment or perform such act
Page 5 of 11
<PAGE> 85
for the account and at the expense of Mortgagor and may enter upon the Mortgaged
Property or any part thereof for such purpose and take all such action thereon
as, in its sole opinion, may be necessary or appropriate therefor. All payments
so made by Mortgagee and all costs, fees and expenses incurred in connection
therewith or in connection with the performance by Mortgagee of any such act,
together with interest thereon at eight percent (8%) per annum shall, together
with such interest, be additional indebtedness secured by this Mortgage and
shall be paid by Mortgagor to Mortgagee on demand. In any action brought to
collect such indebtedness, or to foreclose this Mortgage, Mortgagee shall be
entitled to the recovery of such expenses in such action except as limited by
law or judicial order or decision entered in such proceedings.
19. Any default by Mortgagor of any obligation hereunder, any Default
under the Note, and any Event of Default under the Agreement, the Security
Agreement or the Assignment or any default of any of the other Obligations shall
be an "Event of Default" under this Mortgage.
20. If an Event of Default shall have occurred and be continuing,
Mortgagee, at any time, at its election, may exercise any or all or any
combination of the remedies conferred upon or reserved to it under this
Mortgage, the Agreement, the Note, the Security Agreement, the Assignment or any
instrument collateral thereto, or now or hereafter existing at law, or in equity
or by statute. Without limitation, Mortgagee may (a) declare the entire unpaid
principal balance of the Note and all other indebtedness secured hereby
immediately due and payable, without notice or demand, the same being expressly
waived by Mortgagor, subject to any cure periods provided for in the Note for
non-monetary defaults; (b) proceed at law or equity to collect all indebtedness
secured by this Mortgage due hereunder, whether at maturity or by acceleration;
(c) foreclose the lien of this Mortgage as against all or any part of the
Mortgaged Property; and (d) exercise any rights, powers and remedies it may have
as a secured party under the Uniform Commercial Code, or other similar laws in
effect, including, without limitation, the option of proceeding as to both
personal property and fixtures in accordance with Mortgagee's rights with
respect to real property.
21. Mortgagor does hereby waive to the full extent it may lawfully do
so, the benefit of all appraisement, valuation, stay and extension laws now or
hereafter in force and all rights of marshaling of assets in the event of any
sale of the Mortgaged Property, any part thereof or any interest therein and any
court having jurisdiction to foreclose the lien thereof may sell the Mortgaged
Property in part or as an entirety.
22. All amounts (including, without limitation, the proceeds of any
sale of the Mortgaged Property, any part thereof or any interest therein)
received by Mortgagee hereunder shall be applied to amounts due to it from
Mortgagor hereunder and under the Note, the Agreement, the Security Agreement,
the Assignment and the other Obligations, and shall be applied as follows:
Page 6 of 11
<PAGE> 86
First: the payment of all costs incurred in the collection thereof
(including, without limitation, reasonable attorneys' fees and expenses except
as may have been limited by law or by judicial order or decision entered in any
action to foreclose this Mortgage);
Second: the payment of indebtedness secured by this Mortgage owing to
Mortgagee, other than indebtedness with respect to the Note at the time
outstanding; and
Third: the payment to Mortgagee for the payment of all amounts payable
under the Note in the order provided for therein.
23. Each right, power and remedy of Mortgagee, provided for in this
Mortgage, in the Agreement, the Note, the Security Agreement, the Assignment or
now or hereafter existing at law or in equity or by statute or otherwise, shall
be cumulative and concurrent and shall be in addition to every other right,
power or remedy provided for in this Mortgage, in the Agreement, the Note, the
Security Agreement, the Assignment or now or hereafter existing at law or in
equity or by statute or otherwise, and the exercise or beginning of the exercise
or partial exercise by Mortgagee of any one or more of such rights, powers or
remedies shall not preclude the simultaneous or later exercise by Mortgagee of
any or all such other rights, powers or remedies.
24. All rights, powers and remedies provided herein may be exercised
only to the extent that the exercise thereof does not violate any applicable
law, and are intended to be limited to the extent necessary so that they will
not render this Mortgage invalid, unenforceable or not entitled to be recorded,
registered or filed under any applicable law.
25. No failure by Mortgagee to insist upon the strict performance of
any term hereof or to exercise any right, power or remedy consequent upon an
Event of Default, shall constitute a waiver of any such term or of any such
Event of Default. No waiver of any Event of Default shall affect or alter this
Mortgage, which shall continue in full force, and shall not effect a waiver with
respect to any subsequent such Event of Default or to any other then existing or
subsequent breach.
26. In case Mortgagee shall have proceeded to enforce any right, power
or remedy under this Mortgage by foreclosure, entry or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason, or shall
have been determined adversely to Mortgagee, then and in every case Mortgagor
and Mortgagee shall be restored to their former positions and rights hereunder,
and all rights, power and remedies of Mortgagee shall continue as if no such
proceeding had been taken.
27. Mortgagee shall have no liability for any loss, damage, injury,
cost or expense resulting from any act or omission to act by it or its
representatives whether or not negligent, which was taken or omitted pursuant to
this Mortgage.
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<PAGE> 87
28. Without notice to or consent of Mortgagor and without impairment of
the lien and rights created by this Mortgage, Mortgagee may accept from
Mortgagor or from any other person or persons, additional security for the
indebtedness secured by this Mortgage. Neither the giving of this Mortgage nor
the acceptance of any such additional security shall prevent Mortgagee from
resorting first to such additional security or to the security created by this
Mortgage, in either case without affecting the lien hereof and the rights
conferred hereunder.
29. If all sums then due and payable under this Mortgage, the Note and
the Agreement by Mortgagor shall have been paid and Mortgagor shall have
complied with all the terms, conditions and requirements hereof and thereof,
then this Mortgage shall be null and void and of no further force and effect.
Upon the written request and at the expense of Mortgagor, Mortgagee will execute
and deliver such proper instruments of release and discharge as may reasonably
be requested to evidence such defeasance, release and discharge.
30. Mortgagee and its representatives are hereby authorized to enter
upon and inspect the Mortgaged Property at reasonable times, and so long as
Mortgagee does not unreasonably interfere with Mortgagor's use and enjoyment of
the Mortgaged Property.
31. Mortgagor shall, to the extent permitted by law, immediately upon
demand pay or reimburse Mortgagee for all reasonable attorneys' fees, costs and
expenses incurred by Mortgagee in any proceedings involving the estate of a
decedent, an insolvent or a debtor under federal bankruptcy law, or in any
action, proceeding or dispute of any kind in which Mortgagee is made a party, or
appears as an intervener or party plaintiff or defendant, affecting or relating
to the Note, this Mortgage or the Agreement, the Security Agreement, the
Assignment, Mortgagor or any of the Mortgaged Property, including, but not
limited to, the foreclosure of this Mortgage, any condemnation action involving
the Mortgaged Property, or any action to protect the security hereof, and any
such amounts paid by Mortgagee shall, except as may be limited by law or
judicial order or decision entered in any action to foreclose this Mortgage, be
added to the indebtedness secured hereby and secured by the lien and security
interest of this Mortgage and shall bear interest at eight percent (8%) per
annum.
32. It being the desire and intention of the parties hereto that this
Mortgage and the lien created hereby do not merge in fee simple title to the
Mortgaged Property, it is hereby understood and agreed that should Mortgagee
acquire any additional or other interests in or to the Mortgaged Property or the
ownership thereof, then, unless a contrary intent is manifested by Mortgagee as
evidence by an appropriate document duly recorded, this Mortgage and the lien
hereof shall not merge in the fee simple title, toward the end that this
Mortgage may be foreclosed as if owned by a stranger to the fee simple title.
Page 8 of 11
<PAGE> 88
33. This Mortgage shall be deemed to be made under the laws of the
state of Ohio and for all purposes shall be governed by and construed in
accordance with the laws of Ohio without regard to conflict of laws principals
(except to the extent the Mortgaged Property is situated in a state other than
Ohio and in that case any laws of such state which are required to control
mortgages granted on such property shall apply) and shall inure to the benefit
of and be binding upon Mortgagor and his estate, heirs, executors,
administrators and personal representatives, successors and assigns and
Mortgagee and its successors and assigns. If any term or provision of this
Mortgage shall be held to be invalid, illegal or unenforceable, the validity of
the remaining provisions hereof shall in no way be affected thereby. The
captions or headings herein shall be solely for convenience of reference and in
no way define, limit or describe the scope or intent of any provisions or
sections of this Mortgage. This Mortgage may be executed in any number of
counterparts, each of which shall be regarded as an original and all of which
shall constitute but one and the same instrument; it shall not be necessary in
proving this Mortgage to produce or account for more than one such counterpart.
34. This Mortgage may not be effectively amended, changed, modified,
altered or terminated except as provided herein without the prior written
consent of Mortgagor and Mortgagee.
35. All sums payable by Mortgagor hereunder shall be paid without
notice, demand, counterclaims, setoff, deduction or defense, and without
abatement, suspension, deferment, diminution or reduction, and the obligations
and liabilities of Mortgagor hereunder shall in no way be released, discharged
or otherwise affected (except as expressly provided herein) by reason of (a) any
damage to or destruction of or any condemnation or similar taking of the
Mortgaged Property or any part thereof; (b) any restriction or prevention of or
interference with any use of the Mortgaged Property or any part thereof; (d) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to Mortgagor or any action taken
with respect to this Mortgage by any trustee or receiver of Mortgagor, or by any
court in such proceeding; (e) any claim which Mortgagor has or might have
against Mortgagee; (f) any default or failure on the part of Mortgagee to
perform or comply with any of the terms hereof or of any other agreements
pertaining to the loan on the Mortgaged Property with Mortgagor; or (g) any
other occurrence whatsoever, whether similar or dissimilar to the foregoing,
whether or not Mortgagor shall have notice or knowledge of any of the foregoing.
Except as expressly provided herein, Mortgagor waives all rights now or
hereafter conferred by statute or otherwise to any abatement, suspension,
deferment, diminution or reduction of any sum secured hereby and payable by
Mortgagor.
36. All notices, certificates, requests or other communications
hereunder shall be in writing and shall be deemed to be sufficiently given when
mailed by registered or certified mail, postage prepaid, and addressed to the
addresses set forth in the granting clause. Mortgagor and Mortgagee may, by
notice given hereunder, designate any further
Page 9 of 11
<PAGE> 89
or different addresses to which subsequent notices, certificates, requests or
other communications shall be sent.
37. In the event of litigation concerning this document or any related
document(s), all costs, charges and expenses, including reasonable attorneys'
fees, shall be awarded to the prevailing party. As used herein and all related
loan documents, attorneys' fees shall include, but not be limited to, fees
incurred in all matters of collection
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Page 10 of 11
<PAGE> 90
and enforcement, construction and interpretation, before, during or after trial,
proceedings and appeals, as well as appearances connected with bankruptcy
proceedings.
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage as of the date
written below.
Signed and Acknowledged
in the Presence of: MORTGAGOR:
- - ------------------------------ --------------------------------
WAYNE R. HELLMAN
______________________________ Date:____________________________
I hereby release all of my dower rights in the Mortgaged Property.
Signed and Acknowledged
in the Presence of:
- - ------------------------------ --------------------------------
DIANE HELLMAN
______________________________ Date:____________________________
STATE OF OHIO )
) SS:
COUNTY OF CUYAHOGA )
The foregoing instrument was executed before me this ____ day of
February, 1999, by Wayne R. Hellman and Diane Hellman who are personally known
to me and who did swear that the same was done of their own free will.
-------------------------------
Notary Public
Prepared by:
Jay R. Faeges, Esq.
Goodman Weiss Miller LLP
100 Erieview Plaza, 27th Floor
Cleveland, Ohio 44114
(216) 696-3366
Page 11 of 11
<PAGE> 91
EXHIBIT A - MORTGAGED PROPERTY
REAL ESTATE MORTGAGE
WAYNE R. HELLMAN / ADVANCED LIGHTING TECHNOLOGIES, INC.
PROPERTY ADDRESS: 740 Hardwick Drive
Aurora, Ohio 44202
PARCEL NUMBER: 03-016-00-00-239-000
SENIOR LENDER: Merrill Lynch Credit Corporation
LEGAL DESCRIPTION: Sublot No. 195 in Barrington Subdivision
No. 2 being part of original Aurora
Township Lot Nos. 8, 9, 15 and 16 as
shown by the recorded Plat 94-74 of
Portage County Records (the "Sublot" or
"Sublots"), together with all rights
granted by the Master Declaration of
Covenants, Conditions, Easements and
Restrictions of Barrington, Aurora, Ohio
recorded in Volume 1116, Pages 538
through 600 of Portage County Records.
<PAGE> 92
ALLONGE NO. 2
to
PROMISSORY NOTE
by and between
24 KARAT STREET, INC. AND WAYNE R. HELLMAN
This ALLONGE NO. 2 shall be so firmly affixed to the Promissory Note as
to become a part hereof. The Promissory Note is that certain Note dated May 19,
1997, issued by 24 KARAT STREET, INC. ("Maker") to WAYNE R. HELLMAN in the
principal amount of $350,000, as amended by ALLONGE NO. 1, dated September 2,
1998.
The Promissory Note is hereby amended as follows:
The Promissory Note and all rights and benefits of Wayne R. Hellman
thereunder are hereby assigned to Advanced Lighting Technologies, Inc.
in accordance with the Collateral Assignment of Contract entered into
by Wayne R. Hellman for the benefit of Advanced Lighting Technologies,
Inc., dated October 8, 1998.
Except as amended hereby, the Promissory Note is in full force and
effect.
IN WITNESS WHEREOF, the Maker has executed and delivered this ALLONGE
NO. 2 to Wayne R. Hellman and Advanced Lighting Technologies, Inc. as of the
date written below.
WITNESSES:
24 KARAT STREET, INC.
- - -------------------------
By:________________________
- - -------------------------
Its:________________________
Date:______________________
- - -------------------------
- - -------------------------
<PAGE> 93
Standard Form Florida UCC-1
Financing Statement with Exhibit 1 Attached
<PAGE> 94
EXHIBIT 1
to Florida UCC-1 Financing Statement
I. All personal property now owned or hereinafter acquired
including, but not limited to, stocks; bonds and other
securities; investment property; contract rights; furniture;
furnishings; chattel papers; deposit accounts; documents;
choses in action; money; instruments; goods (whether covered
by a certificate of title or not); general intangibles;
foreign currency; letters of credit and advices of credit; and
II. A 1997 Regal pleasure boat, Registration Number FL1982KB, Hull
Identification Number RGMPA012G697 and all engines, fixtures
and chattels now or hereafter attached thereto or found
thereon; and
III. With respect to all of the foregoing, all (i) privileges and
appurtenances thereto, (ii) renewals or replacement thereof or
articles in substitution therefor, (iii) proceeds of any of
the foregoing or from any insurance payable with respect
thereto (from whatever source), or payments from any taking
under power of eminent domain of all or any portion thereof,
and (iv) all rents, issues, profits or other amounts due to
Debtor in respect thereof; and
IV. Notwithstanding the foregoing, this UCC Financing Statement
does not cover any stocks, bonds or other securities held by
Debtor in Advanced Lighting Technologies, Inc. nor any
membership interest in Hellman, Ltd.
<PAGE> 95
Standard Form Ohio UCC-1
Financing Statement with Exhibit 1 Attached
<PAGE> 96
EXHIBIT 1
to Ohio UCC-1 Financing Statement
I. All personal property now owned or hereinafter acquired
including, but not limited to, stocks; bonds and other
securities; investment property; contract rights; furniture;
furnishings; chattel papers; deposit accounts; documents;
choses in action; money; instruments; goods (whether covered
by a certificate of title or not); general intangibles;
foreign currency; letters of credit and advices of credit; and
II. A 1997 Regal pleasure boat, Registration Number FL1982KB, Hull
Identification Number RGMPA012G697 and all engines, fixtures
and chattels now or hereafter attached thereto or found
thereon; and
III. With respect to all of the foregoing, all (i) privileges and
appurtenances thereto, (ii) renewals or replacement thereof or
articles in substitution therefor, (iii) proceeds of any of
the foregoing or from any insurance payable with respect
thereto (from whatever source), or payments from any taking
under power of eminent domain of all or any portion thereof,
and (iv) all rents, issues, profits or other amounts due to
Debtor in respect thereof; and
IV. Notwithstanding the foregoing, this UCC Financing Statement
does not cover any stocks, bonds or other securities held by
Debtor in Advanced Lighting Technologies, Inc. nor any
membership interest in Hellman, Ltd.
<PAGE> 97
SCHEDULE 2.2(f)
LOAN AGREEMENT
WAYNE R. HELLMAN / ADVANCED LIGHTING TECHNOLOGIES, INC.
1. Key Bank National Association - Senior Lender on property
located at 7181 Ober Lane, Chagrin Falls, Ohio 44023-1125.
2. First Union National Bank of Florida - Senior Lender on
property located at 27261 Hidden River Court, Bonita Springs,
Florida 34134-2638.
3. Merrill Lynch Credit Corporation - Senior Lender on property
located at 735 Hardwick Drive and 740 Hardwick Drive, Aurora,
Ohio 44202.
<PAGE> 98
SCHEDULE 2.2(j)
LOAN AGREEMENT
WAYNE R. HELLMAN / ADVANCED LIGHTING TECHNOLOGIES, INC.
1. Key Bank National Association - Senor Lender on property
located at 7181 Ober Lane, Chagrin Falls, Ohio 44023-1125.
2. First Union National Bank of Florida - Senior Lender on
property located at 27261 Hidden River Court, Bonita Springs,
Florida 34134-2638.
3. Merrill Lynch Credit Corporation - Senior Lender on property
located at 735 Hardwick Drive and 740 Hardwick Drive, Aurora,
Ohio 44202.
<PAGE> 99
EXHIBIT 2.2-l - MARGIN LOAN
LOAN AGREEMENT
WAYNE R. HELLMAN / ADVANCED LIGHTING TECHNOLOGIES, INC.
Amount Currently Owed by Borrower on Margin Loan $15,049,195
Current Amount of Margin Deficit $8,327,313
Collateral Securing the Margin Loan, including Margin Shares $10,008,716
<PAGE> 100
EXHIBIT 2.2-m
LOAN AGREEMENT
WAYNE R. HELLMAN / ADVANCED LIGHTING TECHNOLOGIES, INC.
Stocks, bonds or other securities of Advanced Lighting Technologies,
Inc. held by Hellman, Ltd. or in trust for the benefit of Borrower=s
children.
<PAGE> 1
EXHIBIT 10.2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND SUCH LAWS AND
THE RESPECTIVE RULES AND REGULATIONS THEREUNDER.
SECURED PROMISSORY NOTE
$9,000,000 October 8, 1998
FOR VALUE RECEIVED, WAYNE R. HELLMAN, an individual residing at 7181
Ober Lane, Chagrin Falls, Ohio 44023 ("Maker") promises to pay to the order of
ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio corporation with its offices at
2307 East Aurora Road, Suite One, Twinsburg, Ohio 44087 ("Payee") the principal
sum of Nine Million Dollars ($9,000,000), plus interest (calculated on the basis
of a 365 day year) on the principal outstanding from time to time at eight
percent (8%) per annum. Maker acknowledges and agrees that Payee has paid the
proceeds of the Loan directly to Prudential Securities Incorporated pursuant to
the wire instructions attached hereto as EXHIBIT A, on Maker=s behalf, in
payment of amounts due under the Margin Loan (as defined in the Loan Agreement
of even date herewith by and between Maker and Payee (the "Loan Agreement"))
(the Loan Agreement is by this reference incorporated herein; any initially
capitalized term used but not herein defined shall have the meaning ascribed to
it in the Loan Agreement).
1. MATURITY. All unpaid principal hereunder and all accrued but unpaid
interest thereon shall be due in full at October 6, 1999.
2. ORDER OF PAYMENT; PREPAYMENT. Each payment (and any prepayments) by
Maker to Payee hereunder shall be applied first to the costs of collection, if
any, second to accrued but unpaid interest and third to principal, regardless of
whether Maker designates a payment otherwise. Maker may, at any time he is not
in Default, prepay this Note, in whole or in part, from time to time, without
premium or penalty.
3. PAYMENTS. Payments hereunder shall be made at Payee's address set
forth above, or at such other address as Payee may direct.
4. SECURITY DOCUMENTS. This Note is secured by the Collateral pursuant
to the the terms and conditions set forth in the Security Documents and the
other Loan
$9,000,000 Secured Promissory Note
Maker -- Wayne R. Hellman
Page 1 of 4
<PAGE> 2
Documents, and all of the terms and provisions thereof are by this reference
incorporated herein.
5. DEFAULT. Upon: (A) any Event of Default (as defined in the Loan
Agreement); (including the failure to pay any amount when due) after any
applicable cure period has passed; or (B) Maker no longer being employed by
Payee for any reason (any such event in (A) or (B) being a "Default"), the
unpaid principal of the Loan and the accrued but unpaid interest thereon, shall
automatically become immediately due and payable.
6. DEFAULT INTEREST. Any and all amounts owed by Maker to Payee under
the terms of this Note which are not paid when due (whether by reason of
acceleration or otherwise) shall bear interest at eighteen percent (18%) per
annum or, if less, the highest legal rate, until all of such sums are paid in
full.
7. SETOFF. Maker agrees that, in addition to, and without limitation
of, any right of setoff or counterclaim which Payee may otherwise have against
Maker, upon any Default Payee shall be entitled, at its option, to setoff
amounts owed by it to Maker or amounts held by it for the account of Maker,
against any principal, interest or other amounts owing from Maker to Payee
hereunder or under the other Loan Documents,
8. MAKER'S WAIVER. Maker waives demand, presentment for payment, notice
of dishonor, protest, notice of protest, diligence in collection, bringing suit
in connection with the delivery, acceptance, performance, default or enforcement
of this Note and any homestead exemption. Maker agrees that Payee may extend the
time for payment, accept partial payments, or exchange or release any Collateral
securing the Loan, without discharging or releasing Maker.
9. COLLECTION COSTS. Upon any Default, if this Note is placed by Payee
in the hands of any attorney for collection, through legal proceedings or
otherwise, Maker agrees to pay reasonable attorneys' fees to the holder hereof
together with reasonable costs and expenses of collection, including, without
limitation, any such attorneys' fees, costs and expenses relating to any
proceedings with respect to the bankruptcy, insolvency, or readjustment of debt
of Maker. All such amounts shall be added to principal as they are incurred.
10. AMENDMENT; WAIVER. This Note may not be amended or modified in any
manner except by written instrument executed by Payee and Maker. No delay or
omission on the part of Payee in exercising any right hereunder shall operate as
a waiver of such right or of any such other right, nor shall any such delay or
omission be deemed to bar any right hereunder on any future occasion.
11. SUCCESSORS. Any reference herein to Payee shall be a reference to
Payee and any subsequent holder of this Note. This Note shall be binding upon
Maker, his heirs,
$9,000,000 Secured Promissory Note
Maker -- Wayne R. Hellman
Page 2 of 4
<PAGE> 3
estate, executors, administrators and personal representatives, and shall
benefit Payee and its successors and assigns, and any subsequent holder of this
Note.
12. GENERAL. This Note shall be governed by, and construed and enforced
in accordance with, the laws of the State of Ohio, without regard to any
conflicts or choice of law rules, and shall be construed and interpreted without
any presumption or construction against the party causing this Note to be
drafted.
IN WITNESS WHEREOF, Maker has duly executed this Note on the date first
above written.
MAKER
/s/ WAYNE R. HELLMAN
------------------------------
Wayne R. Hellman
$9,000,000 Secured Promissory Note
Maker -- Wayne R. Hellman
Page 3 of 4
<PAGE> 4
EXHIBIT A
ROETZEL ANDRESS
One Cleveland Center, Suite 1650
1375 E. 9th Street
Cleveland, Ohio 44114
(216) 623-0150
Fax (216) 623-0134
October 7, 1998
Jay R. Faeges, Esq.
Goodman Weiss Miller, LLP
100 Erieview Plaza, 27th Floor
Cleveland, Ohio 44114
RE: Wayne R. Hellman and Advanced Lighting Technologies, Inc.
Dear Jay:
Pursuant to your request, please be advised that as of the close of
business on October 6, the actual debit balance in Wayne R. Hellman's account at
Prudential Securities, Inc. was $15,049,195.00 and that the margin call was
$8,327,313.00. Please be advised that the amount of the debit balance and the
margin call will be affected by the day-to-day fluctuations in the stock price.
The money should be sent to the following by wire transfer:
Chase Manhattan Bank (Chase NYC)
ABA # 021000021
Account 066296390
Further credit to Wayne R. Hellman and
Prudential Securities Account Number JTW-001475
Sincerely,
ROETZEL & ANDRESS
/s/ Donald S. Scherzer/ajl
--------------------------
Donald S. Scherzer
DSS:ajl/16274_1
cc: Mr. Wayne R. Hellman
Gerald W. Cowden, Esq.
VIA FACSIMILE (216-363-5844)
- - ---------------------------
<PAGE> 1
EXHIBIT 10.3
ADVANCED LIGHTING TECHNOLOGIES, INC.
32000 AURORA ROAD
SOLON, OHIO 44139
Dated as of December 22, 1998
To the Administrative Agent
and each of the Lenders party to
the Credit Agreement
referred to below
RE: CREDIT AGREEMENT, DATED AS OF JANUARY 2, 1998,
WITH ADVANCED LIGHTING TECHNOLOGIES, INC.
Ladies and Gentlemen:
Referring to (i) the Credit Agreement, dated as of January 2, 1998, as
amended (the "CREDIT AGREEMENT"; with the terms defined therein being used
herein with the same meanings unless otherwise defined herein), among Advanced
Lighting Technologies, Inc., an Ohio corporation (the "BORROWER"), the Lenders
named therein (the "LENDERS"), and National City Bank, as Administrative Agent
(the "ADMINISTRATIVE AGENT") for the Lenders thereunder, and (ii) the Borrower's
request made December 18, 1998, for a temporary amendment to sections 9.7, 9.8
and 9.11 of the Credit Agreement, this letter will confirm that during the
period (the "TEMPORARY AMENDMENT PERIOD") from the date hereof through the
earlier of (1) February 14, 1999, and (2) the effective date of any amendment of
the Credit Agreement which may be entered into by the parties hereto subsequent
to the date hereof in accordance with section 13.12 of the Credit Agreement, the
Credit Agreement is hereby amended to reflect the following:
1. The maximum ratio of Total Indebtedness to EBITDA, as
referred to in section 9.7(a) of the Credit Agreement, shall be 7.50 to
1.00.
2. The maximum ratio of Total Adjusted Senior Secured
Indebtedness to EBITDA, as referred to in section 9.7(b) of the Credit
Agreement, shall be 2.50 to 1.00.
3. The minimum Interest Coverage Ratio, as referred to in
section 9.8 of the Credit Agreement, shall be 2.00 to 1.00.
4. The minimum Consolidated Tangible Net Worth, as referred to
in section 9.11 of the Credit Agreement, shall be $65,000,000.
5. The computations of the covenants referred to in the
preceding paragraphs 1, 2 and 3 shall be made after excluding special
charges for the fiscal quarter ended December 31, 1998 in an amount not
to exceed $21,000,000. The computations of the covenants referred to in
the preceding paragraphs 1, 2, 3 and 4 shall be made after excluding a
charge made in or for such fiscal
<PAGE> 2
quarter related to discontinued operations in an amount not to exceed
$3,000,000. In determining compliance with the covenant referred to in
paragraph 4 above, there shall be no deduction from Consolidated
Tangible Net Worth in respect of a promissory note in the original
principal amount of $9,000,000 issued by Wayne Hellman to the
Borrower.
After the expiration of the Temporary Amendment Period, the amendments to the
Credit Agreement set forth in paragraphs 1 through 5 above shall have no further
force or effect, and the Credit Agreement shall remain in full force and effect
without regard to any changes or modifications thereto effected pursuant to the
above paragraphs 1 through 5 of this letter.
Notwithstanding anything to the contrary contained in section 2.7(g) of
the Credit Agreement, effective on December 22, 1998 and continuing thereafter
until changed by the Borrower, all of the Lenders and the Administrative Agent
pursuant to an amendment to the Credit Agreement entered enter into as
contemplated by section 13.12 of the Credit Agreement, as to all Loans then or
thereafter outstanding, the Applicable Prime Rate Margin will be 50 basis points
per annum and the Applicable Eurocurrency Margin will be 300 basis points per
annum.
Notwithstanding anything to the contrary contained in the Credit
Agreement, effective on December 22, 1998 and continuing thereafter until
changed by the Borrower, all of the Lenders and the Administrative Agent
pursuant to an amendment to the Credit Agreement entered enter into as
contemplated by section 13.12 of the Credit Agreement, no additional Borrowings
may be incurred, or Letters of Credit issued or increased in amount, if after
giving effect thereto the sum of (x) the aggregate principal amount of all
outstanding Loans, and (y) the Letter of Credit Outstandings, would exceed
$55,000,000.
The Borrower hereby confirms that the Lenders and the Administrative
Agent have made no promises or other undertakings, written or oral, to enter
into any amendment or other modification of the Credit Agreement, except (if
this letter becomes effective as provided below) for the specific amendments set
forth in this letter.
This letter may be executed in multiple counterparts, and by different
parties on separate counterparts, each of which shall be an original and all of
which collectively shall constitute one and the same agreement.
If you are in agreement with the foregoing, please sign a counterpart
of this letter and return it to the Administrative Agent. Upon receipt by the
Administrative Agent of (i) a counterpart of this letter manually signed by the
Borrower, and original or facsimile counterparts of this letter signed by all of
the Lenders and the Administrative Agent, and (ii) payment by the Borrower to
the Administrative Agent of a nonrefundable amendment fee of $75,000, for prompt
distribution PRO RATA to the Lenders in proportion to their Commitments, this
letter shall become effective and shall constitute a binding obligation of the
Borrower, the Lenders and the Administrative Agent.
Very truly yours,
ADVANCED LIGHTING TECHNOLOGIES, INC.
By: /s/ Nicholas R. Sucic
---------------------------
Nicholas R. Sucic
Chief Financial Officer
2
<PAGE> 3
Accepted and Agreed:
NATIONAL CITY BANK, NBD BANK
individually and as Administrative Agent
By:/s/ By: /s/
------------------------------------ ---------------------------
Senior Vice President Title:
PNC BANK, NATIONAL ASSOCIATION NATIONAL BANK OF CANADA,
a Canadian Chartered Bank,
Cleveland Representative Office
By:/s/ By: /s/
------------------------------------ ---------------------------
Title Title:
3
<PAGE> 1
EXHIBIT 10.4
------------
CONFIDENTIAL
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
-----------------------------------------
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT is entered into as of
and is effective as of October 8, 1998, between ADVANCED LIGHTING TECHNOLOGIES,
INC., an Ohio corporation (the "Corporation" or "Advanced Lighting"), and WAYNE
R. HELLMAN ("Hellman").
WITNESSETH:
WHEREAS, Hellman and Advanced Lighting entered into an Employment
Agreement dated October 6, 1995 (the "Original Employment Agreement");
WHEREAS, since the date of the Original Employment Agreement, Hellman
has served as the Chief Executive Officer, Chairman of the Board and President
of Advanced Lighting;
WHEREAS, the Board of Directors, in recognition of the importance of
Hellman's continued and undistracted leadership to the future of the
Corporation, has authorized a loan to Hellman in the amount of $9,000,000, which
requires that Hellman extend the terms of the Original Employment Agreement for
an additional five (5) year term;
WHEREAS, in connection with the ADLT Loan, Advanced Lighting and
Hellman desire to enter into this Amended and Restated Employment Agreement to
ensure Advanced Lighting of the services of Hellman as Chief Executive Officer,
Chairman of the Board and President, and to set forth the rights and duties of
the parties hereto.
<PAGE> 2
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:
Page 2 of 11
<PAGE> 3
1. EMPLOYMENT.
(a) Advanced Lighting hereby employs Hellman, and Hellman hereby
accepts employment, upon the terms and conditions hereinafter
set forth.
(b) During the term of this Employment Agreement, (for purposes
hereof, all references to the term of this Employment
Agreement shall be deemed to include all renewals or
extensions hereof, if any), Hellman shall devote his full-time
and best efforts to his employment and shall perform
diligently such duties as are, or may be, required by the
board of directors of Advanced Lighting (the "Board") within
the bounds of reasonableness and acceptable business standards
and ethics.
(c) During the term of this Employment Agreement, Hellman shall
not, without the prior written consent of the Board, directly
or indirectly, render services of a business, professional or
commercial nature to any other person or firm, whether for
compensation or otherwise, other than in the performance of
duties naturally inherent in the businesses of Advanced
Lighting or any subsidiary of Advanced Lighting.
2. TERM AND POSITION.
(a) Subject to the termination provisions contained herein, the
term of this Employment Agreement shall commence as of January
1, 1996 and shall continue for a term of eight (8) years from
such date.
(b) Hellman shall serve as President and Chief Executive Officer
of Advanced Lighting, and in such substitute or further
offices or positions with Advanced Lighting as shall be
assigned by the Board, without, however, any change in
Hellman's compensation
Page 3 of 11
<PAGE> 4
(but such substitute or further offices or positions shall
be consistent with the office and position of President and
Chief Executive Officer).
3. COMPENSATION.
(a) Subject to the provisions of this Employment Agreement, for
all services which Hellman may render to Advanced Lighting
during the term of this Employment Agreement and ending on the
last day of Advanced Lighting's fiscal year during which the
term of this Employment Agreement began, Hellman shall receive
a salary at the rate of One Hundred Ninety-Five Thousand
Dollars ($195,000.00) per annum, payable in equal, consecutive
biweekly installments.
(b) Provided that Hellman has satisfactorily performed his
services under this Employment Agreement, Hellman shall be
entitled to salary increases from time to time as determined
by the Compensation Committee of Advanced Lighting.
(c) Provided that Hellman has satisfactorily performed his
services under this Employment Agreement, Hellman shall be
entitled to annual bonuses from time to time as determined by
the Compensation Committee of Advanced Lighting.
4. OTHER BENEFITS.
During the term of this Employment Agreement, Hellman shall be entitled
to such vacation privileges, medical reimbursement and hospitalization benefits,
split dollar insurance and such other employment benefits Hellman currently
receives from the Company or any of its affiliates from time to time.
Page 4 of 11
<PAGE> 5
5. TERMINATION AND FURTHER COMPENSATION.
(a) The employment of Hellman under this Employment Agreement, for
the term thereof, may be terminated by Advanced Lighting for
cause at any time by action of the Board. For purposes hereof,
the term "cause" shall mean:
(i) Hellman's fraud, dishonesty, willful misconduct,
moral turpitude or gross negligence in the
performance of his duties hereunder; or
(ii) Hellman's material breach of any provision of this
Employment Agreement.
Any termination by reason of the foregoing shall not be in limitation of any
other right or remedy Advanced Lighting may have under this Employment Agreement
or otherwise.
(b) In the event of (i) termination of this Employment Agreement
for any of the reasons set forth in Subparagraph (a) of this
Paragraph 5, Hellman shall be entitled to no further salary,
bonus or other benefits under this Employment Agreement,
except as to that portion of any unpaid salary and other
benefits accrued and earned by him hereunder up to and
including the effective date of such termination.
(c) In the event of Hellman's death or permanent disability (as
defined herein below) occurring during the term of this
Employment Agreement, this Employment Agreement shall be
deemed terminated and Hellman or his estate, as the case may
be, shall be entitled to no further salary or other
compensation provided for herein except as to that portion of
any unpaid salary accrued or earned by Hellman hereunder up to
and including the date of death or disability, and any
benefits under any insurance policies or other plans.
(d) Permanent disability means the inability of Hellman to perform
satisfactorily his usual or customary occupation for a period
of one hundred twenty (120) days in the
Page 5 of 11
<PAGE> 6
aggregate out of one hundred fifty (150) consecutive days as
a result of a physical or mental illness or other
disability, which, in the written opinion of a physician
resident in Ohio of recognized ability and reputation
selected by Advanced Lighting, is likely to continue for a
significant period of time.
6. RENEWAL.
Not later than six (6) months prior to the termination of this
Agreement, Advanced Lighting shall be entitled to notify Hellman whether it
desires to renew this Employment Agreement with Hellman for an additional period
of three (3) years, which notice, if given, shall contain the compensation and
other benefits proposed to be paid and provided to Hellman by Advanced Lighting.
For a period of thirty (30) days after receipt of such notice, Hellman shall
have the option to accept such offer of renewal or, in the alternative, shall be
entitled to consult with Advanced Lighting with respect to different
compensation and/or benefits to be paid and provided to Hellman by Advanced
Lighting during said renewal period of employment. If at the end of said thirty
(30) day period Hellman and Advanced Lighting are unable to agree, then this
Employment Agreement shall not be renewed at the end of the term thereof, unless
otherwise agreed to by the parties. In the event, however, that Advanced
Lighting does not timely notify Hellman of its desire to renew this Employment
Agreement, then this Employment Agreement shall not be renewed at the end of the
term thereof, unless otherwise agreed upon by the parties.
7. REIMBURSEMENT.
Advanced Lighting shall reimburse Hellman during the term of this
Employment Agreement for travel, entertainment and other expenses reasonably and
necessarily incurred by Hellman in the promotion of Advanced Lighting's
business.
Page 6 of 11
<PAGE> 7
8. COVENANTS REGARDING NONCOMPETITION AND CONFIDENTIAL INFORMATION.
(a) Hellman agrees during the term of this Employment Agreement
and for a period of two (2) years thereafter he will not,
directly or indirectly, do or suffer any of the following:
(i) Own, manage, control or participate in the
ownership, management, or control of, or be
employed or engaged by or otherwise affiliated or
associated as a consultant, independent contractor
or otherwise with any business of the type and
character of or in competition with the business
carried on by Advanced Lighting (as conducted on
the date Hellman ceases to be employed by Advanced
Lighting in any capacity) or its affiliates;
provided, however, that the ownership of not more
than one percent (1%) of the stock of any publicly
traded corporation shall not be deemed a violation
of this covenant;
(ii) Employ, assist in employing, or otherwise
associate in business with any present or former
or future employee, officer or agent of Advanced
Lighting or its affiliates;
(iii) Induce any person who is an employee, officer or
agent of Advanced Lighting or its affiliates to
terminate said relationship;
(iv) Disclose, divulge, discuss, copy or otherwise use
or suffer to be used in any manner, in competition
with, or contrary to the interests of Advanced
Lighting or its affiliates, the customer lists,
manufacturing methods, product research or
engineering data or other trade secrets of
Advanced Lighting or its affiliates, it being
acknowledged by Hellman that all such information
regarding the business of Advanced Lighting or its
affiliates developed,
Page 7 of 11
<PAGE> 8
compiled or obtained by, or furnished to, Hellman while
Hellman shall have been employed by or associated with
Advanced Lighting or its affiliates is confidential
information and Advanced Lighting's or its affiliates'
exclusive property.
(b) Hellman expressly agrees and understands that the remedy at
law for any breach by him of this Paragraph 8 will be
inadequate and that the damages flowing from such breach are
not readily susceptible to being measured in monetary terms.
Accordingly, it is acknowledged that upon adequate proof of
Hellman's violation of any legally enforceable provision of
this Paragraph 8, Advanced Lighting shall be entitled to
immediate injunctive relief and may obtain a temporary order
restraining any threatened or further breach. Nothing in
this Paragraph 8 shall be deemed to limit Advanced
Lighting's remedies at law or in equity for any breach by
Hellman of any of the provisions of this Paragraph 8 which
may be pursued or availed of by Advanced Lighting.
(c) In the event Hellman shall violate any legally enforceable
provision of this Paragraph 8 as to which there is a
specific time period during which he is prohibited from
taking certain actions or from engaging in certain
activities as set forth in such provision then, in such
event, such violation shall toll the running of such time
period from the date of such violation until such violation
shall cease.
9. SEVERABLE PROVISIONS.
The provisions of this Employment Agreement are severable and if any
one or more provisions may be determined to be illegal or otherwise
unenforceable, in whole or in part, the
Page 8 of 11
<PAGE> 9
remaining provisions and any partially unenforceable provision to the extent
enforceable in any jurisdiction shall, nevertheless, be binding and enforceable.
10. BINDING AGREEMENT.
The rights and obligations of Advanced Lighting under this Employment
Agreement shall inure to the benefit of, and shall be binding upon, Advanced
Lighting and its successors and assigns, and the rights and obligations of
Hellman under this Employment Agreement shall inure to the benefit of, and shall
be binding upon, Hellman and his heirs, personal representatives and estate
except as otherwise provided herein.
11. ARBITRATION.
Any controversy or claim arising out of or relating to this Employment
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Rules of the American Arbitration Association then pertaining in the
City of Cleveland, Ohio, and judgment upon the award rendered by the Arbitrator
or Arbitrators may be entered in any court having jurisdiction thereof. The
Arbitrator or Arbitrators shall be deemed to possess the powers to issue
mandatory orders and restraining orders in connection with such arbitration;
provided, however, that nothing in this Paragraph 11 shall be construed so as to
deny Advanced Lighting the right and power to seek and obtain injunctive relief
in a court of equity for any breach or threatened breach of Hellman of any of
his covenants contained in Subparagraph (a) of Paragraph 8 hereof.
12. NOTICES.
Any Notice to be given under this Employment Agreement shall be
personally delivered in writing or shall have been deemed duly given when
received after it is posted in the United States mails, postage prepaid,
registered or certified, return receipt requested, and if mailed to Advanced
Lighting, shall be addressed to its principal place of business, Attention:
Louis S. Fisi, and if mailed
Page 9 of 11
<PAGE> 10
to Hellman, shall be addressed to Hellman at his home address last known on the
records of Advanced Lighting, or at such other address or addresses as either
Advanced Lighting or Hellman may hereafter designate in writing to the other.
13. WAIVER.
The failure of either party to enforce any provision or provisions of
this Employment Agreement shall not in any way be construed as a waiver of any
such provision or provisions as to any future violations thereof, nor prevent
that party thereafter from enforcing each and every other provision of this
Employment Agreement. The rights granted the parties herein are cumulative and
the waiver of any single remedy shall not constitute a waiver of such party's
right to assert all other legal remedies available to it under the
circumstances.
13. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the parties hereto
and supersedes all prior agreements and understandings between the parties. This
Agreement may not be modified or terminated orally. No modification, termination
or attempted waiver shall be valid unless in writing and signed by the party
against whom the same it is sought to be enforced.
15. GOVERNING LAW.
This Employment Agreement shall be governed by and construed according
to the laws of the State of Ohio.
14. BOARD APPROVAL.
Notwithstanding any provision of this Employment Agreement to the
contrary, this Employment Agreement shall not become effective for any purpose
unless and until shall have been approved by the Board at a meeting duly held or
by the Directors' unanimous written consent in lieu of such meeting, which
action shall be considered by the Board within ninety (90) days hereof.
Page 10 of 11
<PAGE> 11
15. CAPTIONS AND PARAGRAPH HEADINGS.
Captions and paragraph headings used herein are for convenience and are
not a part of this Employment Agreement and shall not be used in construing it.
16. MISCELLANEOUS.
Where necessary or appropriate to the meaning hereof, the singular and
plural shall be deemed to include each other, and the masculine feminine and
neuter shall be deemed to include each other.
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Employment Agreement on the day and year first set forth above.
ATTEST: ADVANCED LIGHTING TECHNOLOGIES, INC.
/S/ Nicholas R. Sucic By: /S/ Louis S. Fisi
- - ----------------------------- --------------------------------
Name: Nicholas R. Sucic Name: Louis S. Fisi
-------------------------------
/s/ Rick Barone Its: Executive Vice President
- - ----------------------------- ---------------------------------
Name: Rick Barone
ATTEST:
/s/ Nicholas R. Sucic By: /s/ Wayne R. Hellman
- - ----------------------------- --------------------------------
Name: Nicholas R. Sucic Wayne R. Hellman
/s/ Rick Barone
- - ----------------------------
Name: Rick Barone
Page 11 of 11
<PAGE> 1
ADVANCED LIGHTING TECHNOLOGIES, INC.
EXHIBIT 11 -- STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DOLLAR AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
------------------------- -------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income from continuing operations
attributable to common shareholders $(33,806) $ 3,033 $(33,518) $ 5,821
======== ======== ======== ========
Net income attributable to common
shareholders $(39,972) $ 2,792 $(39,684) $ 5,282
======== ======== ======== ========
Weighted average shares -- Basic:
Outstanding at beginning of period 20,215 16,457 20,190 13,435
Issued pursuant to public offering - - - 2,886
Issued in acquisitions 2 - 1 -
Issued for exercise of stock options - 14 17 22
Issued pursuant to stock purchase plan 5 - 7 -
Issuable in connection with an acquisition - 35 - 35
-------- -------- -------- --------
Weighted average shares -- Basic 20,222 16,506 20,215 16,378
======== ======== ======== ========
Weighted average shares -- Diluted:
Basic from above 20,222 16,506 20,215 16,378
Effect of stock options - 272 - 324
-------- -------- -------- --------
Weighted average shares -- Diluted 20,222 16,778 20,215 16,702
======== ======== ======== ========
Earnings (loss) per share -- Basic
Income from continuing operations $ (1.67) $ .18 $ (1.66) $ .36
Loss from discontinued operations (.31) (.01) (.30) (.04)
-------- -------- -------- --------
Earnings per share -- Basic $ (1.98) $ .17 $ (1.96) $ .32
======== ======== ======== ========
Earnings (loss) per share -- Diluted
Income from continuing operations $ (1.67) $ .18 $ (1.66) $ .35
Loss from discontinued operations (.31) (.01) (.30) (.03)
-------- -------- -------- --------
Earnings per share -- Diluted $ (1.98) $ .17 $ (1.96) $ .32
======== ======== ======== ========
</TABLE>
<PAGE> 1
ADVANCED LIGHTING TECHNOLOGIES, INC.
EXHIBIT 12 -- STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
---------------------------------------
1998 1997
--------------- --------------
<S> <C> <C>
Consolidated pretax income from continuing operations $ (29,734) $ 9,095
Interest expense 6,158 327
Interest portion of rent expense 303 328
--------------- --------------
EARNINGS $ (23,273) $ 9,750
=============== ==============
Interest expense $ 6,158 $ 327
Interest capitalized 458 416
Interest portion of rent expense 303 328
--------------- --------------
FIXED CHARGES $ 6,919 $ 1,071
=============== ==============
RATIO OF EARNINGS TO FIXED CHARGES - 9.1
=============== ==============
</TABLE>
For purposes of calculating the unaudited ratio of earnings to fixed charges,
earnings consist of income (loss) from continuing operations before provision
for income taxes plus fixed charges. Fixed charges consist of interest charges
and amortization of debt issuance costs, whether expensed or capitalized, and
that portion of rental expense that is representative of interest. In the six
months ended December 31, 1998, earnings were inadequate to cover fixed charge
requirements by $30,192.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ADVANCED
LIGHTING TECHNOLOGIES, INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
SIX MONTHS ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 10,656
<SECURITIES> 350
<RECEIVABLES> 36,721
<ALLOWANCES> 553
<INVENTORY> 51,013
<CURRENT-ASSETS> 97,046
<PP&E> 122,618
<DEPRECIATION> 14,494
<TOTAL-ASSETS> 330,096
<CURRENT-LIABILITIES> 43,244
<BONDS> 160,499
0
0
<COMMON> 20
<OTHER-SE> 122,697
<TOTAL-LIABILITY-AND-EQUITY> 330,096
<SALES> 88,302
<TOTAL-REVENUES> 88,302
<CGS> 59,709
<TOTAL-COSTS> 98,691
<OTHER-EXPENSES> 13,292
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (6,158)
<INCOME-PRETAX> (29,734)
<INCOME-TAX> 3,784
<INCOME-CONTINUING> (33,518)
<DISCONTINUED> (6,166)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39,684)
<EPS-PRIMARY> (1.96)
<EPS-DILUTED> (1.96)
</TABLE>
