<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 September 30, 1999
------------------
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 of (I.R.S. Employer Identification No.)
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 20,300,182 shares of the Registrant's Common Stock, $.001 par value
per share, outstanding as of October 31, 1999.
<PAGE> 2
INDEX
ADVANCED LIGHTING TECHNOLOGIES, INC.
PAGE
NO.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
September 30, 1999 and June 30, 1999 .................. 2
Condensed Consolidated Statements of Operations --
Three months ended September 30, 1999 and 1998 ........ 3
Condensed Statement of Consolidated Shareholders' Equity --
Three months ended September 30, 1999.................. 4
Condensed Consolidated Statements of Cash Flows --
Three months ended September 30, 1999 and 1998......... 5
Notes to Condensed Consolidated Financial Statements........ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk...... 27
PART II OTHER INFORMATION
Item 5. Other Information............................................... 28
Item 6. Exhibits and Reports on Form 8-K................................ 29
SIGNATURES.................................................................. 31
EXHIBIT INDEX............................................................... 32
<PAGE> 3
ADVANCED LIGHTING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
SEPTEMBER 30, JUNE 30,
1999 1999
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,259 $ 3,830
Short-term investments - 350
Trade receivables, less allowances of $1,186 and $1,257 29,698 25,485
Receivables from related parties 134 48
Inventories:
Finished goods 23,879 24,275
Raw materials and work-in-process 17,221 16,501
--------- ---------
41,100 40,776
Prepaid expenses 2,476 2,354
--------- ---------
Total current assets 77,667 72,843
Property, plant and equipment:
Land and buildings 38,338 38,364
Production machinery and equipment 54,863 53,508
Other equipment 6,413 6,413
Furniture and fixtures 20,536 20,426
--------- ---------
120,150 118,711
Less accumulated depreciation 18,111 16,263
--------- ---------
102,039 102,448
Receivables from related parties 5,638 5,048
Investments in affiliates 13,498 13,475
Other assets 6,647 6,586
Intangible assets 32,431 32,695
Excess of cost over net assets of businesses acquired, net 51,012 51,411
--------- ---------
$ 288,932 $ 284,506
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt $ 8,536 $ 8,543
Accounts payable 23,415 23,310
Payables to related parties 2,646 1,126
Employee-related liabilities 3,613 3,781
Accrued income and other taxes 988 904
Other accrued expenses 12,732 16,550
--------- ---------
Total current liabilities 51,930 54,214
Long-term debt 158,891 152,496
Other liabilities 427 355
Shareholders' equity
Preferred stock, $.001 par value, 1,000 shares authorized, no shares issued - -
Common stock, $.001 par value, 80,000 shares authorized, 20,297 shares
issued and outstanding as of September 30, 1999 and 20,278 shares issued
and outstanding as of June 30, 1999 20 20
Paid-in-capital 190,799 190,654
Accumulated other comprehensive income (loss) (601) (949)
Loan receivable from officer (8,988) (9,520)
Retained earnings (deficit) (103,546) (102,764)
--------- ---------
77,684 77,441
--------- ---------
$ 288,932 $ 284,506
========= =========
</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
SEPTEMBER 30,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
Net sales $ 56,180 $ 51,287
Costs and expenses:
Cost of sales 34,844 30,904
Marketing and selling 10,175 9,401
Research and development 3,495 3,965
General and administrative 4,035 4,505
Amortization of intangible assets 675 665
-------- --------
Income from operations 2,956 1,847
Other income (expense):
Interest expense (3,790) (2,741)
Interest income 220 238
Income (loss) from equity investments 50 (189)
-------- --------
Loss from continuing operations before income taxes
and cumulative effect of accounting change (564) (845)
Income taxes 218 (174)
-------- --------
Loss from continuing operations before
cumulative effect of accounting change (782) (671)
Reclassification of discontinued operations to continuing operations - 853
Cumulative effect of change in accounting for start-up costs - (2,443)
-------- --------
Net loss $ (782) $ (2,261)
======== ========
Earnings (loss) per share -- basic and diluted:
Loss from continuing operations $ (.04) $ (.03)
Reclassification of discontinued operations to continuing operations - .04
Cumulative effect of accounting change - (.12)
-------- --------
Earnings (loss) per share -- basic and diluted $ (.04) $ (.11)
======== ========
Weighted average shares outstanding:
Basic and diluted 20,284 20,205
======== ========
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE> 5
ADVANCED LIGHTING TECHNOLOGIES, INC.
CONDENSED STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 1999
(in thousands)
<TABLE>
<CAPTION>
ACCUMULATED LOAN
COMMON STOCK COMPREHENSIVE OTHER RECEIVABLE RETAINED
------------------ PAID-IN INCOME COMPREHENSIVE FROM EARNINGS
SHARES PAR VALUE CAPITAL (LOSS) INCOME (LOSS) OFFICER (DEFICIT) TOTAL
------ --------- ------- ------ ------------- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1999 20,278 $ 20 $ 190,654 $ (949) $ (9,520) $(102,764) $ 77,441
Net loss - - (782) - - (782) (782)
Interest on loan to officer (188) (188)
Interest payment received 720 720
Stock issued pursuant to
employee benefit plan 11 - 95 - - - - 95
Stock purchases
by employees 8 - 50 - - - - 50
Other comprehensive
income (loss):
Foreign currency
translation adjustment 348
Other comprehensive ------
income (loss) 348 348 348
------ ---- --------- ------ ------ -------- --------- --------
Comprehensive
income (loss) $ (434)
======
BALANCE AT
SEPTEMBER 30, 1999 20,297 $ 20 $ 190,799 $ (601) $ (8,988) $(103,546) $ 77,684
====== ==== ========= ====== ======== ========= ========
</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>
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (782) $ (2,261)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation 1,849 1,479
Amortization 675 665
Provision for doubtful accounts 24 -
(Income) loss from equity investments (50) 189
Income from discontinued operations - (853)
Cumulative effect of accounting change - 2,443
Changes in operating assets and liabilities:
Trade receivables (4,324) (6,057)
Inventories (324) (5,571)
Prepaids and other assets (784) (447)
Accounts payable and accrued expenses (1,439) (3,773)
Payments related to special charge accruals (792) (529)
Other 978 (378)
-------- --------
Net cash used in operating activities (4,969) (15,093)
INVESTING ACTIVITIES
Capital expenditures (1,440) (9,313)
Sale of short-term investments 350 -
Purchases of businesses - (3,257)
Investments in affiliates - (4,848)
-------- --------
Net cash used in investing activities (1,090) (17,418)
FINANCING ACTIVITIES
Proceeds from revolving credit facility 48,379 88,307
Payments of revolving credit facility (40,716) (54,681)
Proceeds from long-term debt - 868
Payments of long-term debt and capital leases (1,320) (1,447)
Issuance of common stock 145 336
-------- --------
Net cash provided by financing activities 6,488 33,383
-------- --------
Increase in cash and cash equivalents 429 872
Cash and cash equivalents, beginning of period 3,830 22,167
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,259 $ 23,039
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 3,535 $ 4,510
Income taxes paid - 60
Capitalized interest 16 209
Detail of acquisitions:
Assets acquired $ - $ 7,078
Liabilities assumed - (3,756)
-------- --------
Cash paid - 3,322
Less cash acquired - (65)
-------- --------
Net cash paid for acquisition $ - $ 3,257
======== ========
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE> 7
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1999
(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, consisting
of normal recurring accruals. 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, 1999. Operating results for the three
months ended September 30, 1999 are not necessarily indicative of the results
that may be expected for the full-year ending June 30, 2000.
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.
Accounting Change - Cost of Start-Up Activities
During the fourth quarter of fiscal 1999, the Company adopted Statement of
Position ("SOP") 98-5, "Reporting on the Costs of Start-Up Activities,"
effective July 1, 1998. The first quarter of fiscal 1999 has been restated to
reflect the cumulative effect of the accounting change.
New Accounting Standards
The Company has not yet adopted Statement of Financial Accounting Standards
("FAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities."
FAS No. 133 requires that all derivatives, such as interest rate exchange
agreements (swaps), be recognized on the balance sheet at fair value.
Derivatives which are not hedges must be adjusted to fair value through the
results of operations. Derivatives determined to be hedges will be adjusted to
fair value through either the results of operations or other comprehensive
income, depending on the nature of the hedge. The Company is required to adopt
FAS No. 133, as subsequently amended by FAS No. 137, on July 1, 2000. The
impact, if any, on net income, comprehensive income and financial position will
depend on the amount, timing and nature of any agreements entered into by the
Company.
6
<PAGE> 8
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
SEPTEMBER 30, 1999
(Dollar amounts in thousands)
B. BASIS OF PRESENTATION (CONTINUED)
Financial Statement Presentation Changes
Certain amounts for prior periods have been reclassified to conform to the
current period reporting presentation.
C. COMPREHENSIVE INCOME
Statement of Financial Accounting Standards (FAS) No. 130, "Reporting
Comprehensive Income," 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.
For the three months ended September 30, 1999 and 1998, the Company's
comprehensive loss was $(434) and $(1,995), respectively.
D. BANK CREDIT FACILITY
In May 1999, the Company replaced its existing Credit Facility with a $50,000
revolving credit loan and $25,000 term loan provided by several financial
institutions. Subsequent to June 30, 1999 the Company reduced its commitment to
a $60,000 facility. Proceeds from the facility were used to repay the Company's
existing credit facility and certain other long-term debt. The revolving credit
loan has a three-year term expiring in May 2002. Interest rates on revolving
credit loans outstanding are based, at the Company's option, on LIBOR plus 2.75%
or the agent bank's prime rate. Availability of borrowings is determined by the
Company's eligible accounts receivable and inventories. The term loan has a
five-year term expiring in May 2004. The Company pays monthly principal payments
that total $3,576 annually, with the unpaid balance due at maturity. Interest
rates on the term loan are based, at the Company's option, on LIBOR plus 3.25%
or the agent bank's prime rate.
The Bank Credit Facility contains certain affirmative and negative covenants
customary for this type of agreement, prohibits cash dividends, and includes
financial covenants with respect to the coverage of certain fixed charges. The
principal security for the revolving credit loan is substantially all of the
personal property of the Company and each of its North American and United
Kingdom subsidiaries. The term loan is secured by substantially all of the
Company's machinery and equipment and is cross-collateralized and secured with
the revolving credit loan.
7
<PAGE> 9
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
SEPTEMBER 30, 1999
(Dollar amounts in thousands)
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 are redeemable at the Company's option, in whole or in
part, on or after March 15, 2003 at certain preset redemption prices. In
addition, at any time prior to March 15, 2001, the Company may redeem up to 35%
of the aggregate principal amount of the Notes at 108% of par with the proceeds
of one or more public equity offerings. Interest on the Senior Notes is payable
semiannually on March 15 and September 15 of each year beginning on September
15, 1998. There are no sinking fund requirements.
From September 14, 1998, until the 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 Notes 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. SPECIAL CHARGES
At September 30, 1999, the Company had an accrual principally related to the
execution of the Company's fiscal 1999 shift in strategic direction intended to
accelerate and intensify the Company's focus on its metal halide products. The
accrual relates to: 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. All actions required
by the plans are expected to be completed by March 31, 2000. The amounts the
Company will ultimately incur may change as the Company's plans are executed and
actions are completed.
8
<PAGE> 10
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
SEPTEMBER 30, 1999
(Dollar amounts in thousands)
F. SPECIAL CHARGES (CONTINUED)
Details of the activity related to the fiscal 1999 special charges for the three
months ended September 30, 1999 are summarized as follows:
<TABLE>
<CAPTION>
BALANCE AS OF CHARGES BALANCE AS OF
DESCRIPTION CASH/NONCASH JUNE 30, 1999 UTILIZED SEPT. 30, 1999
----------------------------------------- ----------------- ---------------- ------------- ------------------
<S> <C> <C> <C> <C>
Lease/contract cancelations Cash/Noncash $ 3,689 $ 441 $ 3,248
Reduce staffing requirements Cash/Noncash 501 135 366
Severance Cash 180 30 150
Program cancelation Cash 128 78 50
Terminate management benefit program Cash/Noncash 86 - 86
Shut-down costs of facilities Cash 78 53 25
Write-off long-lived assets Cash/Noncash 49 49 -
Other Cash 143 6 137
---------------- ------------- ----------------
$ 4,854 $ 792 $ 4,062
================ ============= ================
</TABLE>
G. DISCONTINUED OPERATIONS SUBSEQUENTLY RETAINED
Microsun Technologies, Inc. ("Microsun") was identified in March 1998 for
disposition through a plan to distribute to ADLT shareholders all of the
ownership of Microsun in a tax-free spin-off transaction estimated to be
completed by December 1998. Because of the deterioration of the capital markets
and the inability to raise capital necessary to spin-off the Microsun business,
the Company concluded that it would wind-down the operations, close the
manufacturing facilities and liquidate the assets of Microsun. At June 30, 1999,
the plan of wind-down had been accomplished, the manufacturing facilities closed
and substantially all assets had been disposed. Accordingly, there were no
remaining discontinued operations accrued losses associated with Microsun at
June 30, 1999.
In October 1999, management decided, with the approval of the Board of
Directors, to retain the Microsun business as part of the Company's continuing
operation. The decision to retain the business was based on management's belief
that, among other reasons, the market demand for Microsun products remains
substantial; the market potential will be expanded as the Microsun portable
lighting fixtures will be marketed and sold along with other existing lines of
products for residential use in an e-commerce format ("Microsun.com"); and the
Microsun business will use the fulfillment capabilities and infrastructure of
existing ADLT businesses.
In accordance with generally accepted accounting principles, the accompanying
financial statements have been reclassified to present Microsun within
continuing operations.
9
<PAGE> 11
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
SEPTEMBER 30, 1999
(Dollar amounts in thousands)
H. RELATED PARTY TRANSACTION
Pursuant to a loan agreement dated October 8, 1998, between the Company and its
Chairman and Chief Executive Officer (the "CEO"), the Company 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.
The CEO has paid accrued interest of $720 on the loan through October 6, 1999.
The principal on the loan was due on October 6, 1999. Members of the Board of
Directors and the CEO are discussing alternative payment terms which will
achieve the Board's original business objectives in making the loan and meet the
Company's current business needs. The Directors and the CEO believe that these
discussions will be completed by January 2000. The Board has informed the CEO
that the Company may require immediate payment during these discussions if the
Company requires the payment to prevent an unacceptable strain on cash
resources.
I. CONTINGENCY
In April and May 1999, three class action suits were filed in the United States
District Court, Northern District of Ohio, by certain alleged shareholders of
the Company on behalf of themselves and purported classes consisting of Company
shareholders, other than the defendants and their affiliates, who purchased
stock during the period from December 30, 1997 through September 30, 1998 or
various portions thereof. A First Amended Class Action Complaint, consolidating
the three lawsuits, was filed on September 30, 1999, and the action is now
pending before a single judge. The named defendants in the case - styled In re
Advanced Lighting Technologies, Inc. Securities Litigation, Master File No.
1:99CV836, pending before the United States District Court, Northern District of
Ohio - are the Company and its Chairman and Chief Executive Officer.
The First Amended Class Action Complaint alleges generally that certain
disclosures attributed to the Company contained misstatements and omissions
alleged to be violations of Section 10(b) of the Securities Exchange Act of 1934
and Rule 10b-5, including claims for "fraud on the market" arising from alleged
misrepresentations and omissions with respect to the Company's
10
<PAGE> 12
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
SEPTEMBER 30, 1999
(Dollar amounts in thousands)
I. CONTINGENCY (CONTINUED)
financial performance and prospects and alleged violations of generally accepted
accounting principles by, among other things, improperly recognizing revenue and
improper inventory accounting. The Complaint seeks certification of the
purported class, unspecified compensatory and punitive damages, pre- and
post-judgment interest and attorneys' fees and costs.
The Company and the CEO believe that these claims lack merit and they intend to
vigorously defend against these actions.
J. SUBSEQUENT EVENT -- GENERAL ELECTRIC COMPANY INVESTMENT
During September 1999, General Electric Company ("GE") executed a definitive
agreement to make an investment in the Company of $20,554. During October 1999,
GE completed the investment in the Company. In exchange for the investment, GE
received 761,250 shares of the Company's newly-created Series A Stock
convertible at any time into 3,045,000 shares of Company Common Stock (subject
to adjustment). GE also received a Warrant (the "Initial Warrant") to purchase
an additional 1,000,000 shares of Company Common Stock (subject to adjustment),
which is immediately exercisable at $.01 per share. GE has been a holder of
535,887 shares of Company Common Stock since the Company's initial public
offering in 1995. The Series A Stock, Common Stock issuable on exercise of the
Initial Warrant, and the Common Stock held by GE represent (after giving effect
to the shares issued on exercise of the Initial Warrant) approximately 18.8% of
the voting power and equity ownership of the Company after the GE investment.
The proceeds of the transaction were applied principally to the reduction of
short-term liabilities and outstanding amounts under the Company's Bank Credit
Facility.
The Series A Stock has a liquidation preference of $27 per share, plus an amount
equal to 8% per annum from the date of issuance to the date of payment
("Liquidation Preference Amount"). The Company is required to redeem any shares
of Series A Stock which have not been converted or retired on September 30,
2010. In addition, GE may, by notice, require the Company to redeem the
outstanding Series A Stock, within one year following either September 30, 2004,
or the occurrence of certain corporate events. If the Company fails to maintain
certain financial ratios, GE will have the right to acquire a combination of
subscription rights to additional shares and proxies with respect to shares
voted by certain officers of the Company, giving GE the ability to obtain the
majority of the voting power of the Company.
11
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
(Dollar amounts in thousands)
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, 1999 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.("DSI"), 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 deposition 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 $31,539 on research and development, representing 7.2% of aggregate
net sales from continuing operations over 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 components and 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 has spent additional amounts for manufacturing
process and efficiency enhancements, which were charged to cost of goods sold
when incurred. The Company expects to continue 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 DSI. 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 systems in the growing metal halide lighting
industry.
12
<PAGE> 14
RECENT DEVELOPMENTS
GENERAL ELECTRIC COMPANY INVESTMENT
On September 28, 1999, General Electric Company ("GE") entered into a definitive
agreement to make an investment in the Company of $20,554. On October 6, 1999,
GE completed the investment in the Company.
The additional capital resources provided by the GE investment are expected to
provide additional flexibility to pursue opportunities in the metal halide
business. In addition, GE and the Company have entered into a five year,
renewable agreement for the supply of metal halide salts to GE. The Company and
GE are in discussions with respect to other supply arrangements. The Company
anticipates that the GE investment and the expansion which it will permit will
result in an expanded supplier-customer relationship with GE, enhancing the
Company's earnings and competitive position in the metal halide marketplace.
The GE investment includes 761,250 shares of the Company's newly-created Series
A Stock convertible at any time into 3,045,000 shares of Company Common Stock
(subject to adjustment). GE also received a Warrant (the "Initial Warrant") to
purchase an additional 1,000,000 shares of Common Stock of the Company (subject
to adjustment), which is immediately exercisable. GE has been a holder of
535,887 shares of Company Common Stock since the Company's initial public
offering in 1995. The Series A Stock, Common Stock issuable on exercise of the
Initial Warrant and the Common Stock held by GE represent (after giving effect
to the shares issued on exercise of the Initial Warrant) approximately 18.8% of
the voting power and equity ownership of the Company. See "Terms of the Series A
Stock" and "Terms of the Initial Warrant." Pursuant to the terms of the Stock
Purchase Agreement, GE is to provide the Company with five nominees as potential
Company's Board of Directors who are not directors, officers, employees or 10%
shareholders of GE. The Company is required to cause the number of such nominees
serving on the Board to be equal to the greater of 20% of the number of members
of the Board or the number of members which most nearly corresponds to GE's
percentage ownership interest in the Company.
The proceeds of the GE transaction have been applied principally to the
reduction of short-term liabilities and outstanding amounts under the Company's
Credit Facility, and have the effect of increasing available borrowings under
the Company's Credit Facility.
The following summaries of the terms of the Series A Stock, the Terms of the
Initial Warrant and Additional Terms of the GE Transaction are summaries of the
definitive documents in connection with the GE investment.
Terms of the Series A Stock
The Series A Stock is a newly authorized series of preferred stock of the
Company created for issuance in the GE transaction. 761,250 shares of Series A
Stock have been authorized and issued to GE. The Series A Stock has a
liquidation preference of $27 per share, plus an amount equal to 8% per annum
from the date of issuance to the date of payment ("Liquidation Preference
Amount").
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<PAGE> 15
Each outstanding share of Series A Stock is convertible at any time into four
shares (subject to adjustment as described below) of Common Stock of the
Company. Prior to conversion, holders of Series A Stock are entitled to vote in
all shareholder matters together with the holders of Company Common Stock as a
single class. In any such vote, the holders of Series A Stock are entitled to
four votes (equal to the number of shares of Common Stock into which the Series
A Stock held may initially be converted).
The Company is required to redeem any shares of Series A Stock which have not
been converted or retired on September 30, 2010. Any such redemption would be
made at the Liquidation Preference Amount. In addition, holders of the Series A
Stock may require the Company to redeem their shares of Series A Stock by giving
notice to the Company on or before September 30, 2004. If such notice is given,
the Company will be required to make such redemption on or prior to September
30, 2005. In addition, holders of Series A Stock will be entitled to require the
Company to redeem the Series A Stock following the occurrence of any of the
following events (each a "Triggering Event"): (1) failure of the shareholders of
the Company to approve, at the 1999 annual meeting, proposals necessary for
exercise of any rights to acquire beneficial ownership of additional shares of
Common Stock as described in "Additional Terms of the GE Transaction"; or (2)
any action by the Company to give effect to certain major corporate actions,
including actions to merge, sell all or a substantial portion of its assets
(other than in the ordinary course of business), issue capital stock, incur or
have outstanding indebtedness for borrowed money in excess of $210,000. Upon the
occurrence of a Triggering Event, the holders of the Series A Stock may require
the Company to redeem their shares of Series A Stock by giving notice to the
Company within 90 days following the Triggering Event. If such notice is given,
the Company will be required to make such redemption within one year following
such notice. Any such redemption would be made at the Liquidation Preference
Amount. Under the terms of the bank's revolving credit facility and the
indenture (the "Indenture") relating to the Company's Senior Notes due 2008, the
redemption of the Series A Stock would currently constitute an event of default,
permitting acceleration of the related indebtedness. If prior consent of the
banks is obtained, the redemption is permitted under the credit facility.
Payments for the redemption of equity securities are "Restricted Payments" under
the Indenture. The total of all "Restricted Payments" under the Indenture (with
exceptions not applicable to stock redemption) cannot exceed one-half of the
total of consolidated net earnings of the Company (excluding consideration of
certain unusual items) from April 1, 1998 (taken as a single period) plus the
amount of proceeds received from sales of non-redeemable stock. As of September
30, 1999, the Company had a net loss, excluding extraordinary items, of $79,442
for the period. Until this deficit has been cured, the Company cannot redeem the
Series A Stock without causing an event of default with respect to the Senior
Notes. In addition, the Indenture prohibits Restricted Payments (with exceptions
not applicable to stock redemptions) at any time where the ratio of EBITDA to
Interest Expense for the preceding four fiscal quarters does not exceed 2.5
to 1.
Subject to approval by Company shareholders, if the Company fails to make any
redemption as required (subject to permitted deferrals in the event that such
redemption would cause an event of default with respect to certain indebtedness
of the Company), the conversion ratio of the Series A Stock would be increased
from four shares of Common Stock to eight shares of Common Stock per share of
Series A Stock. In addition, also subject to the approval of Company
shareholders, the conversion ratio will be subject to adjustment to prevent
dilution of the interest of GE by the issuance of Common Stock after October 6,
1999. Except for issuance
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<PAGE> 16
of shares under existing employee benefit plans, and certain other enumerated
exceptions, any shares of Common Stock issued at a price below $6.75 per share,
or, if higher, below the then current market price, would result in adjustment
of the conversion ratio. Any adjustment in the conversion ratio would not affect
the voting power represented by shares of Series A Stock prior to conversion.
Upon liquidation, each share of Series A Stock will be entitled to be paid the
Liquidation Preference Amount prior to any payment or distribution to the
holders of Company Common Stock. Following such payment, holders of Series A
Stock will be entitled to a proportional share of any distribution to holders of
Company Common Stock based on the number of shares of Common Stock into which
the Series A Stock could have been converted at the time of the liquidation.
Terms of the Initial Warrant
The Initial Warrant entitles the holder to purchase shares of Company Common
Stock at $.01 per share. The Initial Warrant is immediately exercisable for
1,000,000 shares (subject to adjustment) of Common Stock. The number of shares
subject to the Initial Warrant will be subject to adjustment, after approval by
Company shareholders, at any time prior to exercise if the Company issues Common
Stock at a price below $6.75 per share or, if higher, below the then current
market price.
Additional Terms of the GE Transaction
In addition to GE's initial investment, under certain circumstances, GE will be
entitled to make additional investments in the Company and receive the right to
vote additional shares of Company Common Stock. The exercise of certain of these
rights is subject to applicable law, including the Ohio Control Share
Acquisition Act and the Hart-Scott-Rodino Antitrust Improvements Act of 1976
("HSR Approval"). GE and the Company entered into a Contingent Warrant Agreement
("Contingent Warrant Agreement"). The Contingent Warrant Agreement identifies
certain occurrences which will entitle GE to exercise these rights.
Upon the Second Occurrence (defined below), if it occurs, GE would be required
to exercise in full the Initial Warrant. In addition, GE would receive the right
to vote the number of shares then owned by Wayne R. Hellman and Hellman, LTD.
pursuant to proxies granted by Messrs. Hellman and Ruud. GE would receive the
right to vote the number of shares as to which Mr. Hellman then has voting power
pursuant to the Hellman Voting Trust or Irrevocable Proxies granted with respect
to shares removed from the Hellman Voting Trust (all shares voted by Mr.
Hellman, currently approximately 3.9 million shares, are referred to
collectively as the "Hellman Shares"). GE would also have an option, at the then
current market price, to purchase from Messrs. Hellman and Ruud, the number of
shares of Common Stock which, together with the shares owned by GE, would
represent 25% of the voting power of the Company. The Company would also be
required to grant to GE an additional warrant (the "First Contingent Warrant")
to purchase shares of Company Common Stock at the then current market price. The
number of shares subject to the First Contingent Warrant would be equal to the
number of shares required to allow GE to have a majority of the voting power of
the Company, assuming GE had effective proxies with respect to all shares as to
which Messrs. Hellman and Ruud then have voting power.
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<PAGE> 17
The exercise of the First Contingent Warrant, the options on shares held by
Messrs. Hellman and Ruud, and effectiveness of GE's proxy with respect to any
such shares, is subject to prior compliance with the Ohio Control Share
Acquisition Act (which condition would be fulfilled by shareholder approval to
be sought at the Company's annual meeting) and HSR Approval (which requires the
Company and GE to provide information to the federal government to allow it to
determine whether to contest an increase by GE to an interest in the Company in
excess of 25% pursuant to antitrust law). If the proxies become effective after
the Second Occurrence, GE will have the proxies to vote the number of Hellman
Shares and will be entitled to exercise approximately 35% of the then
outstanding voting power of the Company (assuming that none of the Hellman
Shares have been transferred by the beneficial owners and no issuance of
additional shares by the Company other than pursuant to the GE transaction) or
approximately 34% of the voting power of the Company on a fully diluted basis.
GE has not indicated that it will acquire additional shares of Company Common
Stock. However, if GE were to acquire additional shares of Common Stock (other
than shares subject to effective proxies as described above or shares obtained
on the exercise of the First Contingent Warrant), or if the number of
outstanding shares on a fully diluted basis were reduced, GE could obtain in
excess of 35% of the voting power of the Company on a fully diluted basis. In
addition, if a substantial number (currently approximately 300,000 shares) of
Hellman Shares were transferred (other than to GE) prior to the Second
Occurrence, and if GE exercised the First Contingent Warrant, GE would acquire
in excess of 35% of the voting power of the Company on a fully diluted basis. If
GE were to acquire in excess of 35% of the voting power of the Company on a
fully diluted basis, the terms of the Indenture relating to the Senior Notes
would require that the Company offer to repurchase the $100,000 principal amount
of outstanding Senior Notes due 2008 at a price of 101% of the principal amount
thereof, plus accrued interest ("Offer to Repurchase Notes").
Upon the Third Occurrence (defined below), GE would receive the right to vote
the number of shares then owned by Mr. Ruud, and the right to vote the number of
shares as to which Mr. Ruud then has voting power pursuant to the Ruud Voting
Trust or Irrevocable Proxies granted with respect to shares removed from the
Ruud Voting Trust, currently approximately 3.6 million shares (the "Ruud
Shares"). The effectiveness of this right requires that the conditions for the
effectiveness of the proxies following the Second Occurrence have been
satisfied, and that any additional provisions of the Ohio Control Share
Acquisition Act required with respect to proxies or the Ruud Shares be
satisfied. If the proxies on the Ruud Shares become effective after the Third
Occurrence, GE will have the right to vote the Ruud Shares and will be entitled
to exercise approximately 48.4% of the then outstanding voting power of the
Company (assuming that none of the Hellman Shares or the Ruud Shares have been
sold by the beneficial owners, no exercise by GE of the Contingent Warrants and
no issuance of additional shares by the Company other than pursuant to the GE
transaction). If the Company has not already made an Offer to Repurchase Notes,
it will be required to make the offer upon effectiveness of the proxy on the
Ruud Shares. In addition, GE will receive an additional warrant (the "Second
Contingent Warrant") which will entitle GE to purchase additional shares of
Common Stock at the then current market price. The number of shares subject to
the Second Contingent Warrant will be the number of shares necessary to give GE
50% plus one vote of the voting power of the Company (including the exercise of
all outstanding Warrants, shares subject to irrevocable proxies, the shares
subject to the Second Contingent Warrant and all proxies held with respect to
Hellman Shares and Ruud Shares). Subject to shareholder approval, after the
Third Occurrence,
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<PAGE> 18
if the Company issues additional shares of Common Stock to anyone other than GE,
GE will be entitled to purchase, on the same terms given to the third party, the
number of shares required to maintain GE's voting power.
The basis for GE's additional rights will be the failure of the Company to
maintain a 2.0 to 1.0 ratio of EBITDA (as defined) to Interest Expense (as
defined) over the applicable measurement periods. The first measurement period
is the six months ended December 31, 1999. Thereafter, the measurement periods
are the six months ending on the last day of each successive fiscal quarter
until September 30, 2010. The first failure to maintain the required ratio would
be the "First Occurrence," the second such failure would be the "Second
Occurrence" and the third such failure would be the "Third Occurrence." However,
after the First Occurrence, if the Company maintains the required ratio in the
three fiscal quarters immediately prior to the measurement period in which a
failure occurs, a Second Occurrence or Third Occurrence, as the case may be,
would not be effective, if the Company maintained the required ratio for the
measurement period immediately following the measurement period in which such
occurrence would otherwise have been effective. Under the terms of the
transaction, EBITDA consists of net earnings, plus interest expense, plus
depreciation and amortization, plus income taxes, less extraordinary gains and
gains from asset sales plus extraordinary losses and losses from asset sales.
Interest Expense consists of interest expense (net of interest income)
calculated in accordance with generally accepted accounting principles, but
excludes amortization of deferred financing costs not exceeding $125 in any
fiscal quarter.
DISCONTINUED OPERATIONS SUBSEQUENTLY RETAINED
Microsun Technologies, Inc. ("Microsun") was identified in March 1998 for
disposition through a plan to distribute to ADLT shareholders all of the
ownership of Microsun in a tax-free spin-off transaction estimated to be
completed by December 1998. Because of the deterioration of the capital markets
and the inability to raise capital necessary to spin-off the Microsun business,
the Company concluded that it would wind-down the operations, close the
manufacturing facilities and liquidate the assets of Microsun. At June 30, 1999,
the plan of wind-down had been accomplished, the manufacturing facilities closed
and substantially all assets had been disposed. Accordingly, there were no
remaining discontinued operations accrued losses associated with Microsun at
June 30, 1999.
In October 1999, management decided, with the approval of the Board of
Directors, to retain the Microsun business as part of the Company's continuing
operation. The decision to retain the business was based on management's belief
that, among other reasons, the market demand for Microsun products remains
substantial, the market potential will be expanded as the Microsun portable
lighting fixtures will be marketed and sold along with other existing lines of
products for residential use in an e-commerce format ("Microsun.com"), and the
Microsun business will use the fulfillment capabilities and infrastructure of
existing ADLT businesses.
In accordance with generally accepted accounting principles, the accompanying
financial statements have been reclassified to present Microsun within
continuing operations.
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BANK CREDIT FACILITY
In May 1999, the Company replaced its existing Credit Facility with a $50,000
revolving credit loan and $25,000 term loan provided by several financial
institutions. Subsequent to June 30, 1999 the Company reduced its commitment to
a $60,000 facility. Proceeds from the facility were used to repay the Company's
existing credit facility and certain other long-term debt. The revolving credit
loan has a three-year term expiring in May 2002. Interest rates on revolving
credit loans outstanding are based, at the Company's option, on LIBOR plus 2.75%
or the agent bank's prime rate. Availability of borrowings is determined by the
Company's eligible accounts receivable and inventories. The term loan has a
five-year term expiring in May 2004. The Company pays monthly principal payments
that total $3,576 annually, with the unpaid balance due at maturity. Interest
rates on the term loan are based, at the Company's option, on LIBOR plus 3.25%
or the agent bank's prime rate.
The Bank Credit Facility contains certain affirmative and negative covenants
customary for this type of agreement, prohibits cash dividends, and includes
financial covenants with respect to the coverage of certain fixed charges. The
principal security for the revolving credit loan is substantially all of the
personal property of the Company and each of its North American and United
Kingdom subsidiaries. The term loan is secured by substantially all of the
Company's machinery and equipment and is cross-collateralized and secured with
the revolving credit loan.
UPDATE ON IN-PROCESS RESEARCH AND DEVELOPMENT
The Company's research and development projects acquired in connection with the
January 1998 acquisition of Deposition Sciences, Inc. are generally progressing
in line with the estimates set forth in the Company's 1999 Annual Report on Form
10-K.
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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
September 30,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net sales 100% 100%
Costs and expenses:
Cost of sales 62.0 60.3
Marketing and selling 18.1 18.3
Research and development 6.2 7.7
General and administrative 7.2 8.8
Amortization of intangible assets 1.2 1.3
------------ ------------
Income from operations 5.3 3.6
Other income (expense):
Interest expense (6.8) (5.3)
Interest income 0.4 0.5
Loss from equity investments 0.1 (0.4)
------------ ------------
Loss from continuing operations before income taxes
and cumulative effect of accounting change (1.0) (1.6)
Income taxes 0.4 (0.3)
------------ ------------
Loss from continuing operations before
cumulative effect of accounting change (1.4) (1.3)
Reclassification of discontinued operations to continuing operations - 1.7
Cumulative effect of change in accounting for start-up costs - (4.8)
------------ ------------
Net loss (1.4%) (4.4%)
============ ============
</TABLE>
Factors which have affected the results of operations for the first quarter of
fiscal 2000 as compared to the first quarter of fiscal 1999 are discussed below.
QUARTER ENDED SEPTEMBER 30, 1999 COMPARED WITH QUARTER ENDED SEPTEMBER 30, 1998
Net sales. Net sales increased 9.5% to $56,180 in the first quarter of fiscal
2000 from $51,287 in the first quarter of fiscal 1999. Sales in the first
quarter of fiscal 1999 included lamp equipment sales of $2,554. The first
quarter of fiscal 1999 is the last quarter in which the Company recorded lamp
equipment sales. Excluding these sales, net sales increased 15.3% from $48,733
in the first quarter of fiscal 1999.
Fiscal 2000 first quarter sales reflect continued growth in the sales of the
Company's core U.S. metal halide operations, in non-metal halide products, and
in overseas sales. The Company's metal halide sales increased 9% (10% increase
in the United States) from the year ago period, excluding lamp equipment sales
in the first quarter of fiscal 1999. The Company's core metal
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<PAGE> 21
halide materials business, a key indicator of industry trends, was up 28% from
fiscal 1999. Geographically, these sales of materials were up 16% in the U.S.
and grew 47% outside the U.S. Sales of Uni-Form(R) pulse start products continue
to accelerate to an estimated 6% share of new metal halide installations.
Sales outside the U.S. increased 14%, excluding the lamp equipment sales in the
first quarter of fiscal 1999. The Company attributes the increase in these sales
to the resurgence and recovery of foreign economies, especially in the Pacific
Rim. Sales of non-metal halide products grew 36%, representing strong sales of
the Company's materials, particularly thin-film optical coating materials.
Sales increases were driven by increased volume in the Company's materials,
components and systems. Pricing in the metal halide lighting business is
competitive, and prices for the Company's products have remained flat or
declined slightly. The introduction of new products has helped to stabilize the
Company's product pricing.
Cost of Sales. Cost of sales increased 12.7% to $34,844 in the first quarter of
fiscal 2000 from $30,904 in the first quarter of fiscal 1999. The increase was
primarily attributable to increased unit volume. As a percentage of net sales,
cost of sales increased to 62.0% in the first quarter of fiscal 2000 from 60.3%
in the first quarter of fiscal 1999.
Marketing and Selling Expenses. Marketing and selling expenses increased 8.2% to
$10,175 in the first quarter of fiscal 2000 from $9,401 in the first quarter of
fiscal 1999. Marketing and selling expenses, as a percentage of net sales,
remained relatively comparable at 18.1% in the first quarter of fiscal 2000 as
compared to 18.3% in the first quarter of fiscal 1999.
Research and Development Expenses. Research and development expenses decreased
11.9% to $3,495 in the first quarter of fiscal 2000 from $3,965 in the first
quarter of fiscal 1999. Research and development expenses are incurred related
to: (i) expansion of the new line of Uni-Form (R) pulse start lamps (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. The decrease in research and development was
primarily a result of a reduction in spending related to the development of
pulse start lamps. As a percentage of net sales, research and development
expenses decreased to 6.2% in the first quarter of fiscal 2000 from 7.7% in the
first quarter of fiscal 1999.
General and Administrative Expenses. General and administrative expenses
decreased 10.4% to $4,035 in the first quarter of fiscal 2000 from $4,505 in the
first quarter of fiscal 1999. As a percentage of net sales, general and
administrative expenses decreased to 7.2% in the first quarter of fiscal 2000
from 8.8% in the first quarter of fiscal 1999. The decrease as a percentage of
net sales primarily reflects a spending growth rate which is lower than sales
increases through the leveraging of fixed costs as sales levels increase and
also reflects the Company's efforts to control general and administrative costs.
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Amortization of Intangible Assets. Amortization expense increased slightly to
$675 in the first quarter of fiscal 2000 from $665 in the first quarter of
fiscal 1999. Amortization expense relates primarily to the amortization of
goodwill and other intangible assets related to the January 1998 acquisitions of
Ruud Lighting, Inc. and Deposition Sciences, Inc.
Income from Operations. As a result of the items noted above, income from
operations in the first quarter of fiscal 2000 increased to $2,956 from $1,847
in the first quarter of fiscal 1999. As a percentage of net sales, income from
operations increased to 5.3% in the first quarter of fiscal 2000 from 3.6% in
the first quarter of fiscal 1999.
Interest Expense. Interest expense increased to $3,790 in the first quarter of
fiscal 2000 from $2,741 in the first quarter of fiscal 1999. This increase
resulted primarily from the higher average debt outstanding during the first
quarter of fiscal 2000 as compared to the first quarter of fiscal 1999, and to a
lesser extent, due to increases in interest rates.
Interest Income. Interest income decreased to $220 in the first quarter of
fiscal 2000 from $238 in the first quarter of fiscal 1999. This decrease is
attributable to lower average cash equivalents and short-term investments in the
first quarter of fiscal 2000 as compared to the first quarter of fiscal 1999.
Income (Loss) from Equity Investments. The income from equity investments in the
first quarter of fiscal 2000 represents $50 of earnings from the Company's
investment in Fiberstars, Inc., a marketer and distributor of fiber optic
lighting products. The loss from equity investments in fiscal 1999 represents
$53 of earnings from the Company's investment in Fiberstars, Inc., offset by a
$242 loss from the Company's investment in Venture Lighting Japan, a
manufacturer and marketer of metal halide lamps in Japan.
Loss from Continuing Operations before Income Taxes. The Company incurred a loss
from continuing operations before income taxes of $564 during the first quarter
of fiscal 2000 as compared to a loss from continuing operations before income
taxes of $845 during the first quarter of fiscal 1999.
Income Taxes. Income tax expense was $218 for the first quarter of fiscal 2000
as compared to an income tax benefit of $174 in the first quarter of fiscal
1999. The income tax expense in the first quarter of fiscal 2000 relates
primarily to certain of the Company's foreign operations.
At June 30, 1999, the Company had net operating loss carryforwards ("NOLs") of
$57,309 available to reduce future United States federal taxable income, which
expire in varying amounts from 2008 to 2019.
The Company also has research and development credit carryforwards for tax
purposes of approximately $3,006, which expire in varying amounts from 2005 to
2019. Additionally, in conjunction with the Alternative Minimum Tax ("AMT")
rules, the Company had available AMT credit carryforwards for tax purposes of
approximately $162, which may be used indefinitely to reduce regular federal
income taxes.
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Also at June 30, 1999, the Company had foreign net operating loss carryforwards
for tax purposes totaling $5,209, that expire in varying amounts from 2000 to
2005 and $10,587 that have no expiration dates.
Reclassification of Discontinued Operations to Continuing Operations. See
"Discontinued Operations Subsequently Retained" and Note G of "Notes to
Condensed Consolidated Financial Statements (Unaudited)" for further discussion.
Cumulative Effect of Change in Accounting for Start-Up Costs. During the fourth
quarter of fiscal 1999, the Company adopted Statement of Position ("SOP") 98-5,
"Reporting on the Costs of Start-Up Activities," effective July 1, 1998. The
first quarter of fiscal 1999 has been restated to reflect the cumulative effect
of the accounting change of $2,443.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal financial requirements are for market development
activities, research and development efforts, investments in business
acquisitions, joint ventures and working capital. These requirements have been,
and the Company expects they will continue to be, financed through a combination
of cash flow from operations, borrowings under various credit facilities and the
sale of stock.
Cash increased $429 during the first quarter of fiscal 2000. Uses of cash
consisted of $4,969 used in operating activities and $1,090 used in investing
activities. These uses of cash were offset by net financing activities of
$6,488.
Net cash used in operating activities. Net cash used in operating activities
totaled $4,969 during the first quarter of fiscal 2000 as compared to $15,093 in
the first quarter of fiscal 1999. The increase in trade receivables of $4,324
accounted for a large part of this usage, and was primarily a result of the
increase in sales. In spite of this usage of cash in the first quarter, the
Company intends to manage its cash resources to generate positive cash flow from
operating activities for the full fiscal year 2000 and beyond.
Net cash used in investment activities. During the first quarter of fiscal 2000,
investing activities used $1,090 of cash, which was primarily represented a
$1,440 usage for capital expenditures offset by a $350 source of funds from the
sale of a short-term investment.
Capital expenditures, primarily for production equipment and leasehold and
facility improvements, totaled $1,440 during the first quarter of fiscal 2000 as
compared to $9,313 during the first quarter of fiscal 1999. Capital expenditures
in fiscal 2000 related to 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 limited 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 the acquisition of certain capital equipment
and, for all practical purposes, facilities expenditures have been completed.
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<PAGE> 24
As a result of the Company's decision to terminate joint venture equipment
contracts in the quarter ended December 31, 1998, approximately $6,500 of new
production equipment is available for installation at the Company's Solon, Ohio
lamp manufacturing facility. The Company estimates its maintenance level for
capital expenditures will approximate $6,000 to $8,000 over the next twelve
months. Future capital expenditures beyond this level will be discretionary, as
the Company presently has sufficient operating 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 January 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 $14,500 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, 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 $35,500 in cash.
Net cash provided by financing activities. During the first quarter of fiscal
2000, net financing activities provided cash of $6,488, which included $7,663 of
cash provided from net borrowings under the Company's revolving credit
facilities, net of repayments of long-term debt and capital leases of $1,320.
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 principal balance outstanding of a
margin account loan, which is secured by 2,053,070 shares of the
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<PAGE> 25
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.
The CEO has paid accrued interest of $720 on the loan through October 6, 1999.
The principal on the loan was due on October 6, 1999. Members of the Board of
Directors and the CEO are discussing alternative payment terms which will
achieve the Board's original business objectives in making the loan and meet the
Company's current business needs. The Directors and the CEO believe that these
discussions will be completed by January 2000. The Board has informed the CEO
that the Company may require immediate payment during these discussions if the
Company requires the payment to prevent an unacceptable strain on cash
resources.
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
September 30, 1999 was $25,737, resulting in a working capital ratio of current
assets to current liabilities of 1.5 to 1.0, as compared to $18,629 or 1.3 to
1.0 at June 30, 1999. As of September 30, 1999, the Company had $4,259 in cash
and cash equivalents.
The interest-bearing obligations of the Company totaled $167,427 as of September
30, 1999, and consisted of: $44,239 of borrowings under the Bank Credit
Facility; $100,000 of 8% Senior Notes; mortgages of $16,915; a promissory note
due to an affiliate of $3,000; borrowings of a foreign subsidiary of $1,715;
capital leases of $1,547; and, other obligations of $11.
In May 1999, the Company replaced its existing Credit Facility with a $50,000
revolving credit loan and $25,000 term loan provided by several financial
institutions. Subsequent to June 30, 1999 the Company reduced its commitment to
a $40,000 revolver and $20,000 term loan. Proceeds from the facility were used
to repay the Company's existing credit facility and certain other long-term
debt. The revolving credit loan has a three-year term expiring in May 2002.
Interest rates on loans outstanding are based, at the Company's option, on LIBOR
plus 2.75% or the agent bank's prime rate. Availability of borrowings is
determined by the Company's eligible accounts receivable and inventories.
Following the GE investment on October 6, 1999, after the proceeds were applied
to reduce the term loan to $20,000 under the Bank Credit Facility and apply the
remainder of the proceeds to reduce the revolving credit loan. The term loan has
a five-year term expiring in May 2004. The Company pays monthly principal
payments of $298, with the unpaid balance due at maturity. Interest rates on the
term loan are based, at the Company's option, on LIBOR plus 3.25% or the agent
bank's prime rate.
The Bank Credit Facility contains certain affirmative and negative covenants
customary for this type of agreement, prohibits cash dividends, and includes
financial covenants with respect to the coverage of certain fixed charges. The
principal security for the revolving credit loan is
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<PAGE> 26
substantially all of the personal property of the Company and each of its North
American and United Kingdom subsidiaries. The term loan is secured by
substantially all of the Company's machinery and equipment and is
cross-collateralized and secured with the revolving credit loan.
The Company's implementation of the cost reduction and cash flow enhancement
initiatives including consolidation of equipment and lamp-making operations,
reductions in capital expenditures, consolidation of international operations,
reduction of corporate expenses, and overall 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 fiscal 2000 and
beyond.
The Company believes that the available cash, cash flow from operations, and the
initiatives outlined above, along with availability of approximately $15,000
under its existing Bank Credit Facility after giving effect to the GE
investment, will enable the Company to fund its operations for at least the next
12 months.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
The Company has not yet adopted FAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." FAS 133 requires that all derivatives, such
as interest rate exchange agreements (swaps), be recognized on the balance sheet
at fair value. Derivatives which are not hedges must be adjusted to fair value
through the results of operations. Derivatives determined to be hedges will be
adjusted to fair value through either the results of operations or other
comprehensive income, depending on the nature of the hedge. The Company is
required to adopt FAS No. 133, as subsequently amended by FAS No. 137, on July
1, 2000. The impact, if any, on net income, comprehensive income and financial
position will depend on the amount, timing and nature of any agreements entered
into by the Company.
YEAR 2000 READINESS
State of Readiness. During the past three fiscal years, the Company has been
actively involved in finding and correcting the 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 that are no longer being supported by the original
supplier.
The most critical noninformation 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 revealed only minor Year 2000
problems which were quickly corrected and the Company does not expect to find
any further problems.
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.
The Company has had reasonable success in
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<PAGE> 27
obtaining reliable Year 2000 compliance certifications. The Company continues to
be concerned with the potential loss of energy (electricity and natural gas) at
its facilities worldwide, with the most vulnerable facilities presently
preparing contingency plans to protect their plant and equipment.
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 is in the final stages of its projects
and does not anticipate that future Year 2000 costs related to information
technology operations will be significantly beyond the scope of normal
operations.
The Company is in the process of implementing contingency plans to protect it
from Year 2000 failures. These plans are mostly complete and will result in
limited additional expenditures. Primarily these expenditures have been in the
form of increased inventory and the addition of some generating and auxiliary
heating equipment to protect facilities.The Company anticipates that additional
total costs will not have a material impact on the ongoing results of
operations.
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 United States experiences
significant interruptions in basic services, such as the electric power grid,
natural gas, telephone service or the banking systems. And while recent data on
the readiness of the electric power utilites have been increasingly more
positive, the Company's highest level of contingency planning is being focused
in this area.
Contingency Plans. The Company, through its various purchasing and production
control departments, is in the process 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 development
of alternative suppliers, the enhancements of on-hand materials and the
augmentation of the most critical finished goods. Facilities in very cold
climates are preparing to minimize the potential effects of the loss of
electricity.
Completion. Based on management's assessment of current progress, the Company
believes it will complete the limited amount of Year 2000 modifications and
contingency plans that remain before the end of 1999. The Company is in close
contact with its key hardware and software suppliers, and will implement any
future updates shortly after they are released.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 costs to the Company of its preparations or any disruptions
will not be material.
26
<PAGE> 28
FOREIGN CURRENCY
Approximately 34% of the Company's net sales in fiscal 1999, were denominated in
currencies other than U.S. dollars, principally Pounds Sterling, Australian
dollars and Canadian dollars. A weakening of such currencies versus the U.S.
dollar could have a material adverse effect on the Company. The Company
currently does not hedge its foreign currency exposure.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the three months ended September 30, 1999, 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, 1999.
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 5. OTHER INFORMATION
(a) As previously reported, pursuant to a loan agreement dated October 8, 1998,
between the Company and Mr. Hellman, its Chairman and Chief Executive Officer
(the "Hellman Loan Agreement"), the Company has loaned $9,000,000 to Mr. Hellman
for a one-year term at the rate of 8%. The loan was made following approval by
the Company's Board of Directors (Messrs. Hellman and Fisi, Executive Vice
President and a director of the Company, did not participate in the
deliberations). The proceeds of the loan were used to reduce the outstanding
principal balance of a loan from Prudential Securities Incorporated ("PSI"),
which is secured by 2,053,070 shares of the Company Common Stock owned by Mr.
Hellman and Hellman Ltd. (the "Hellman Personal Shares"). In connection with the
loan, the Board asked for and received Mr. Hellman's agreement to extend the
term of his employment agreement to December 31, 2003. The Hellman Loan
Agreement prohibits Mr. Hellman from encumbering the Hellman Personal Shares in
any manner except pursuant to existing agreements governing Mr. Hellman's margin
account at PSI, without consent of the Board's representative.
The CEO has paid accrued interest of $720,000 on the loan through October 6,
1999. The principal on the loan was due on October 6, 1999. Members of the Board
of Directors and the CEO are discussing alternative payment terms which will
achieve the Board's original business objectives in making the loan and meet the
Company's current business needs. The Directors and the CEO believe that these
discussions will be completed by January 2000. The Board has informed the CEO
that the Company may require immediate payment during these discussions if the
Company requires the payment to prevent an unacceptable strain on cash
resources.
28
<PAGE> 30
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
SEQUENTIAL
PAGE NUMBER/
EXHIBIT INCORPORATED
NUMBER TITLE BY REFERENCE
- ------ ----- ------------
3.1 Second Amended and Restated Articles of Incorporation *
3.2 Certificate of Adoption of Amended and Restated Articles of
Incorporation of the Company filed as of October 6, 1999,
with the Ohio Secretary of State relating to the Series A
Convertible Preferred Shares
3.3 Code of Regulations **
4.1 Reference is made to Exhibits 3.1, 3.2 and 3.3
4.2 Registration Rights Agreement dated as of September 30, 1999,
by and between the Company and General Electric Company
10.1 Side Letter Agreement dated August 5, 1999 by and among the
Company and certain of its subsidiaries, PNC Bank, National
Association, and BankBoston, N.A. relating to the Credit
Agreement by and among the Company and certain of its
subsidiaries and PNC Bank, National Association, as agent for
certain other banks dated as of May 21, 1999
10.2 Assignment and Acceptance Agreement by and among the Company,
PNC Bank National Association, and BankBoston, N.A. dated as
of August 5, 1999
10.3 First Amendment Agreement by and among the Company and
certain of its subsidiaries and PNC Bank, National
Association, as agent for certain other banks dated as of
August 17, 1999, and amending the Credit Agreement by and
among the same parties dated as of May 21, 1999
10.4 Second Amendment Agreement by and among the Company and
certain of its subsidiaries and PNC Bank, National
Association, as agent for certain other banks dated as of
August 18, 1999, and amending the Credit Agreement by and
among the same parties dated as of May 21, 1999
10.5 Stock Purchase Agreement by and between the Company and
General Electric Company dated as of September 28, 1999
29
<PAGE> 31
SEQUENTIAL
PAGE NUMBER/
EXHIBIT INCORPORATED
NUMBER TITLE BY REFERENCE
- ------ ----- ------------
10.6 Contingent Warrant Agreement dated as of September 30, 1999,
by and among the Company; General Electric Company; Wayne R.
Hellman, individually and as voting trustee under Voting
Trust Agreement dated October 10, 1995; Hellman, Ltd.; and
Alan J. Ruud, individually and as voting trustee under Voting
Trust Agreement dated January 2, 1998
10.7 Series A1 Warrant to Purchase Common Shares of the Company
issued to General Electric Company dated as of October 6,
1999
10.8 Lamp Materials Purchase Agreement by and among the Company;
General Electric Company, acting through its GE Lighting
business; and APL Engineered Materials, Inc. dated as of
September 30, 1999
10.9 Patent and Technical Assistance Agreement by and among the
Company; APL Engineered Materials, Inc.; and General Electric
Company, acting through its GE Lighting business dated as of
September 30, 1999
11 Statement re Computation of Per Share Earnings
12 Statement Re: Computation of Ratio of Earnings to Fixed
Charges
27 Financial Data Schedule
- --------
* Incorporated by reference to Exhibit of the same number in Company's
Quarterly Report on Form 10-Q for the Quarterly Period ended December 31,
1996.
** Incorporated by reference to Exhibit 3.2 in Company's Registration
Statement on Form S-1, Registration No. 33-97902, effective December 11,
1995.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter ended September 30,
1999.
30
<PAGE> 32
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 hereunto duly authorized.
ADVANCED LIGHTING TECHNOLOGIES, INC.
Date: November 12, 1999 By: /s/ Wayne R. Hellman
--------------------
Wayne R. Hellman
Chief Executive Officer
Date: November 12, 1999 By: /s/ Nicholas R. Sucic
---------------------
Nicholas R. Sucic
Chief Financial Officer
31
<PAGE> 33
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE NO.
- ------ ----------------------- --------
3.1 Second Amended and Restated Articles of Incorporation *
3.2 Certificate of Adoption of Amended and Restated Articles of
Incorporation of the Company filed as of October 6, 1999,
with the Ohio Secretary of State relating to the Series A
Convertible Preferred Shares
3.3 Code of Regulations **
4.1 Reference is made to Exhibits 3.1, 3.2 and 3.3
4.2 Registration Rights Agreement dated as of September 30, 1999,
by and between the Company and General Electric Company
10.1 Side Letter Agreement dated August 5, 1999 by and among the
Company and certain of its subsidiaries, PNC Bank, National
Association, and BankBoston, N.A. relating to the Credit
Agreement by and among the Company and certain of its
subsidiaries and PNC Bank, National Association, as agent for
certain other banks dated as of May 21, 1999
10.2 Assignment and Acceptance Agreement by and among the Company,
PNC Bank National Association, and BankBoston, N.A. dated as
of August 5, 1999
10.3 First Amendment Agreement by and among the Company and
certain of its subsidiaries and PNC Bank, National
Association, as agent for certain other banks dated as of
August 17, 1999, and amending the Credit Agreement by and
among the same parties dated as of May 21, 1999
10.4 Second Amendment Agreement by and among the Company and
certain of its subsidiaries and PNC Bank, National
Association, as agent for certain other banks dated as of
August 18, 1999, and amending the Credit Agreement by and
among the same parties dated as of May 21, 1999
10.5 Stock Purchase Agreement by and between the Company and
General Electric Company dated as of September 28, 1999
32
<PAGE> 34
SEQUENTIAL
PAGE NUMBER/
EXHIBIT INCORPORATED
NUMBER TITLE BY REFERENCE
- ------ ----- ------------
10.6 Contingent Warrant Agreement dated as of September 30, 1999,
by and among the Company; General Electric Company; Wayne R.
Hellman, individually and as voting trustee under Voting
Trust Agreement dated October 10, 1995; Hellman, Ltd.; and
Alan J. Ruud, individually and as voting trustee under Voting
Trust Agreement dated January 2, 1998
10.7 Series A1 Warrant to Purchase Common Shares of the Company
issued to General Electric Company dated as of October 6,
1999
10.8 Lamp Materials Purchase Agreement by and among the Company;
General Electric Company, acting through its GE Lighting
business; and APL Engineered Materials, Inc. dated as of
September 30, 1999
10.9 Patent and Technical Assistance Agreement by and among the
Company; APL Engineered Materials, Inc.; and General Electric
Company, acting through its GE Lighting business dated as of
September 30, 1999
11 Statement re Computation of Per Share Earnings
12 Statement Re: Computation of Ratio of Earnings to Fixed
Charges
27 Financial Data Schedule
- --------
* Incorporated by reference to Exhibit of the same number in Company's
Quarterly Report on Form 10-Q for the Quarterly Period ended December 31,
1996.
** Incorporated by reference to Exhibit 3.2 in Company's Registration
Statement on Form S-1, Registration No. 33-97902, effective December 11,
1995.
33
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF ADOPTION OF
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
ADVANCED LIGHTING TECHNOLOGIES, INC.
Louis S. Fisi, Executive Vice President/Secretary of ADVANCED LIGHTING
TECHNOLOGIES, INC., an Ohio corporation (the "Corporation"), having its
principal office in the City of Solon, Ohio, does hereby certify that on the 28
day of September, 1999, pursuant to the authority of Ohio Revised Code Section
1701.70(B)(1), Article Four of the Second Amended and Restated Articles of
Incorporation of the Corporation and the Code of Regulations of the Corporation,
the directors of said Corporation did unanimously approve by unanimous written
consent the following action and adopt the following resolution amending the
existing Articles of Incorporation:
AMENDMENT TO SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION RELATING TO
EXPRESS TERMS OF SERIES A CONVERTIBLE PREFERRED SHARES
RESOLVED, that, pursuant to Section 1701.70(B)(1) of the Ohio Revised
Code and Article Four of the Second Amended and Restated Articles of
Incorporation of Advanced Lighting Technologies, Inc. (the "Corporation"),
effective on the date of filing of a certified copy of this resolution with the
Secretary of State of the State of Ohio, such Article Four is hereby amended to
include Paragraph 3 to Part A to fix the express terms of the Corporation's
Series A Preferred Shares, which paragraph 3 is attached to these Resolutions as
Exhibit A, and such amendment shall, and does hereby, amend such Second Amended
and Restated Articles of Incorporation effective on such date.
IN WITNESS WHEREOF, Louis S. Fisi, Executive Vice President and
Secretary, acting for and on behalf of said Corporation, has hereunto subscribed
his name this 29 day of September, 1999.
/s/ Louis S. Fisi
-------------------------------------------------
Louis S. Fisi, Executive Vice President/Secretary
<PAGE> 2
EXHIBIT A
---------
3. Series A Convertible Preferred Shares.
I. DEFINITIONS. For purposes of this Paragraph 3 of this Part A of this
Article Fourth, the following terms shall have the following meanings:
(a) "Additional Common Shares" shall mean Common Shares issued by the
Corporation after the Effective Date.
(b) "Additional Issuance" shall have the meaning ascribed to such term
in Subsection V(c)(iii)(A) hereof.
(c) "Appraised Value" shall mean, in respect of any Common Share on any
date herein specified, the fair saleable value of such Common Share (determined
without giving affect to the discount for (i) a minority interest or (ii) any
lack of liquidity of the Common Share or (iii) the fact that the Corporation may
have no class of equity registered under the Exchange Act) based on the equity
value of the Corporation, as determined by an investment banking or valuation
firm selected in accordance with the following sentences, divided by the number
of Common Shares outstanding on a Fully Diluted Basis as determined in
accordance with GAAP (assuming the payment of the exercise prices for such
shares). The determination of the Appraised Value per Common Share shall be made
by an investment banking or valuation firm of nationally recognized standing
selected by the Corporation and acceptable to the Majority Holders. If the
investment banking or valuation firm selected by the Corporation is not
acceptable to the Majority Holders and the Corporation and the Majority Holders
cannot agree on a mutually acceptable investment banking or valuation firm, then
the Majority Holders and the Corporation shall each choose one such investment
banking or valuation firm and the respective chosen firms shall agree on another
investment banking or valuation firm which shall make the determination. The
Corporation shall retain, at its sole cost, such investment banking or valuation
firm as may be necessary for the determination of Appraised Value required by
the terms of these Third Amended and Restated Articles of Incorporation.
(d) "Business Day" shall mean any day that is not a Saturday or Sunday
or a day on which banks are required to be closed in the State of New York.
(e) "Closing Period" shall have the meaning ascribed to such term in
Subsection VII(f) hereof.
<PAGE> 3
(f) "Common Shares" shall mean the Common Shares, par value one
thousandth of one cent ($.001), of the Corporation.
(g) "Contingent Shares" shall mean the Common Shares issued upon
exercise of the Contingent Warrants.
(h) "Contingent Warrant Agreement" shall mean the Contingent Warrant
Agreement, dated the Effective Date, among the Original Purchaser, the
Corporation, Hellman, Ltd., Wayne R. Hellman, Wayne R. Hellman, as voting
trustee under Voting Trust Agreement dated October 10, 1995, Alan J. Ruud and
Alan J. Ruud, as voting trustee under Voting Trust Agreement dated January 2,
1998.
(i) "Contingent Warrants" shall mean the First Contingent Warrant and
the Second Contingent Warrant issued under the Contingent Warrant Agreement,
dated as of the Effective Date, between the Corporation and the Original
Purchaser.
(j) "Control Share Acquisition Resolution" shall mean the resolution to
be voted upon by the shareholders of the Corporation at the Corporation's 1999
annual meeting to amend the Corporation's Articles of Incorporation to provide
that Section 1701.831 of the Ohio Revised Code shall not apply to "control share
acquisitions" (as defined in Section 1701.01 of the Ohio Revised Code) of shares
of capital stock of the Corporation.
(k) "Conversion Ratio" shall have the meaning ascribed to such term in
Subsection V(a) hereof.
(l) "Conversion Shares" shall mean the Common Shares to be issued upon
the conversion of Series A Preferred Shares.
(m) "Convertible Securities" shall mean evidences of indebtedness,
shares of capital stock or other securities that are convertible into or
exchangeable, with or without payment of additional consideration in cash or
property, for Additional Common Shares, either immediately or upon the
occurrence of a specified date or a specified event.
(n) "Corporation Put Right Notice" shall have the meaning ascribed to
such term in Subsction VII(e) hereof.
(o) "Credit Agreements" shall have the meaning ascribed to such term in
Subsection VII(f) hereof.
(p) "Current Market Price" shall mean, in respect of any Common Share
on any date herein specified, if there shall then be a public market for the
Common Shares, the average of the daily market prices for 20 consecutive
Business Days immediately preceding such date or, if there is no such public
market, the Appraised Value per Common Share. The daily market price for each
such Business Day shall be (i) the last sale price on such day on the principal
stock exchange or NASDAQ-NMS on which such Common Shares are then listed or
admitted to trading, or (ii) if no sale takes place on such day on any such
exchange or NASDAQ-NMS, the
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<PAGE> 4
average of the last reported closing bid and asked prices on such day as
officially quoted on any such exchange or NASDAQ-NMS, or (iii) if the Common
Shares are not then listed or admitted to trading on any stock exchange or
NASDAQ-NMS, the average of the last reported closing bid and asked prices on
such day in the over-the-counter market, as furnished by the NASDAQ or the
National Quotation Bureau, Inc., or (iv) if neither such corporation at the time
is engaged in the business of reporting such prices, as furnished by any similar
firm then engaged in such business, or (v) if there is no such firm, as
furnished by any member of the NASD selected mutually by the Majority Holders
and the Corporation or, if they cannot agree upon such selection, as selected by
two such members of the NASD, one of which shall be selected by the Majority
Holders and one of which shall be selected by the Corporation.
(q) "Effective Date" shall mean the date on which the Amendment to
these Articles of Incorporation designating the Series A Preferred Shares became
effective.
(r) "Fully Diluted Basis" means, with respect to any determination or
calculation, that such determination or calculation is performed on a fully
diluted basis (assuming the issuance of all Common Shares issuable under any
then outstanding options, warrants or convertible securities of any kind)
determined in accordance with GAAP for purposes of determining book value or net
income per share.
(s) "Governmental Approval" shall have the meaning ascribed to such
term in Subsection VII(c) hereof.
(t) "Indebtedness for Borrowed Money" shall mean as to any Person, at a
particular time, all items which constitute, without duplication (a)
indebtedness for borrowed money, (b) indebtedness in respect of the deferred
purchase price of property, (c) indebtedness evidenced by notes, bonds,
debentures or similar instruments, (d) capital lease obligations (i.e.,
obligations with respect to leases which are required to be capitalized for
financial reporting purposes in accordance with GAAP), (e) all obligations of
such Person in respect of capital stock subject to mandatory redemption or
redemption at the option of the holder thereof, in whole or in part, and (f) all
contingent obligations of such Person in respect of any of the foregoing. As to
the Corporation and any Subsidiary, the term Indebtedness for Borrowed Money
shall not include indebtedness to the Corporation from any Subsidiary,
indebtedness to any Subsidiary from the Corporation or indebtedness to any
Subsidiary from any Subsidiary.
(u) "Liquidation Preference Amount" shall have the meaning ascribed to
such term in Subsection III(a) hereof.
(v) "Majority Holders" shall mean the holders of Series A Preferred
Shares convertible into more than 50% of the aggregate number of Conversion
Shares then issuable upon conversion of all then outstanding Series A Preferred
Shares.
(w) "NASDAQ Approval" shall mean approval of the transactions
contemplated by the Stock Purchase Agreement by the shareholders of the
Corporation pursuant to NASDAQ Rule 4460(i)(D).
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<PAGE> 5
(x) "Original Purchaser" shall mean General Electric Company, a New
York corporation.
(y) "Other Property" shall have the meaning ascribed to such term in
Subsection V(c)(viii) hereof.
(z) "Permitted Issuances" shall mean (i) the issuance or conversion of
options issued pursuant to any stock option plan, employee incentive plan,
employee stock purchase plan or employee retirement and savings plan approved by
the Corporation's Board of Directors, (ii) the issuance of Conversion Shares,
Contingent Shares or Warrant Shares, and (iii) the issuance of Common Shares to
satisfy obligations in respect of acquisitions of securities or assets of any
Person, provided (A) such contracts were entered into prior to September 30,
1999, and (B) the number of Common Shares subject to this subclause (iii) shall
not exceed 110,000 in the aggregate.
(aa) "Person" shall mean any natural person, corporation, firm,
partnership, association, government, governmental agency or other entity,
whether acting in an individual, fiduciary or other capacity.
(bb) "Preferred Shares" shall mean the Series A Preferred Shares and
the shares of any other series of Preferred Shares created in accordance with
these Articles of Incorporation.
(cc) "Purchase Price" shall mean $6.75 per Common Share (as the same
may be adjusted from time to time to take into account any action by the
Corporation in respect of its Common Shares, including, without limitation,
stock splits, dividends, combinations and reclassifications).
(dd) "Put Option" shall have the meaning ascribed to such term in
Subsection VII(h) hereof.
(ee) "Put Option Date" shall have the meaning ascribed to such term in
Subsection VII(h) hereof.
(ff) "Put Option Notice" shall have the meaning ascribed to such term
in Subsection VII(h) hereof.
(gg) "Put Option Purchase Price" shall have the meaning ascribed to
such term in Subsection VII(h) hereof.
(hh) "Put Shares" shall have the meaning ascribed to such term in
Subsection VII(h) hereof.
(ii) "Redemption Date" shall have the meaning ascribed to such term in
Subsection VI(a) hereof.
(jj) "Redemption Notice" shall have the meaning ascribed to such term
in Subsection VI(c) hereof.
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(kk) "Redemption Price" shall have the meaning ascribed to such term in
Subsection VI(a) hereof.
(ll) "Second Occurrence Failure" shall have the meaning ascribed
thereto in the Contingent Warrant Agreement.
(mm) "Series A Preferred Shares" shall mean the Series A Convertible
Preferred Shares, par value one thousandth of one cent ($.001), of the
Corporation.
(nn) "Stock Purchase Agreement" shall mean the Stock Purchase Agreement
dated September 28, 1999, between Advanced Lighting Technologies, Inc., an Ohio
corporation, and the Original Purchaser.
(oo) "Stock Plans" shall mean the Corporation's 1995 Incentive Award
Plan, the Corporation's Billion Dollar Market Capitalization Incentive Award
Plan, the Corporation's 1998 Incentive Award Plan, the Corporation's Employee
Stock Purchase Plan and the Corporation's 401(k) Retirement and Savings Plan.
(pp) "Subsequent Closing Period" shall have the meaning ascribed to
such term in Subsection VII(f) hereof.
(qq) "Subsidiaries" shall mean any other corporations of which more
than 50% of the outstanding shares of capital stock having ordinary voting power
for the election of directors is owned directly or indirectly by the
Corporation, by the Corporation and one or more Subsidiaries, or by one or more
other Subsidiaries.
(rr) "Warrant" shall mean the warrant in the form of EXHIBIT 1 attached
to the Stock Purchase Agreement for the right to purchase additional Common
Shares.
(ss) "Warrant Shares" shall mean Common Shares to be issued upon
exercise of the Warrant.
II. DIVIDENDS. No dividends shall be declared and set aside for any Series A
Preferred Shares of the Corporation except in the event that the Board of
Directors of the Corporation shall declare a dividend payable upon the then
outstanding Common Shares of the Corporation, in which event the holders of the
Series A Preferred Shares shall be entitled to the amount of dividends per share
as would be declared payable on the number of Common Shares into which each
Series A Preferred Share held by each holder thereof could be converted pursuant
to the provisions of Subsection V hereof, such number determined as of the
record date for the determination of holders of Common Shares entitled to
receive such dividend.
III. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) TREATMENT AT LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of Series A Preferred Shares shall be entitled to
receive, prior and in preference to any distribution
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of any of the assets or surplus funds of the Corporation to the holders of the
Common Shares by reason of their ownership thereof, the amount of $27.00 per
Series A Preferred Share (as adjusted for any stock dividends, combinations or
splits with respect to such shares), plus interest thereon calculated at a rate
per annum equal to 8% compounded annually from the date of issuance of each
Series A Preferred Share until the date of payment (the "Liquidation Preference
Amount"). Interest shall be determined on the basis of a 365 day year for the
actual number of days elapsed from the date of issuance until the date of
payment. If upon the occurrence of any liquidation, dissolution or winding up,
the assets and surplus funds required to be distributed among the Series A
Preferred Shares shall be insufficient to permit the payment to such holders of
the full preferential amount, then the entire assets and surplus funds of the
Corporation legally available for distribution shall be distributed among the
holders of the Series A Preferred Shares so that all holders of Series A
Preferred Shares shall receive an amount per share pro rata in accordance with
the preferential amount payable with respect to each Series A Preferred Share.
After payment to the holders of the Series A Preferred Shares of the amounts
set forth above, the entire remaining assets and funds of the Corporation
legally available for distribution, if any, shall be distributed among the
holders of the Common Shares in proportion to the Common Shares then held by
them; provided, however, that the holders of Series A Preferred Shares shall be
entitled by reason of their ownership thereof to participate in any such
distribution of any remaining assets or surplus funds to the holders of the
Common Shares as if the holders of the Series A Preferred Shares converted such
securities into Common Shares at the Conversion Ratio set forth in Subsection V
below (as adjusted as set forth herein) immediately prior to the date of such
event in addition to receipt of the amounts to which they are entitled on
account of their ownership of the Series A Preferred Shares as set forth above.
(b) TREATMENT OF REORGANIZATIONS, CONSOLIDATIONS, MERGERS, AND SALES
OF ASSETS. For purposes of this Section III, any acquisition of the Corporation
by means of (i) consolidation, merger or other form of corporate reorganization
in which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring
corporation or its subsidiary, or (ii) a sale of all or substantially all of
the assets of the Corporation, shall be treated as a liquidation, dissolution
or winding up of the Corporation and the holders of the Series A Preferred
Shares, at their option, shall have the right to receive, in lieu of the
preferential distributions described in this Section III, at the closing, the
same consideration per share payable to holders of the Common Shares as if the
holders of the Series A Preferred Shares converted such securities into Common
Shares at the Conversion Ratio set forth in Section V below (as adjusted as set
forth herein) immediately prior to the closing of such transaction.
(c) DISTRIBUTIONS OTHER THAN CASH. Whenever a distribution provided
for in this Section III shall be payable in securities or property other than
cash, the value of such distribution shall be the fair market value of such
securities or other property as determined in good faith by the Board of
Directors.
IV. VOTING.
(a) GENERAL. In addition to special voting rights provided by
applicable law, each holder of Series A Preferred Shares shall be entitled to
vote on all matters and shall be entitled to cast four (4) votes for each
Series A Preferred Share held at the record date for the determination
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of shareholders entitled to vote on such matter or, if no record date is
established, at the date such vote is taken or any written consent of
shareholders is first executed, such votes to be counted together with all
other shares of capital stock having general voting powers and not separately
as a class. Notwithstanding any adjustment to the Conversion Ratio (as defined
in Section V) pursuant to Section V, Section VI or Section VII hereof, no
holder of Series A Preferred Shares shall at any time be entitled to cast more
than four (4) votes for each Series A Preferred Share held by such holder. In
all cases where the holders of Series A Preferred Shares have the right to vote
separately as a class, such holders shall be entitled to one vote for each such
share held by them.
(b) SPECIAL MEETINGS. The holders of at least a majority of the
aggregate number of Series A Preferred Shares then outstanding (evidenced in
writing by such holders or by vote at a meeting of shareholders called for such
purpose) shall have the right at any time to call for a special meeting of the
Board of Directors of the Corporation for such specified purposes as such
holders may deem desirable. Such special meeting shall be convened in
accordance with the applicable notice provisions of the Corporation's Code of
Regulations.
V. CONVERSION. The holders of Series A Preferred Shares shall have
conversion rights as follows:
(a) OPTIONAL CONVERSION; FRACTIONAL SHARES. Each issued and outstanding
Series A Preferred Share shall be convertible, at the option of the holder
thereof, at any time and from time to time without the payment of additional
consideration, at the office of the Corporation or any transfer agent for such
stock, into 4 fully paid and nonassessable Common Shares (the "Conversion
Ratio"). The Corporation shall not be required to issue a fractional Common
Share upon conversion of any Series A Preferred Share. If any fraction of a
share would, but for this provision, be issuable upon conversion of a Series A
Preferred Share, in lieu of such fractional share, the Corporation may, at its
option, pay a cash adjustment in respect of such final fraction in an amount
equal to the same fraction of the Current Market Price per Common Share on the
date of conversion.
(b) RESERVATION OF COMMON SHARES. The Corporation shall at all times
reserve and keep available out of its authorized but unissued Common Shares,
solely for the purpose of issuance upon the conversion of the Series A
Preferred Shares, such number of Common Shares issuable upon the conversion of
all outstanding Series A Preferred Shares. All Common Shares which are so
issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Corporation shall
take all such actions as may be necessary to assure that all such Common Shares
may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon which
Common Shares may be listed (except for official notice of issuance which shall
be immediately delivered by the Corporation upon each such issuance).
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(c) ADJUSTMENTS. Subject to NASDAQ Approval, the following adjustments
shall apply as set forth in this Section V. The Corporation shall give each
holder of Preferred Shares notice of any event described below in accordance
with Section V(d) below.
(i) SHARE DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any
time the Corporation shall:
(A) take a record of the holders of its Common
Shares for the purpose of entitling them to receive a dividend
payable in, or other distribution of, Additional Common Shares,
(B) subdivide its outstanding Common Shares
into a larger number of Common Shares, or
(C) combine its outstanding Common Shares into
a smaller number of Common Shares,
then, the Conversion Ratio shall be adjusted such that the number of Common
Shares into which each Series A Preferred Share is convertible immediately
after the occurrence of any such event shall be adjusted to equal the number
of Common Shares that a record holder of the same number of Common Shares into
which a Series A Preferred Share is convertible immediately prior to the
occurrence of such event would own or be entitled to receive after the
happening of such event.
(ii) CERTAIN OTHER DISTRIBUTIONS AND ADJUSTMENTS.
(A) If at any time the Corporation shall take a
record of the holders of its Common Shares for the purpose of
entitling them to receive any dividend or other distribution
of:
(1) cash,
(2) any evidences of its
indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever
(other than cash, Convertible Securities or
Additional Common Shares), or
(3) any warrants or other rights to
subscribe for or purchase any evidences of its
indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever
(other than cash, Convertible Securities or
Additional Common Shares),
then, the holders of Series A Preferred Shares shall be entitled
to receive such dividend or distribution as if such holder had
converted such Series A Preferred Shares into Common Shares.
(B) A reclassification of the Common Shares
(other than a change in par value, or from par value to no par
value or from no par value to par value) into
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Common Shares and shares of any other class of stock shall be
deemed a distribution by the Corporation to the holders of its
Common Shares of such shares of such other class of stock
within the meaning of Subsection (c)(ii)(A) above and, if the
outstanding Common Shares shall be changed into a larger or
smaller number of Common Shares as a part of such
reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding Common
Shares within the meaning of Subsection (c)(i) hereof.
(iii) ISSUANCE OF ADDITIONAL COMMON SHARES.
(A) If at any time the Corporation shall
(except as hereinafter provided) issue or sell any Additional
Common Shares (an "Additional Issuance"), other than Permitted
Issuances, in exchange for consideration in an amount per
Additional Common Share less than either the Purchase Price or
the Current Market Price on the date of such Additional
Issuance (before giving effect to such Additional Issuance)
then, effective at the time of such Additional Issuance, the
number of Common Shares which will be issued upon conversion of
the Series A Preferred Shares shall be increased to a number
determined by multiplying the number of Common Shares subject
to issuance upon conversion of the Series A Preferred Shares
immediately before such Additional Issuance by a fraction, the
numerator of which shall be the number of Common Shares
immediately after giving effect to such Additional Issuance
(calculated on a Fully Diluted Basis) and the denominator of
which shall be the sum of:
(1) the number of Common Shares outstanding
immediately before giving effect to such Additional Issuance
(calculated on a Fully Diluted Basis), plus
(2) the number of Common Shares that the
aggregate consideration received by the Corporation with
respect to such Additional Issuance would purchase at the
"Calculation Price" on the date of such Additional Issuance
(before giving effect to such Additional Issuance).
For purposes of the preceding calculation, the term "Calculation
Price" shall mean (a) the Purchase Price if the consideration
received per Additional Common Share is less than the Purchase
Price but greater than the Current Market Price, (b) the Current
Market Price if the consideration received per Additional Common
Share is less than the Current Market Price but greater than the
Purchase Price and (c) the greater of the Purchase Price and the
Current Market Price if the consideration received per Additional
Common Share is less than both the Purchase Price and the Current
Market Price.
In computing adjustments under this Subsection, fractional
interests in Common Shares shall be taken into account to the
nearest one-thousandth of a share.
(B) Subsection (c)(iii)(A) shall not apply to any
issuance of Additional Common Shares for which an adjustment is
provided under Subsections (c)(i) and (c)(ii). No adjustment of
the number of Common Shares
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into which the Series A Preferred Shares are convertible shall be
made under Subsection (c)(iii)(A) upon the issuance of any
Additional Common Shares that are issued pursuant to the exercise
of any warrants or other subscription or purchase rights or
pursuant to the exercise of any conversion or exchange rights in
any Convertible Securities, if any such adjustment shall
previously have been made upon the issuance of such warrants or
other rights or upon the issuance of such Convertible Securities
(or upon the issuance of any warrant or other rights therefor)
pursuant to Subsections (c)(iv) and (c)(v).
(iv) ISSUANCE OF WARRANTS OR OTHER RIGHTS. If at any time the
Corporation shall take a record of the holders of its Common Shares for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Corporation is the
surviving corporation) issue or sell, any warrants or other rights to subscribe
for or purchase any Additional Common Shares or any Convertible Securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which a Common Share is issuable upon
the exercise of such warrants or other rights or upon conversion or exchange of
such Convertible Securities shall be less than either the Purchase Price or the
Current Market Price on the date of such issue or sale, then the number of
Common Shares which will be issued upon conversion of the Series A Preferred
Shares shall be adjusted as provided in Subsection (c)(iii)(A) on the basis that
the maximum number of Additional Common Shares issuable pursuant to all such
warrants or other rights necessary to effect the conversion or exchange of all
such Convertible Securities shall be deemed to have been issued and outstanding
and the Corporation shall be deemed to have received all of the consideration
payable therefor, if any, as of the date of the issuance of such warrants or
other rights. No further adjustments to the number of Common Shares which will
be issued upon conversion of the Series A Preferred Shares shall be made upon
the actual issue of Common Shares or of Convertible Securities upon exercise of
warrants or other rights contemplated by this Subsection (c)(iv) or upon the
actual issue of Common Shares upon conversion or exchange of Convertible
Securities contemplated by this Subsection (c)(iv).
(v) ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the
Corporation shall take a record of the holders of its Common Shares for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Corporation is the
surviving corporation) issue or sell, any Convertible Securities, whether or not
the rights to exchange or convert thereunder are immediately exercisable, and
the price per share for which a Common Share is issuable upon such conversion or
exchange shall be less than either the Purchase Price or the Current Market
Price on the date of such issue or sale, then the number of Common Shares which
will be issued upon conversion of the Series A Preferred Shares shall be
adjusted as provided in Subsection (c)(iii)(A) on the basis that the maximum
number of Additional Common Shares necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
and outstanding and the Corporation shall have received all of the consideration
payable therefor, if any, as of the date of issuance of such Convertible
Securities. No adjustment to the number of Common Shares into which the Series A
Preferred Shares are convertible shall be made under this Subsection (c)(v) upon
the issuance of any Convertible Securities that are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Subsection (c)(iv). No
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further adjustments of the number of Common Shares into which the Series A
Preferred Shares are convertible shall be made upon the actual issue of such
Common Shares upon conversion or exchange of such Convertible Securities and,
if any issue or sale of such Convertible Securities is made upon exercise of
any warrant or other right to subscribe for or to purchase any such Convertible
Securities for which adjustments of the number of Common Shares into which the
Series A Preferred Shares are convertible have been or are to be made pursuant
to other provisions of this Subsection (c), no further adjustments of the
number of Common Shares into which the Preferred Shares are convertible shall
be made by reason of such issue or sale.
(vi) SUPERSEDING ADJUSTMENT. If, at any time after any
adjustment of the number of Common Shares into which the Series A Preferred
Shares are convertible shall have been made pursuant to Subsections (c)(iv) and
(c)(v) as the result of any issuance of warrants, rights or Convertible
Securities,
(A) such warrants or rights, or the right of
conversion or exchange in such other Convertible Securities, shall
expire, and all or a portion of such warrants or rights, or the right
of conversion or exchange with respect to all or a portion of such
other Convertible Securities, as the case may be, shall not have been
exercised, or
(B) the consideration per share for which Common
Shares are issuable pursuant to such warrants or rights, or the terms
of such other Convertible Securities, shall be increased solely by
virtue of provisions therein contained for an automatic increase in
such consideration per share upon the occurrence of a specified date or
event,
then the previous adjustment made to the number of Common Shares into which the
Preferred Shares are convertible shall be rescinded and annulled and the
Additional Common Shares that were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such rights or options
or other Convertible Securities on the basis of
(C) treating the number of Additional Common Shares
or other property, if any, theretofore actually issued or issuable
pursuant to the previous exercise of any such warrants or rights or any
such right of conversion or exchange, as having been issued on the date
or dates of any such exercise and for the consideration actually
received and receivable therefor, and
(D) treating any such warrants or rights or any such
other Convertible Securities that then remain outstanding as having
been granted or issued immediately after the time of such increase of
the consideration per share for which Common Shares or other property
are issuable under such warrants or rights or other Convertible
Securities; whereupon a new adjustment of the number of Common Shares
into which the Series A Preferred Shares are convertible shall
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be made, which new adjustment shall supersede the previous adjustment
so rescinded and annulled.
(vii) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments to the number of Common Shares into which the Series A Preferred
Shares are convertible provided for in this Subsection (c):
(A) COMPUTATION OF CONSIDERATION. To the extent that
any Additional Common Shares or any Convertible Securities or any
warrants or other rights to subscribe for or purchase any Additional
Common Shares or any Convertible Securities shall be issued for cash
consideration, the consideration received by the Corporation therefor
shall be the amount of the cash received by the Corporation therefor,
or, if such Additional Common Shares or Convertible Securities are
offered by the Corporation for subscription, the subscription price,
or, if such Additional Common Shares or Convertible Securities are sold
to underwriters or dealers for public offering without a subscription
offering, the initial public offering price (in any such case
subtracting any amounts paid or receivable for accrued interest or
accrued dividends and without taking into account any compensation,
discounts or expenses paid or incurred by the Corporation for and in
the underwriting of, or otherwise in connection with, the issuance
thereof). To the extent that such issuance shall be for a consideration
other than cash, then, except as herein otherwise expressly provided,
the amount of such consideration shall be deemed to be the fair value
of such consideration at the time of such issuance as determined in
good faith by the Board of Directors of the Corporation. In case any
Additional Common Shares or any Convertible Securities or any warrants
or other rights to subscribe for or purchase such Additional Common
Shares or Convertible Securities shall be issued in connection with any
merger in which the Corporation issues any securities, the amount of
consideration therefor shall be deemed to be the fair value, as
determined in good faith by the Board of Directors of the Corporation,
of such portion of the assets and business of the nonsurviving
corporation as such Board in good faith shall determine to be
attributable to such Additional Common Shares, Convertible Securities,
warrants or other rights, as the case may be. The consideration for any
Additional Common Shares issuable pursuant to any warrants or other
rights to subscribe for or purchase the same shall be the consideration
received by the Corporation for issuing such warrants or other rights
plus the additional consideration payable to the Corporation upon
exercise of such warrants or other rights. The consideration for any
Additional Common Shares issuable pursuant to the term of any
Convertible Securities shall be the consideration received by the
Corporation for issuing warrants or other rights to subscribe for or
purchase such Convertible Securities, plus the consideration paid or
payable to the Corporation in respect of the subscription for or
purchase of such Convertible Securities, plus the additional
consideration, if any, payable to the Corporation upon the exercise of
the right of conversion or exchange in such Convertible Securities. In
case of the issuance at any time of any Additional Common Shares or
Convertible Securities in payment or satisfaction of any dividends upon
any class of stock other than Common Shares, the Corporation shall be
deemed to have received for such Additional Common Shares or
Convertible Securities a consideration equal to the amount of such
dividend so paid or satisfied.
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(B) WHEN ADJUSTMENTS TO BE MADE. The adjustments
required by this Subsection (c) shall be made whenever and as often as
any specified event requiring an adjustment shall occur, except that
any adjustment to the number of Common Shares into which the Series A
Preferred Shares are convertible that would otherwise be required may
be postponed (except in the case of a subdivision or combination of
Common Shares, as provided for in Subsection (c)(i)) up to, but not
beyond the date of conversion if such adjustment either by itself or
with other adjustments not previously made adds or subtracts less than
1% of the Common Shares into which the Series A Preferred Shares are
convertible immediately prior to the making of such adjustment. Any
adjustment representing a change of less than such minimum amount
(except as aforesaid) that is postponed shall be carried forward and
made as soon as such adjustment, together with other adjustments
required by this Subsection (c) and not previously made, would result
in a minimum adjustment or on the date of conversion. For the purpose
of any adjustment, any specified event shall be deemed to have occurred
at the close of business on the date of its occurrence.
(C) FRACTIONAL INTERESTS. In computing adjustments
under this Subsection (c), fractional interests in Common Shares shall
be taken into account to the nearest 1/1000th of a share.
(D) WHEN ADJUSTMENT NOT REQUIRED. If the Corporation
shall take a record of the holders of its Common Shares for the purpose
of entitling them to receive a dividend or distribution or subscription
or purchase rights and shall, thereafter and before the distribution to
shareholders thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
(E) ESCROW OF SHARES. If after any property becomes
distributable pursuant to this Subsection (c) by reason of the taking
of any record of the holders of Common Shares, but prior to the
occurrence of the event for which such record is taken, and the holders
of Series A Preferred Shares convert such Series A Preferred Shares,
any Additional Common Shares issuable upon exercise by reason of such
adjustment shall be deemed the last Common Shares into which the Series
A Preferred Shares have been converted (notwithstanding any other
provision to the contrary herein) and such shares or other property
shall be held in escrow for such holder by the Corporation to be issued
to such holder upon and to the extent that the event actually takes
place. Notwithstanding any other provision to the contrary herein, if
the event for which such record was taken fails to occur or is
rescinded, then such escrowed shares shall be cancelled by the
Corporation and escrowed property returned to the Corporation.
(F) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever
the Board of Directors of the Corporation shall be required to make a
determination in good faith of the fair value of any item under this
Subsection (c), such determination may be challenged in good faith by
the Majority Holders, and any dispute shall be resolved by an
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investment banking or valuation firm of recognized national standing
selected by the Corporation and acceptable to the Majority Holders.
(G) PROHIBITION ON ADJUSTMENT. The provisions of
Subsections (c)(iii), (c)(iv) and (c)(v) shall not operate to reduce
the number of Common Shares which will be issued upon conversion of the
Series A Preferred Shares.
(viii) REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION
OR DISPOSITION OF ASSETS. In case the Corporation shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Corporation is not the surviving corporation or where
there is a change in or distribution with respect to the Common Shares), or
sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, Common Shares of the successor or acquiring corporation, or any cash,
shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Shares
of the Corporation, then each holder of Series A Preferred Shares shall have the
right thereafter to receive, upon conversion of such Series A Preferred Shares,
the number of Common Shares of the successor or acquiring corporation or of the
Corporation, if it is the surviving corporation, and Other Property receivable
upon or as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a holder of the number of Common
Shares into which the Series A Preferred Shares owned by such holder are
convertible immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Corporation) shall expressly assume
the due and punctual observance and performance of each and every covenant and
condition of the Series A Preferred Shares to be performed and observed by the
Corporation and all the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined by resolution of the
Board of Directors of the Corporation) in order to provide for adjustments of
Common Shares into which the Series A Preferred Shares are convertible which
shall be as nearly equivalent as practicable to the adjustments provided for in
this Subsection (c). For purposes of this Subsection (c)(viii), "common stock of
the successor or acquiring corporation" shall include stock of such corporation
of any class that is not preferred as to dividends or assets over any other
class of stock of such corporation and that is not subject to redemption and
shall also include any evidences of indebtedness, shares of stock or other
securities that are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Subsection (c)(viii) shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
(ix) OTHER ACTION AFFECTING COMMON SHARES. In case at any time
or from time to time the Corporation shall take any action in respect of its
Common Shares, other than any action described in this Subsection (c), then,
unless such action will not have a materially adverse effect upon the rights of
holders of Series A Preferred Shares, the number of Common
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Shares or other stock into which the Series A Preferred Shares are convertible
shall be adjusted in such manner as may be equitable in the circumstances.
(d) NOTICES TO HOLDERS OF SERIES A PREFERRED SHARES.
(i) NOTICE OF ADJUSTMENTS. Not less than 10 nor more than 30
days prior to the record date or effective date, as the case may be, of any
action that requires or might require an adjustment or readjustment pursuant to
Subsection (c), the Corporation shall forthwith prepare and deliver to each
holder of Series A Preferred Shares, a signed copy of a certificate executed by
the chief financial officer of the Corporation setting forth, in reasonable
detail, the event requiring the adjustment and the method by which such
adjustment was calculated (including a description of the basis on which the
Board of Directors of the Corporation determined the fair value of any evidences
of indebtedness, shares of stock, other securities or property or warrants or
other subscription or purchase rights referred to in Subsection (c)(vii)(A),
specifying the number of Common Shares into which the Series A Preferred Shares
are convertible and (if such adjustment was made pursuant to Subsections
(c)(viii) or (c)(ix)) describing the number and kind of any other shares of
stock or Other Property into which the Series A Preferred Shares are
convertible, after giving effect to such adjustment or change. The Corporation
shall keep at its office or agency copies of all such certificates and cause the
same to be available for inspection at said office during normal business hours
by any holder of Series A Preferred Shares or any prospective purchaser of
Series A Preferred Shares designated by a holder thereof.
(ii) NOTICE OF CORPORATE ACTION. If at any time:
(A) the Corporation shall take a record of the
holders of its Common Shares for the purpose of entitling them to
receive a dividend or other distribution, or any right to subscribe for
or purchase any evidences of its indebtedness, any shares of stock of
any class or any other securities or property, or to receive any other
right, or
(B) there shall be any capital reorganization of the
Corporation, any reclassification or recapitalization of the capital
stock of the Corporation or any consolidation or merger of the
Corporation with, or any sale, transfer or other disposition of all or
substantially all the property, assets or business of the Corporation
to, another corporation, person or entity, or
(C) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in any one or more of such cases, the Corporation shall give to each
holder of Series A Preferred Shares (A) at least 30 days prior written notice of
the date on which a record date shall be selected for such dividend,
distribution or right or for determining rights to vote in respect of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, and (B) in the case of any
such reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least 30 days prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause also shall specify (A) the date on which
any such
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<PAGE> 17
record is to be taken for the purpose of such dividend, distribution or right,
the date on which the holders of Common Shares shall be entitled to any such
dividend, distribution or right, and the amount and character thereof, and (B)
the date on which any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up is to take place and the time, if any such time is to be fixed, as of which
the holders of Common Shares shall be entitled to exchange their Common Shares
for securities or other property deliverable upon such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to each holder of Series A Preferred Shares at
the last address of such holder appearing on the books of the Corporation.
VI. REDEMPTION OF SERIES A PREFERRED SHARES.
(a) MANDATORY REDEMPTION. The Corporation shall redeem all of the
issued and outstanding Series A Preferred Shares on September 30, 2010 (the
"Redemption Date"). The redemption price for the Series A Preferred Shares
redeemed shall be the Liquidation Preference Amount (the "Redemption Price"). If
on the Redemption Date the funds of the Corporation legally available are
insufficient to redeem all of the Series A Preferred Shares, the number of
Series A Preferred Shares legally permitted to be redeemed shall be redeemed and
Series A Preferred Shares which the Corporation is legally unable to redeem
shall be redeemed as soon thereafter as funds become legally available for such
redemption. In addition, with respect to any Series A Preferred Shares that the
Corporation is legally or otherwise unable to redeem within the one year period
commencing on the Redemption Date and, if the Conversion Ratio has not been
increased pursuant to Section VII, then, subject to NASDAQ Approval, the
Conversion Ratio applicable to such Series A Preferred Shares shall increase
from 4 Common Shares for each Series A Preferred Share to 8 Common Shares for
each Series A Preferred Share and the holders of the Series A Preferred Shares
shall have the right to convert such Series A Preferred Shares at any time prior
to redemption thereof by the Corporation.
(b) PRORATION. To the extent the Corporation is legally unable to
redeem all Series A Preferred Shares on the Redemption Date, the Series A
Preferred Shares to be redeemed shall be selected pro rata in accordance with
the ratio the number of Series A Preferred Shares held by each respective holder
bears to the total number of Series A Preferred Shares then issued and
outstanding. Not less than 30 or more than 60 days' previous notice shall be
given to the holders of record of the Series A Preferred Shares to be redeemed,
by registered or certified mail, postage prepaid.
(c) MECHANICS. At least 60 days prior to the Redemption Date, written
notice (hereinafter referred to as the "Redemption Notice") shall be mailed,
postage prepaid, to each holder of record of the Series A Preferred Shares, at
its address shown on the records of the Corporation; PROVIDED, HOWEVER, that the
Corporation's failure to give such Redemption Notice shall in no way affect its
obligation to redeem Series A Preferred Shares as provided in Section VI(a)
hereof. The Redemption Notice shall contain the following information:
(i) the number of Series A Preferred Shares held by the holder
and the total number of Series A Preferred Shares held by all holders.
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(ii) the Redemption Date and the applicable Redemption Price;
(iii) the number of Series A Preferred Shares to be redeemed;
and
(iv) a statement that the holder is to surrender to the
Corporation, at the place designated herein, its certificate or certificates
representing the Series A Preferred Shares to be redeemed.
(d) SURRENDER OF CERTIFICATES. Each holder of Series A Preferred Shares
to be redeemed shall surrender the certificate or certificates representing such
shares to the Corporation, and thereupon the applicable Redemption Price for
such shares as set forth in this Section 6 shall be paid to the order of the
person whose name appears on such certificate or certificates and each
surrendered certificate shall be cancelled and retired and new certificates
representing any Series A Preferred Shares not redeemed shall be issued to the
holder at no additional cost.
VII. PUT OPTIONS.
(a) GENERAL PUT OPTION. On September 30, 2004, the Majority Holders
shall have the right to require the Corporation to purchase all or part of the
Series A Preferred Shares that the Majority Holders then own at a purchase price
equal to the Put Option Purchase Price. If the Corporation fails to so purchase
any Put Shares under this Section VII(a) within any applicable Closing Period or
any applicable Subsequent Closing Period (each as defined in clause (f) below),
then, subject to NASDAQ Approval, the Conversion Ratio applicable to all
outstanding Series A Preferred Shares shall increase from 4 Common Shares for
each Series A Preferred Share to 8 Common Shares for each Series A Preferred
Share.
(b) OPT OUT/NASDAQ PUT. If either (i) the Control Share Acquisition
Resolution is not approved by the affirmative vote of the holders of shares
entitling them to exercise a majority of the voting power of the Corporation at
the Corporation's 1999 annual meeting of shareholders, or (ii) NASDAQ Approval
is not obtained at the Corporation's 1999 annual meeting of shareholders, then
the Majority Holders shall have the right to require the Corporation to purchase
all or part of the Series A Preferred Shares that the Majority Holders then own
at a purchase price equal to the Put Option Purchase Price.
(c) GOVERNMENTAL APPROVAL PUT. If within 365 days after the Original
Purchaser has filed its Notification and Report Form as required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in connection
with a Second Occurrence Failure by the Corporation under the Contingent Warrant
Agreement, the Corporation and the Original Purchaser are unable to obtain all
governmental and other approvals required under any applicable laws, statutes,
orders, rules, regulations or policies, or any guidelines promulgated
thereunder, including, without limitation, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("Government Approval"), then the Majority
Holders shall have the right to require the Corporation to purchase all or part
of the Series A Preferred Shares that the Majority Holders then own at a
purchase price equal to the Put Option Purchase Price.
(d) OCCURRENCE BASED PUT. If the Corporation or any of its Subsidiaries
shall (i) authorize or issue any shares of capital stock of any class or any
options, warrants, or rights to
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purchase capital stock of any class or any securities convertible into capital
stock of any class, other than (A) Conversion Shares issued upon conversion of
the Series A Preferred Shares, (B) Warrant Shares issued upon exercise of the
Warrant, (C) Common Shares issued to employees of the Corporation pursuant to
the Stock Plans, (D) Contingent Shares issued upon exercise of the Contingent
Warrants, (E) capital stock of any Subsidiary issued to the Corporation or any
Subsidiary or (F) Common Shares issued to satisfy obligations in respect of
acquisitions of securities or assets of any Person, provided that (I) such
contracts were entered into prior to September 30, 1999, and (II) the number of
Common Shares subject to this subparagraph (F) shall not exceed 110,000 in the
aggregate, or (ii) directly or indirectly sell, lease, or otherwise dispose of
more than 10% of the properties and assets of the Corporation and its
Subsidiaries on a consolidated basis, in the aggregate, to any Person (other
than the Corporation any Subsidiary), whether in one transaction or in a series
of transactions over any period of twelve consecutive months, or (iii) merge
into or with or consolidate with any other Person other than a Subsidiary, or
(iv) create, incur, assume, or otherwise become or remain liable, directly or
indirectly, for any Indebtedness for Borrowed Money that would cause the
Corporation to have Indebtedness for Borrowed Money in excess of $210,000,000
in the aggregate at any time, whether by loan, guaranty, mortgage, or
otherwise, excluding indebtedness incurred in connection with a redemption of
Series A Preferred Shares, then in any such case the Majority Holders shall
have the right to require the Corporation to purchase all or part of the Series
A Preferred Shares that the Majority Holders then own at a purchase price equal
to the Put Option Purchase Price. If the Corporation fails to so purchase any
Put Shares under this Section VII(d) within any applicable Closing Period or
any applicable Subsequent Closing Period, then, subject to NASDAQ Approval, the
Conversion Ratio applicable to all outstanding Series A Preferred Shares shall
increase from 4 Common Shares for each Series A Preferred Share to 8 Common
Shares for each Series A Preferred Share.
(e) MECHANICS. The Corporation shall deliver written notice to each
holder of Series A Preferred Shares at such holder's address on the books and
records of the Corporation of each event giving rise to a Put Option under
clauses (b), (c) and (d) of this Section VII (the "Corporation Put Right
Notice"). The Corporation Put Right Notice shall be mailed by first class
certified mail, return receipt requested, no later than two (2) business days
after the occurrence of the event giving rise to the Put Option. In order to
exercise a Put Option under clause (b), (c) or (d) of this Section VII, a holder
of the Series A Preferred Shares shall, no later than ninety (90) days after
receipt of the Corporation Put Right Notice, send written notice to the
Corporation specifying that the holder has elected to exercise its Put Option.
In order to exercise a Put Option under clause (a) of this Section VII, a holder
of the Series A Preferred Shares shall, no later than September 30, 2004, send
written notice to the Corporation specifying that it has elected to exercise the
Put Option.
(f) CLOSING PERIOD. If the purchase or redemption of Put Shares under
clauses (a), (b), (c) or (d), as the case may be, would not cause or constitute
a default under any agreement or indenture relating to indebtedness of the
Corporation then outstanding (collectively, the "Credit Agreements"), the
closing of the purchase of Put Shares under this Section VII shall occur as soon
as practicable after the delivery of a Put Option Notice with respect to such
Put Shares on a date mutually acceptable to the Majority Holders and the
Corporation, but in no event later than one year from the date of delivery of
the applicable Put Option Notice (the "Closing Period"). If the Corporation may
purchase part but not all of the Put Shares without causing a default under
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<PAGE> 20
the Credit Agreements, the Corporation shall purchase, within the Closing
Period, that number of Put Shares (pro rata from each holder based on the
number of Put Shares held by each holder and the total number of Put Shares
held by all holders) that it may purchase without causing or constituting a
default under the Credit Agreements. Subject to any earlier conversion of any
Put Shares, the Corporation shall from time to time purchase Put Shares at any
time that any such purchase would not cause or constitute a default under the
Credit Agreements. The closing of the purchase of any Put Shares under the
preceding sentence shall occur as soon as practicable after the date that the
determination is made that such purchase will not cause or constitute a default
under the Credit Agreements on a date mutually acceptable to the Majority
Holders and the Corporation, but in no event later than sixty (60) days after
the date of such determination (each, a "Subsequent Closing Period"). Until
purchased by the Corporation in accordance with the terms of this Section VII,
the holders of the Put Shares shall have the right to convert Put Shares
notwithstanding delivery of a Put Option Notice.
(g) SURRENDER OF CERTIFICATES. Each holder of Put Shares to be
purchased pursuant to a Put Option shall surrender the certificate or
certificates representing all such Put Shares to the Corporation on or before
the closing of the purchase of the Put Shares, and thereupon the applicable Put
Option Purchase Price for such shares as set forth in this Section VII shall be
paid to the order of the person whose name appears on such certificate or
certificates for each Put Share purchased and each surrendered certificate shall
be cancelled and retired and new certificates representing any Series A
Preferred Shares not purchased shall be issued to the holder at no additional
cost. If any Put Shares are not purchased within the Closing Period or
Subsequent Closing Period, as the case may be, each certificate issued
representing such shares shall bear a legend indicating the increase, if any, in
the Conversion Ratio pursuant to this Section VII.
(h) CERTAIN DEFINITIONS. For purpose of this Section VII, the following
terms shall have the following meanings:
"Put Option" shall mean the option of the Majority Holders to
require the Corporation to purchase the Series A Preferred Shares owned by the
Majority Holders under clauses (a), (b), (c) and (d) of this Section VII.
"Put Option Date" shall mean the date on which the Original
Purchaser has actual notice that an event giving rise to a Put Option under this
Section VII has occurred.
"Put Option Notice" shall mean the written notice sent by the
Original Purchaser to the Corporation pursuant to which the Original Purchaser
notifies the Corporation that it is exercising its Put Option right under clause
(a), (b), (c) or (d) of this Section VII.
"Put Option Purchase Price" shall mean the Liquidation
Preference Amount.
"Put Shares" shall mean any Series A Preferred Shares with
respect to which the Majority Holders have elected to exercise their right to
require the Corporation to purchase under clauses (a), (b), (c) or (d) of this
Section VII.
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<PAGE> 21
VIII. NO REISSUANCE OF PREFERRED STOCK. No Series A Preferred Share or Series
A Preferred Shares acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be cancelled, retired and eliminated from the shares which the Corporation
shall be authorized to issue. The President or any Vice President and the
Secretary or any Assistant Secretary of the Corporation are hereby authorized
and directed on behalf of the Corporation to file such documents from time to
time as may be necessary to reduce the authorized number of Series A Preferred
Shares accordingly.
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<PAGE> 1
EXHBIT 4.2
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated
as of September 30, 1999, is between Advanced Lighting Technologies, Inc., an
Ohio corporation (the "Company"), and General Electric Company, a New York
corporation (the "Purchaser").
RECITIALS:
----------
A. Pursuant to a Stock Purchase Agreement (the "Stock Purchase
Agreement") dated September 28, 1999, between the Company and the Purchaser, the
Purchaser has agreed to purchase seven hundred sixty-one thousand two hundred
fifty (761,250) shares of Series A Convertible Preferred Stock, par value $.001,
of the Company (the "Series A Shares")
B. It is a condition to the obligations of the Purchaser under
the Stock Purchase Agreement that the parties hereto execute this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
covenants contained herein, the parties agree as follows:
1. DEFINITIONS. Capitalized terms used but not otherwise
defined herein shall have meanings assigned to such terms in the Stock Purchase
Agreement. The following terms when used in this Agreement shall have the
following meanings (such definitions to be equally applicable to the singular
and plural forms thereof):
"COMMISSION" shall mean the Securities and Exchange
Commission.
"COMMON SHARES" shall mean the common shares, par value $.001,
of the Company.
"CONTINGENT WARRANT AGREEMENT" shall mean the Contingent
Warrant Agreement in the form of Exhibit 2.2 attached to the Stock Purchase
Agreement.
"CONTINGENT WARRANTS" shall mean the warrants issued pursuant
to the Contingent Warrant Agreement.
"DEMAND REGISTRATION" shall have the meaning provided in
Section 2(a).
"PERSON" shall mean any natural person, corporation, firm,
partnership, association, government, governmental agency or other entity,
whether acting in an individual, fiduciary or other capacity.
"REGISTRABLE SECURITIES" shall mean (i) any equity securities
of the Company issued or issuable upon exercise of the option to convert the
Series A Shares issued pursuant to the Stock Purchase Agreement; (ii) any equity
securities of the Company issued or issuable
<PAGE> 2
upon exercise of the Contingent Warrants, (iii) any equity securities of the
Company issued or issuable upon exercise of the Warrant, (iv) any shares of
equity securities of the Company held as of the date hereof or acquired
hereafter by the Purchaser or any transferee, successor or assign of the
Purchaser; and (v) any equity securities of the Company issued or issuable with
respect to the securities referred to in clauses (i), (ii), (iii) or (iv) by way
of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular Registrable Securities, such securities shall cease to be
Registrable Securities when they have been distributed to the public pursuant to
an offering registered under the Securities Act or sold to the public through a
broker, dealer or market maker in compliance with Rule 144 (or any similar rule
then in force). For purposes of this Agreement, a Person shall be deemed to be a
holder of Registrable Securities whenever the Person has the right to acquire,
directly or indirectly, the Registrable Securities (upon conversion or exercise
in connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not the
acquisition has actually been effected.
"REGISTRATION EXPENSES" shall have the meaning provided in
Section 6(a).
"RULE 144" shall mean Rule 144 promulgated under the
Securities Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"THIRD PARTY REGISTRABLE SECURITIES" shall mean securities
having registration rights pursuant to the Registration Rights Agreement dated
January 2, 1998, entered into in connection with the acquisition by the Company
of Ruud Lighting, Inc., and the Registration Rights Agreement dated January 28,
1998, entered into in connection with the acquisition by the Company of
Deposition Sciences, Inc.
"THIRD PARTY REGISTRATION RIGHTS" shall mean the registration
rights granted to the holders of the Third Party Registrable Securities.
"WARRANT" shall mean the warrant in the form of Exhibit 1
attached to the Stock Purchase Agreement.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended.
Other capitalized terms used herein shall have the meaning
assigned to them herein.
2. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. Subject to the terms and
conditions hereof, if the holders of Registrable Securities representing at
least either (i) an aggregate of 30% of the total of all Registrable Securities,
or (ii) Registrable Securities having a minimum anticipated aggregate offering
price of at least $7,500,000, request registration under the Securities Act of
any of their Registrable Securities on Form S-1 or any similar long-form
registration ("Long-Form Registrations") or, as provided in Section 2(c), the
holders of Registrable Securities request registration under the Securities Act
of all or part of their Registrable Securities on Form S-2 or S-3 or any similar
short-form registration ("Short-Form
2
<PAGE> 3
Registrations"), if available, which requests specify the approximate number of
Registrable Securities requested to be registered and the anticipated per share
price range for such offering, then within ten days after receipt of any such
request, the Company shall give written notice of such requested registration to
all other holders of Registrable Securities and shall include in the
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 15 days after the receipt
of the Company's notice. All registrations requested pursuant to this Section
2(a) are referred to herein as "Demand Registrations."
(b) LONG-FORM REGISTRATIONS. The holders of Registrable
Securities shall be entitled to request one (1) Long-Form Registration in which
the Company shall pay all Registration Expenses ("Company-paid Long-Form
Registrations"). A registration shall not count as the one (1) permitted
Long-Form Registration until it has become effective, and any Company-paid
Long-Form Registration above shall not count as the one (1) permitted Long-Form
Registration unless the holders of Registrable Securities are able to register
and sell 100% of the Registrable Securities requested to be included in such
registration. Notwithstanding the foregoing, the Company shall pay all
Registration Expenses in connection with any registration initiated as a
Company-paid Long-Form Registration, whether or not it has become effective;
provided, however, that the Company shall not be required to pay the
Registration Expenses of a Long-Form Registration which is withdrawn at the
request of the holders of Registrable Securities participating in such offering.
(c) SHORT-FORM REGISTRATIONS. In addition to the Long-Form
Registration provided pursuant to Section 2(b), the holders of Registrable
Securities shall be entitled to request an unlimited number of Short-Form
Registrations, each with a minimum anticipated aggregate offering price of at
least $1,500,000 in which the Company shall pay all Registration Expenses.
Demand Registrations shall be Short-Form Registrations whenever the Company is
permitted to use any applicable short form. After the Company has become subject
to the reporting requirements of the 1934 Act, the Company shall use its best
efforts to make Short-Form Registrations available for the sale of Registrable
Securities.
(d) PRIORITY ON DEMAND REGISTRATIONS. Except as required by
the Third Party Registration Rights, the Company shall not include in any Demand
Registration any securities which are not Registrable Securities without the
prior written consent of the holders of a majority of the Registrable Securities
initially requesting such registration. If a Demand Registration is an
underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering
exceeds the number of Registrable Securities and other securities, if any, which
can be sold in an orderly manner in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities initially
requesting registration, the Company shall include in the registration, prior to
the inclusion of any securities which are not Registrable Securities, the number
of Registrable Securities requested to be included which, in the opinion of the
underwriters, can be sold in an orderly manner within the price range of the
offering, pro rata among the respective holders thereof on the basis of the
amount of Registrable Securities owned by each such holder. Any Persons other
than holders of Registrable Securities who participate in Demand Registrations
which are not at the Company's expense must pay their share of the Registration
Expenses as provided in Section 7.
3
<PAGE> 4
(e) RESTRICTIONS ON REGISTRATIONS. The Company shall not be
obligated to effect any Demand Registration within six months after the
effective date of a previous Demand Registration or a registration in which the
holders of Registrable Securities were given piggyback rights pursuant to
Section 3 and in which there was no reduction in the number of Registrable
Securities requested to be included (except to the extent permitted pursuant to
Section 2(b) with respect to a Long-Form Registration). The Company may postpone
for up to six months the filing or the effectiveness of a registration statement
for a Demand Registration if the Board of Directors of the Company determines in
good faith that it is reasonably foreseeable that the Demand Registration would
reasonably be expected to have a material adverse effect on any proposal or plan
by the Company to engage in any acquisition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender offer or
similar transaction; provided, that, in such event, the holders of Registrable
Securities initially requesting the Demand Registration shall be entitled to
withdraw such request and, if such request is withdrawn, the Demand Registration
shall not count as the one (1) permitted Long-Form Registration hereunder, and
the Company shall pay all Registration Expenses in connection with the withdrawn
registration.
(f) SELECTION OF UNDERWRITERS. The holders of a majority of
the Registrable Securities initially requesting registration shall have the
right to select the investment banker(s) and manager(s) to administer the
offering, subject to the Company's approval which shall not be unreasonably
withheld.
3. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Subject to the terms and conditions
hereof, whenever the Company proposes to register any of its securities under
the Securities Act (other than pursuant to a Demand Registration) and the
registration form to be used may be used for the registration of Registrable
Securities (a "Piggyback Registration"), the Company shall give prompt written
notice to all holders of Registrable Securities of the Company's intention to
effect such a registration and shall include in the registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within 15 days after the receipt of the Company's notice.
(b) PIGGYBACK EXPENSES. The Registration Expenses of the
holders of Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in an orderly manner in such offering
within a price range acceptable to the Company, subject to the Third Party
Registration Rights, the Company shall include in such registration (i) first,
the securities the Company proposes to sell, (ii) second, the Registrable
Securities requested to be included in the registration, pro rata among the
holders of such Registrable Securities on the basis of the number of shares
owned by each such holder, and (iii) third, other securities requested to be
included in the registration.
4
<PAGE> 5
(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities and the managing underwriters advise the Company in
writing that, in their opinion, the number of securities requested to be
included in the registration exceeds the number which can be sold in an orderly
manner in such offering within a price range acceptable to the holders initially
requesting the registration, subject to the Third Party Registration Rights, the
Company shall include in such registration (i) first, the Registrable Securities
requested to be included in the registration, pro rata among the holders of such
Registrable Securities on the basis of the number of shares owned by each
holder, and (ii) second, other securities requested to be included in such
registration.
(e) SELECTION OF UNDERWRITERS. If any Piggyback Registration
is an underwritten offering, the selection of investment banker(s) and
manager(s) for the offering must be approved by the holders of a majority of the
Registrable Securities included in such Piggyback Registration, which approval
shall not be unreasonably withheld.
(f) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to Registrable Securities (pursuant to
Section 2 or pursuant to this Section 3), and if such previous registration has
not been withdrawn or abandoned, the Company shall not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities, until
a period of at least six months has elapsed from the effective date of the
previous registration.
4. HOLDBACK AGREEMENTS.
(a) Each holder of Registrable Securities agrees not to effect
any public sale or distribution (including sales pursuant to Rule 144) of equity
securities of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and the 90-day
period or such longer period as required by the underwriters managing the
registered public offering beginning on the effective date of any underwritten
Demand Registration or underwritten Piggyback Registration in which Registrable
Securities are included (except for sales of such securities as part of such
underwritten registered offering and as otherwise permitted under Rule 144(k)),
unless the underwriters managing the registered public offering otherwise agree.
(b) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 90-day period or such longer period as required by the
underwriters managing the registered public offering beginning on the effective
date of any underwritten Demand Registration or any underwritten Piggyback
Registration (except as part of such underwritten registration or pursuant to
registrations on Form S-8 or any successor form), unless the underwriters
managing the registered public offering otherwise agree, and (ii) to cause each
holder of its equity securities, or any securities convertible into or
exchangeable or exercisable for its equity securities, purchased from the
Company at any time after the date of this Agreement (other than in a registered
public offering) to agree not to effect any public sale or distribution
(including sales pursuant to Rule 144) of any such securities
5
<PAGE> 6
during such period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered public
offering otherwise agree.
5. REGISTRATION PROCEDURES. Whenever the holders of
Registrable Securities have requested that any Registrable Securities be
registered pursuant to this Agreement, the Company shall use its best efforts to
effect the registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof, and pursuant thereto
the Company shall as expeditiously as possible:
(a) Prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its best efforts
to cause the registration statement to become effective and remain effective
until the earlier of (i) the date when all Registrable Securities covered by the
registration statement have been sold, or (ii) 180 days from the effective date
of the registration statement; provided that before filing a registration
statement or prospectus or any amendments or supplements thereto, the Company
shall furnish to the counsel selected by the holders of a majority of the
Registrable Securities covered by the registration statement copies of all such
documents proposed to be filed, including documents that are to be incorporated
by reference into the registration statement, amendment or supplement, which
documents shall be subject to the review of such counsel, and which proposed
registration statement or amendment or supplement thereto shall not be filed by
the Company if the holders of a majority of the Registrable Securities covered
by the registration statement, amendment or supplement reasonably object to such
filing;
(b) Prepare and file with the Commission such amendments and
supplements to the registration statement and the prospectus used in connection
therewith as may be necessary to keep the registration statement effective for
the period referred to in Section 5(a) and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by the
registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in the registration
statement;
(c) Furnish to each seller of Registrable Securities such
number of copies of the registration statement, each amendment and supplement
thereto, the prospectus included in the registration statement (including each
preliminary prospectus) and such other documents as such holder may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such holder;
(d) Use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any holder thereof reasonably requests and do any and all other
acts and things which may be reasonably necessary or advisable to enable such
holder to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such holder;
(e) Notify each holder of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such holder, the Company shall
prepare a supplement
6
<PAGE> 7
or amendment to the prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not contain an
untrue statement of a material fact or omit to state any fact necessary to make
the statements therein not misleading;
(f) Promptly notify the holders of Registrable Securities and
the underwriters, if any, of the following events and (if requested by any such
Persons) confirm such notification in writing: (i) the filing of the prospectus
or any prospectus supplement and the registration statement and any amendment or
post-effective amendment thereto and, with respect to the registration statement
or any post-effective amendment thereto, the declaration of the effectiveness of
such document; (ii) any requests by the Commission for amendments or supplements
to the registration statement or the prospectus or for additional information;
(iii) the issuance or threat of issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings for that purpose; and (iv) the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or threat
of initiation of any proceeding for such purpose;
(g) Cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, endeavor to secure
designation of all such Registrable Securities covered by the registration
statement as a NASDAQ "national market system security" within the meaning of
Rule 11Aa2-1 of the Commission or, failing that, to secure NASDAQ authorization
for such Registrable Securities and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register as such with
respect to such Registrable Securities with the NASD;
(h) Provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(i) Enter into such customary agreements (including, without
limitation, underwriting agreements in customary form) and take all such other
actions as the holders of a majority of the Registrable Securities being sold or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities (including, without limitation,
effecting a stock split or a combination of shares);
(j) Make available for inspection by any holder of Registrable
Securities, any underwriter participating in any disposition pursuant to the
registration statement and any attorney, accountant or other agent retained by
any such holder or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such holder, underwriter, attorney,
accountant or agent in connection with the registration statement;
(k) Otherwise endeavor to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least twelve months beginning with the first day of
7
<PAGE> 8
the Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(l) Permit any holder of Registrable Securities to participate
in the preparation of such registration or comparable statement and to require
the insertion therein of material furnished to the Company in writing, which in
the reasonable judgment of the holder and its counsel should be included;
(m) Make every reasonable effort to prevent the entry of any
order suspending the effectiveness of the registration statement and, in the
event of the issuance of any such stop order, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any security included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order;
(n) Use its best efforts to cause such Registrable Securities
covered by the registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
holders thereof to consummate the disposition of such Registrable Securities;
(o) Cooperate with the selling holders of Registrable
Securities and the underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends, and enable such Registrable Securities to
be in such lots and registered in such names as the underwriters may request at
least two business days prior to any delivery of Registrable Securities to the
underwriters;
(p) Provide a CUSIP number for all Registrable Securities not
later than the effective date of the registration statement; and
(q) Prior to the effectiveness of the registration statement
and any post-effective amendment thereto and at each closing of an underwritten
offering, (i) make such representations and warranties to the selling holders of
such Registrable Securities and the underwriters, if any, with respect to the
Registrable Securities and the registration statement as are customarily made by
issuers to underwriters in primary underwritten offerings, (ii) obtain opinions
of counsel to the Company and updates thereof (which counsel and which opinions
shall be reasonably satisfactory to the underwriters, if any, and to the holders
of a majority of the Registrable Securities being sold) addressed to each
selling holder and the underwriters, if any, covering the matters customarily
covered in opinions requested in underwritten offerings and such other matters
as may be reasonably requested by such holders and underwriters or their
counsel, (iii) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the selling
holders of Registrable Securities and the underwriters, if any, such letters to
be in customary form and covering matters of the type customarily covered in
"cold comfort" letters by underwriters in connection with primary underwritten
offerings, and (iv) deliver such documents and certificates as may be reasonably
requested by the holders of a majority of the Registrable Securities being sold
and by the
8
<PAGE> 9
underwriters, if any, to evidence compliance with clause (i) above and with any
customary conditions contained in the underwriting agreement or other agreement
entered into by the Company.
6. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company and all independent certified public
accountants, underwriters (excluding discounts and commissions) and other
Persons retained by the Company (all such expenses being herein called
"Registration Expenses"), shall be borne by the Company, and the Company shall
pay its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit or quarterly review, the expense of any
liability insurance and the expenses and fees for listing the securities to be
registered on each securities exchange on which similar securities issued by the
Company are then listed or on the NASD automated quotation system.
(b) In connection with each Demand Registration and each
Piggyback Registration, the Company shall reimburse the holders of Registrable
Securities covered by such registration for the reasonable fees and
disbursements of one (1) counsel chosen by the holders of a majority of the
Registrable Securities initially requesting such registration.
(c) To the extent Registration Expenses are not required to be
paid by the Company, each holder of securities included in any registration
hereunder shall pay those Registration Expenses allocable to the registration of
the holder's securities so included, and any Registration Expenses not so
allocable shall be borne by all sellers of securities included in the
registration in proportion to the aggregate selling price of the securities to
be so registered.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted
by law, each holder of Registrable Securities, its affiliates and their
respective officers, directors, employees and agents, as the case may be, and
each Person who controls the holder (within the meaning of the Securities Act),
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein as provided in Section 7(b) below. In connection with an underwritten
offering, the Company shall indemnify the underwriters, their officers,
directors and partners, as the case may be, and each Person who controls the
underwriters (within the meaning of the Securities Act), to the same extent as
provided above with respect to the indemnification of the holders of Registrable
Securities.
9
<PAGE> 10
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each holder shall furnish to
the Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by the holder; provided that the obligation to indemnify
shall be individual to each holder and shall be limited to the net amount of
proceeds received by the holder from the sale of Registrable Securities pursuant
to the registration statement.
(c) Any Person entitled to indemnification hereunder shall (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification and (ii) unless in the indemnified party's
reasonable judgment a conflict of interest between the indemnified and the
indemnifying parties may exist with respect to such claim, permit the
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party shall not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than One (1) counsel for all parties indemnified by the
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party, a conflict of interest may exist between the
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and shall survive the transfer of securities.
The Company also agrees to make such provisions as are reasonably requested by
any indemnified party for contribution to the party in the event the Company's
indemnification is unavailable for any reason.
8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless the
Person (a) agrees to sell the Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements, and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters other than representations and warranties regarding the holder and
the holder's intended method of distribution.
10
<PAGE> 11
9. REPORTS UNDER THE SECURITIES LAWS. With a view to making
available to the holders of Registrable Securities the benefits of Rule 144 and
any other rule or regulation of the Commission that may at any time permit the
holder to sell securities of the Company to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144, at all times subsequent to 90 days after
the effective date of any registration statement covering an underwritten public
offering filed under the Securities Act by the Company;
(b) File with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
1934 Act at any time after it is subject to the registration requirements; and
(c) Furnish to any the holder so long as the holder owns any
of the Registrable Securities forthwith upon request a written statement by the
Company that it has complied with the reporting requirements of Rule 144 (at any
time after 90 days after the effective date of the registration statement filed
by the Company), and of the Securities Act and the 1934 Act (at any time after
it has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed by the Company as may be reasonably requested by any holder in availing
itself of any rule or regulation of the Commission permitting the selling of any
the securities without registration.
10. CERTAIN LIMITATIONS IN CONNECTION WITH FUTURE GRANTS OF
REGISTRATION RIGHTS. From and after the date of this Agreement, the Company
shall not enter into any agreement with any holder or prospective holder of any
securities of the Company providing for the granting to the holder of
registration rights unless the agreement:
(a) Includes as a term the equivalent of Section 4 of this
Agreement;
(b) Includes a provision that, in the case of a Demand
Registration, protects the holders of Registrable Securities if marketing
factors require a limitation on the number of securities to be included in an
underwriting in the manner contemplated by Sections 2(d), 3(c) and 3(d) of this
Agreement;
(c) Is otherwise not inconsistent with the rights granted to
the holders of Registrable Securities in this Agreement; and
(d) Is approved by the holders of a majority of the
Registrable Securities then outstanding.
11. TRANSFER OF REGISTRATION RIGHTS. Provided that the Company
is given written notice by the holder of Registrable Securities at the time of
any transfer of Registrable Securities by such holder stating the name and
address of the transferee of such Registrable Securities and identifying the
securities with respect to which the rights under this Agreement are being
assigned, the rights of the holder of Registrable Securities under this
Agreement may be transferred in whole or in part at any time to any such
transferee, so long as such transfer of securities is in accordance with all
applicable state and federal securities laws and regulations.
11
<PAGE> 12
12. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company shall not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of Registrable
Securities in this Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
shall not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would materially and
adversely affect the marketability of such Registrable Securities in any such
registration (including, without limitation, effecting a stock split or a
combination of shares).
(c) REMEDIES. Any Person having rights under any provision of
this Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may, in its sole discretion,
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived only upon the
prior written consent of the Company and holders of a majority of the
Registrable Securities (excluding all Registrable Securities held by the
Company). The failure of any party to enforce any of the provisions of this
Agreement will in no way be construed as a waiver of such provisions and will
not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
(e) SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto,
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities who consents in
writing to be bound by this Agreement.
(f) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, that provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed
simultaneously in multiple counterparts, any one of which need not contain the
signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement.
12
<PAGE> 13
(h) DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive
headings of this Agreement are inserted for convenience only and do not
constitute a Section of this Agreement. The use of the word "including" in this
Agreement shall be by way of example rather than by limitation.
(i) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law.
(j) NOTICES. All notices, demands or other communications to
be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be delivered personally to the recipient, sent by
reputable express courier service (charges prepaid) or sent by certified or
registered mail, return receipt requested and postage prepaid and shall be
deemed to have been given when so delivered, sent or deposited in the U.S. mail.
Such notices, demands and other communications shall be sent to the parties
hereto at the addresses indicated below or, with respect to subsequent holders
of Registrable Securities, at the addresses of such holders set forth in the
books and records of the Company:
if to the Company:
Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
Attention: President
with a copy to:
Cowden, Humphrey & Sarlson Co., L.P.A.
1414 Terminal Tower
Cleveland, Ohio 44113
Attention: James S. Hogg, Esq.
Facsimile: (216) 241-2881
if to the Purchaser:
GE Lighting
1975 Noble Rd.
Cleveland, OH 44112
Attention: President and Chief
Executive Officer
Facsimile: (216) 266-8699
13
<PAGE> 14
with a copy to:
GE Lighting
1975 Noble Rd.
Cleveland, OH 44112
Attention: General Counsel
Facsimile: (216) 266-3856
or to such other address as it appears in the records of the Company (unless
otherwise indicated by such holder) or to the attention of such other person as
the recipient party has specified by prior written notice to the sending party.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
ADVANCED LIGHTING TECHNOLOGIES, INC.
By: /s/ Wayne R. Hellman
------------------------------------------
Name: Wayne R. Hellman
-------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------
GENERAL ELECTRIC COMPANY
By: /s/ Mike S. Zafirovski
------------------------------------------
Name: Mike S. Zafirovski
-------------------------------------
Title: President and CEO, GE Lighting
-------------------------------------
14
<PAGE> 1
EXHIBIT 10.1
[SIDE LETTER]
PNC BANK, NATIONAL ASSOCIATION
2 PNC Plaza
620 Liberty Avenue
Pittsburgh, PA 15222
August 5, 1999
BankBoston, N.A.
100 Federal Street
Boston, MA 02110
RE: CREDIT AGREEMENT DATED AS OF MAY 21, 1999 AMONG ADVANCED LIGHTING
TECHNOLOGIES, INC., AS U.S. BORROWER, BALLASTRONIX INCORPORATED (KNA
VENTURE LIGHTING POWER SYSTEMS, NORTH AMERICA INC.) AND CANADIAN
LIGHTING SYSTEMS HOLDING, INCORPORATED, AS CANADIAN BORROWERS, PARRY
POWER SYSTEMS LIMITED AND VENTURE LIGHTING EUROPE LTD., AS UK
BORROWERS, VARIOUS FINANCIAL INSTITUTIONS, AS BANKS, AND PNC BANK,
NATIONAL ASSOCIATION, AS AGENT (THE "CREDIT AGREEMENT") (CAPITALIZED
TERMS USED IN THIS LETTER WITHOUT DEFINITION HAVE THE MEANINGS ASCRIBED
THERETO IN THE CREDIT AGREEMENT)
Ladies and Gentlemen:
In connection with BankBoston, N.A. ("BankBoston") entering into that certain
Assignment and Acceptance Agreement pursuant to which it agrees to become a
"Bank" under the Credit Agreement, as more fully set forth in the Assignment and
Acceptance Agreement, PNC Bank, National Association, as Agent ("Agent") and
BankBoston hereby agree as follows:
1. The definition "Required Banks" contained in Article I of the Credit
Agreement shall be amended (the "Amendment") to mean Agent and at least
one other Lender (other than PNC Bank, National Association) which has
a minimum commitment of $10,000,000.
2. Section 5.3 of the Credit Agreement shall be amended to expressly
provide for, among other things:
(a) the weekly delivery of Borrowers assignment of sales and the
monthly delivery of Borrower's Certificate by each Borrower;
(b) the delivery on a monthly basis of an accounts receivable
aging report and an accounts payable report, to be in form of
substance satisfactory to the Agent and the Required Banks;
(c) the consent of the Required Banks for any amendment to the
Indenture, namely that the definition of Indenture contained
in the Credit Agreement will be modified in the third line
thereof to provide for the "prior written consent of the
Required Banks"; and
<PAGE> 2
(d) the modification of the definition of "Total Unused Credit
Availability" contained in Article I of the Credit Agreement
to read in its entirety as follows: "Total Unused Credit
Availability" shall mean, at any time, the difference between
(a) the sum of (i) the U.S. Borrowing Base, (ii) the UK
Borrowing Base and (iii) the Canadian Borrowing Base, minus
(b) the Revolving Credit Exposure."
3. The Canadian Credit Facility set forth in Section 2.1.A.3 of the Credit
Agreement will be modified under the terms of the Amendment to provide
that:
(a) borrowing requests by Canadian Borrowers shall request Loans
from the Banks in Dollars;
(b) Loans from the Banks to Canadian Borrowers will be made in
Dollars; and
(c) the repayment of Loans made by the Banks to the Canadian
Borrowers will be repaid in Dollars.
The Credit Agreement, the Canadian Revolving Credit Notes and the other
Related Writings, as applicable, will be modified to reflect the
foregoing in a manner satisfactory to Agent and the Banks.
4. Until such time as the Credit Agreement and Related Writings are
modified to reflect the provisions of Paragraphs 3 and 5 herein, no
Loans will be made under Canadian Revolving Credit Commitment. In lieu
thereof, to the extent that there is availability under the U.S.
Borrowing Base, U.S. Borrower may request U.S. Revolving Loans and
advance funds by way of intercompany loans to the Canadian Borrowers as
permitted by the Credit Agreement.
5. The Amendment will provide for the deletion of Section 2.5(e)(ii)(C)
and (D). The Amendment will further provide for the deletion of the
second paragraph under Section 3.2 of the Credit Agreement, and the
addition in place thereof of provisions that will provide that if the
Borrower pays any additional amount under Section 3.2 to a Bank and
such Bank determines in its sole discretion that it has actually
received or realized in connection therewith any refund or any
reduction of, or credit against, its tax liabilities in or with respect
to the taxable year in which the additional amount is paid, such Bank
shall pay to such Borrower an amount that the Bank shall, in its sole
discretion, determine is equal to the net benefit, after tax, which was
obtained by the Bank in such year as a consequence of such tax benefit;
provided, however, that any Bank may determine in its sole discretion
consistent with the policies of such Bank whether to seek a tax
benefit, and nothing in Section 3.2 shall require a Bank to disclose
any confidential information to any Borrower (including, without
limitation, its tax returns). Additionally, in connection with Canadian
Borrowers' withholding tax liability with respect to Canadian Revolving
Loans, the Amendment will contain provisions specifically stating that
(a) Canadian Borrowers are responsible for the timely payment of all
withholding taxes, (b) evidence of the making of those payments in a
timely manner, and (c) Banks and Agent will be indemnified for any loss
or liability resulting from Canadian Borrowers' failure to make such
tax payments in a timely manner.
<PAGE> 3
6. Notwithstanding the provisions of Section 10.3 of the Credit Agreement
or the definition of "Required Lenders", the Amendment and any related
changes to the Related Writings shall be in a form and substance
satisfactory to Borrower, Agent, BankBoston and any other Banks and
shall address such other matter as are deemed necessary or appropriate
by Agent and the Banks. The parties hereto will use their good faith
efforts to enter into the Amendment no later than August 25, 1999.
The undersigned agree to and acknowledge the foregoing terms, provisions and
conditions of this letter.
PNC BANK, NATIONAL ASSOCIATION, PNC BANK, NATIONAL ASSOCIATION,
as Agent as Bank
By: /s/Richard Muse, Jr. By: /s/Richard Muse, Jr.
------------------------- -------------------------
Title: Vice President Title: Vice President
----------------------- -----------------------
Date: 8/4/99 Date: 8/4/99
------------------------ ------------------------
BANKBOSTON, N.A., as Bank VENTURE LIGHTING POWER
SYSTEMS, NORTH AMERICA INC.
By: /s/Paul R. Crimlisk (fka Ballastronix Incorporated)
-------------------------
Title: Vice President By: /s/R. G. Douglas Oulton
----------------------- --------------------------
Date: 8/5/99 Title: V.P. Finance
------------------------ -----------------------
Date: 99/8/7
------------------------
ADVANCED LIGHTING TECHNOLOGIES, INC.
PARRY POWER SYSTEMS LIMITED
By: /s/Nicholas R. Sucic
-------------------------
Title: Vice President By: /s/R. M. Heyworth
----------------------- --------------------------
Date: Title: Technical Director
------------------------ -----------------------
Date: 30-7-99
----------------------
CANADIAN LIGHTING SYSTEMS HOLDINGS,
INCORPORATED
By: /s/R. G. Douglas Oulton
-------------------------
Title: V. P. Finance
-----------------------
Date: 99/8/7
------------------------
VENTURE LIGHTING EUROPE, LTD.
By: /s/S. D. Weaver
-------------------------
Title: Export Sales & Marketing Director
----------------------------------
Date: 30th July, 1999
------------------------
<PAGE> 1
Exhibit 10.2
[BankBoston, N.A.]
ASSIGNMENT AND ACCEPTANCE AGREEMENT
This Assignment and Acceptance Agreement (this "Assignment Agreement")
between PNC Bank, National Association (the "Assignor") and BankBoston, N.A.
(the "Assignee") is dated as of August 5, 1999. The parties hereto agree as
follows:
1. PRELIMINARY STATEMENT. Assignor is a party to a Credit Agreement,
dated as of May 21, 1999 (which, as it may from time to time be amended,
restated or otherwise modified is herein called the "Credit Agreement"), among
ADVANCED LIGHTING TECHNOLOGIES, INC., as U.S. Borrower, certain Subsidiaries as
Canadian Borrowers and certain Subsidiaries as UK Borrowers (collectively,
"Borrowers", and, individually, "Borrower"), the banking institutions named on
SCHEDULE 1 thereto (collectively, "Banks" and, individually, "Bank"), and PNC
BANK, NATIONAL ASSOCIATION, as agent for the Banks ("Agent"). Capitalized terms
used herein and not otherwise defined herein shall have the meanings attributed
to them in the Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. Assignor hereby sells and assigns to
Assignee, and Assignee hereby purchases and assumes from Assignor, an interest
in and to Assignor's rights and obligations under the Credit Agreement,
effective as of the Assignment Effective Date (as hereinafter defined), equal to
the percentage interest specified on ANNEX 1 hereto (hereinafter, "Assignee's
Percentage") of Assignor's right, title and interest in and to (a) the
Commitment of Assignor which is outstanding on the Assignment Effective Date,
(b) Assignor's interest in any Letter of Credit, as defined in the Credit
Agreement, which is issued and outstanding on the Assignment Effective Date, (c)
any Note delivered to Assignor pursuant to the Credit Agreement, and (d) the
Credit Agreement and the other Related Writings. After giving effect to such
sale and assignment and on and after the Assignment Effective Date, Assignee
shall be deemed to have a "Commitment Percentage" under the Credit Agreement
equal to the Commitment Percentage set forth in subsections I.C on ANNEX 1
hereto.
3. ASSIGNMENT EFFECTIVE DATE. The Assignment Effective Date (the
"Assignment Effective Date") shall be two (2) Business Days (or such other time
agreed to by Agent) after the following conditions precedent have been
satisfied:
(a) receipt by Agent of this Assignment Agreement, including ANNEX 1
hereto, properly executed by Assignor and Assignee and accepted and consented to
by Agent and, if necessary pursuant to the provisions of Section 10.10(A)(i) of
the Credit Agreement, by Borrowers;
(b) receipt by Agent from Assignee of an administrative questionnaire,
or other similar document, which shall include (i) the address for notices under
the Credit Agreement, (ii) the address of its Lending Office, (iii) wire
transfer instructions for delivery of funds by Agent, (iv) and such other
information as Agent shall request; and
1
<PAGE> 2
(c) receipt by Agent from Assignor or Assignee of any other information
required pursuant to Section 10.10 of the Credit Agreement or otherwise
necessary to complete the transaction contemplated hereby.
4. PAYMENT OBLIGATIONS. In consideration for the sale and assignment of
Loans hereunder, Assignee shall pay Assignor, on the Assignment Effective Date,
an amount in Dollars equal to Assignee's Percentage. Any interest, fees and
other payments accrued prior to the Assignment Effective Date with respect to
the Assigned Amount shall be for the account of Assignor. Any interest, fees and
other payments accrued on and after the Assignment Effective Date with respect
to the Assigned Amount shall be for the account of Assignee. Each of Assignor
and Assignee agrees that it will hold in trust for the other part any interest,
fees or other amounts which it may receive to which the other party is entitled
pursuant to the preceding sentence and to pay the other party any such amounts
which it may receive promptly upon receipt thereof.
5. CREDIT DETERMINATION; LIMITATIONS ON ASSIGNOR'S LIABILITY. Assignee
represents and warrants to Assignor, Borrowers, Agent and the other Banks (a)
that it is capable of making and has made and shall continue to make its own
credit determinations and analysis based upon such information as Assignee
deemed sufficient to enter into the transaction contemplated hereby and not
based on any statements or representations by Assignor, (b) Assignee confirms
that it meets the requirements to be an assignee as set forth in Section 10.10
of the Credit Agreement; (c) Assignee confirms that it is able to fund the Loans
and the Letters of Credit as required by the Credit Agreement; and (d) Assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement and the Related Writings
are required to be performed by it as a Bank thereunder, in all events as the
Credit Agreement is modified pursuant to the side letter among Borrowers, Agent
and Assignee dated the date hereof (the "Side Letter") and the related Amendment
(as defined in the Side Letter) to the Credit Agreement. It is understood and
agreed that (a) the assignment and assumption hereunder are made without
recourse to Assignor, (b) Assignor makes no representation or warranty of any
kind to Assignee except that (i) Assignor has not received notice from any
Borrower that an Event of Default (as defined in the Credit Agreement) has
occurred and (ii) Assignor has the ability to assign hereunder, and (c) Assignor
shall not be responsible for (i) the due execution, legality, validity,
enforceability, genuineness, sufficiency or collectability of the Credit
Agreement or any Related Writings, (ii) any representation, warranty or
statement made in or in connection with the Credit Agreement or any of the
Related Writings, (iii) the financial condition or creditworthiness of any
Borrower or any Guarantor, (iv) the performance of or compliance with any of the
terms or provisions of the Credit Agreement or any of the Related Writings, (v)
inspecting any of the property, books or records of any Borrower, or (vi) the
validity, enforceability, perfection, priority, condition, value or sufficiency
of any collateral securing or purporting to secure the Loans or Letters of
Credit. Neither Assignor nor any of its officers, directors, employees, agents
or attorneys shall be liable for any mistake, error of judgment, or action taken
or omitted to be taken in connection with the Loans, the Letters of Credit, the
Credit Agreement or the Related Writings, except for its or their own bad faith
or willful misconduct. Assignee appoints Agent to take such action as agent on
its behalf and to exercise such powers under the Credit Agreement as are
delegated to Agent by the terms thereof.
2
<PAGE> 3
6. INDEMNITY. Assignee agrees to indemnify and hold Assignor harmless
against any and all losses, cost and expenses (including, without limitation,
attorneys' fees) and liabilities incurred by Assignor in connection with or
arising in any manner from Assignee's performance or non-performance of
obligations assumed under this Assignment Agreement.
7. SUBSEQUENT ASSIGNMENTS. After the Assignment Effective Date,
Assignee shall have the right pursuant to Section 10.10 of the Credit Agreement
to assign the rights which are assigned to Assignee hereunder, provided that (a)
any such subsequent assignment does not violate any of the terms and conditions
of the Credit Agreement, any of the Related Writings, or any law, rule,
regulation, order, writ, judgment, injunction or decree and that any consent
required under the terms of the Credit Agreement or any of the Related Writings
has been obtained, (b) the assignee under such assignment from Assignee shall
agree to assume all of Assignee's obligations hereunder in a manner satisfactory
to Assignor and (c) Assignee is not thereby released from any of its obligations
to Assignor hereunder.
8. REDUCTIONS OF AGGREGATE AMOUNT OF COMMITMENTS. If any reduction in
the Total Commitment Amount occurs between the date of this Assignment Agreement
and the Assignment Effective Date, the percentage of the Total Commitment Amount
assigned to Assignee shall remain the percentage specified in Section 1 hereof
and the dollar amount of the Commitment of Assignee shall be recalculated based
on the reduced Total Commitment Amount.
9. ACCEPTANCE OF AGENT; NOTICE BY ASSIGNOR. This Assignment Agreement
is conditioned upon the acceptance and consent of Agent and, if necessary
pursuant to Section 10.10A of the Credit Agreement, upon the acceptance and
consent of Borrowers; provided, that the execution of this Assignment Agreement
by Agent and, if necessary, by Borrowers is evidence of such acceptance and
consent.
10. ENTIRE AGREEMENT. This Assignment Agreement embodies the entire
agreement and understanding between the parties hereto and supersede all prior
agreements and understandings between the parties hereto relating to the subject
matter hereof.
11. GOVERNING LAW. This Assignment Agreement shall be governed by the
internal law, and not the law of conflicts, of the State of Ohio.
12. NOTICES. Notices shall be given under this Assignment Agreement in
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall be
the address set forth under each party's name on the signature pages hereof.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
and Acceptance Agreement by their duly authorized officers as of the date first
above written.
ASSIGNOR:
620 Liberty Avenue PNC BANK, NATIONAL ASSOCIATION
Pittsburgh, PA 15222
By: /s/ Richard Muse, Jr.
----------------------------
Title: Vice President
-------------------------
ASSIGNEE:
100 Federal Street BANKBOSTON, N.A.
Boston, MA 02110
By: /s/ Paul R. Crimlisk
----------------------------
Title: Vice President
-------------------------
Accepted and Consented to this 4th day of August, 1999:
PNC BANK, NATIONAL ASSOCIATION,
as Agent
By: /s/ Richard Muse, Jr.
--------------------------------------------------
Title: Vice President
-----------------------------------------------
Accepted and Consented to this ____ day of August, 1999:
ADVANCED LIGHTING
TECHNOLOGIES, INC.
By: /s/ Nicholas R. Sucic
--------------------------------------------------
Title: Vice President
-----------------------------------------------
4
<PAGE> 5
ANNEX 1
TO
ASSIGNMENT AND ACCEPTANCE AGREEMENT
<TABLE>
<CAPTION>
Financial Commitment Revolving Canadian UK Revolving Term Loan Maximum
Institution Percentage Credit Revolving Credit Commitment Amount
Commitment Credit Commitment Amount
Amount Commitment Amount
Amount
<S> <C> <C> <C> <C> <C> <C>
PNC Bank, 80% $40,000,000 $4,800,000 $4,800,000 $20,000,000 $60,000,000
National
Association
- -------------------------------------------------------------------------------------------------------------------------
BankBoston, 20% $10,000,000 $1,200,000 $1,200,000 $ 5,000,000 $15,000,000
N.A.
- -------------------------------------------------------------------------------------------------------------------------
Total 100% $6,000,000 $6,000,000 $75,000,000
- -------------------------------------------------------------------------------------------------------------------------
Maximum $50,000,000
Revolving
Credit
Commitment
Amount
- -------------------------------------------------------------------------------------------------------------------------
Maximum $25,000,000
Term Loan
Commitment
Amount
- -------------------------------------------------------------------------------------------------------------------------
Total $75,000,000
Commitment
Amount
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 1
Exhibit 10.3
FIRST AMENDMENT AGREEMENT
This First Amendment Agreement is effective as of the 17th day of
August, 1999, by and among ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio
corporation ("U.S. Borrower"), VENTURE LIGHTING POWER SYSTEMS, NORTH AMERICA
INC. (f.k.a. Ballastronix Incorporated), a corporation organized under the laws
of the Province of Nova Scotia, CANADIAN LIGHTING SYSTEMS HOLDING, INCORPORATED,
a corporation organized under the laws of the Province of Nova Scotia
(collectively, "Canadian Borrowers" and, individually, "Canadian Borrower"),
PARRY POWER SYSTEMS LIMITED (Company No. 2833448, f.k.a. Venture Lighting Europe
Ltd.), incorporated under the laws of England, VENTURE LIGHTING EUROPE LTD.
(Company No. 3341889, f.k.a. Parry Power Systems Limited), incorporated under
the laws of England (collectively, "UK Borrowers" and, individually, "UK
Borrower"; and together with U.S. Borrower and Canadian Borrowers, collectively,
"Borrowers" and, individually, "Borrower"), the banking institutions listed on
Schedule 1 to the Credit Agreement, as hereinafter defined ("Banks"), and PNC
BANK, NATIONAL ASSOCIATION, as agent for the Banks ("Agent"):
WHEREAS, Borrowers, Agent and the Banks are parties to a certain Credit
Agreement dated as of May 21, 1999, that provides, among other things, for loans
aggregating Seventy-Five Million Dollars ($75,000,000), all upon certain terms
and conditions stated therein ("Credit Agreement");
WHEREAS, Borrowers, Agent and the Banks desire to amend the Credit
Agreement to add and to modify certain provisions thereof; and
WHEREAS, each term used herein shall be defined in accordance with the
Credit Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other valuable considerations, Borrowers,
Agent and the Banks hereby agree as follows:
1. Article I of the Credit Agreement is hereby amended to delete the
definitions of "Canadian Base Rate Loan", "Canadian Borrowing Base", "Canadian
Exposure", "Canadian Fixed Rate Loan", "Canadian Letter of Credit Commitment",
"Canadian Letter of Credit Exposure", "Canadian Revolving Credit Commitment",
"Designated Lending Office", "Dollar Equivalent", "Indenture", "Required Banks",
"Total Unused Credit Availability" therefrom in their entirety and to insert in
place thereof, respectively, the following:
"Canadian Base Rate Loan" shall mean a Revolving Loan
described in subsection 3 of Section 2.1A hereof on which Canadian
Borrowers shall pay interest at a rate based on the Base Rate.
"Canadian Borrowing Base" shall mean an amount not in excess
of the sum of the following: (a) eighty-five percent (85%) of the
Dollar Equivalent of the aggregate amount due and owing on the Eligible
Receivables of each Canadian Borrower, plus (b) the lesser of (i) (A)
fifty-five percent (55%) of the Dollar Equivalent of the aggregate of
the Eligible
1
<PAGE> 2
Raw Materials of each Canadian Borrower, plus (B) sixty-five percent
(65%) of the Dollar Equivalent of the aggregate of the Eligible
Inventory of each Canadian Borrower, or (ii) the CAD Equivalent, at any
time of determination, of Three Million Dollars ($3,000,000); provided,
however that the amount of the Canadian Borrowing Base may be increased
or decreased by Agent and the Banks at any time and from time to time,
in the exercise of their sole discretion and each Canadian Borrower
consents to any such increases or decreases and acknowledges that
decreasing the amount of the Canadian Borrowing Base or increasing the
reserves may limit or restrict Canadian Revolving Loans requested by
Canadian Borrowers.
"Canadian Exposure" shall mean, at any time, the sum of (a)
the aggregate principal amount of all Canadian Revolving Loans
outstanding, and (b) the Canadian Letter of Credit Exposure.
"Canadian Fixed Rate Loan" shall mean a Revolving Loan
described in subsection 3 of Section 2.1A hereof on which Canadian
Borrowers shall pay interest at a rate based on the Eurodollar Rate.
"Canadian Letter of Credit Commitment" shall mean the
commitment of the Fronting Bank, on behalf of the Canadian Banks, to
issue Letters of Credit during the Commitment Period in an aggregate
outstanding face amount which shall never exceed One Million Dollars
($1,000,000), on the terms and conditions set forth in subsection 3(b)
of Section 2.1A hereof.
"Canadian Letter of Credit Exposure" shall mean the sum of (a)
the aggregate undrawn face amount of all issued and outstanding
Canadian Letters of Credit, and (b) the aggregate draws made on
Canadian Letters of Credit that are not yet reimbursed by Canadian
Borrowers or converted to Canadian Revolving Loans pursuant to
subsection 3(b) of Section 2.1A hereof.
"Canadian Revolving Credit Commitment" shall mean the
obligation hereunder of the Canadian Banks to make Canadian Revolving
Loans and to participate in the issuance of Canadian Letters of Credit
up to an aggregate principal amount outstanding at any time equal to
the lesser of (a) Six Million Dollars ($6,000,000) or (b) the Canadian
Borrowing Base (or such lesser amount as shall be determined pursuant
to Section 2.8 hereof).
"Designated Lending Office" shall mean the main office of
Agent.
"Dollar Equivalent" of any amount stated in Canadian Dollars
shall mean the Dollar equivalent of such amount, determined by Agent on
the basis of its spot rate at approximately 10:00 A.M. (Cleveland, Ohio
time) on the date two (2) Business Days before the date of such
determination, for the purchase of CAD with Dollars for delivery on the
date of such determination.
2
<PAGE> 3
"Indenture" shall mean that certain Indenture between Advanced
Lighting Technologies, Inc., as issuer, and The Bank of New York, as
trustee, dated as of March 18, 1998, as amended and as the same may,
with the prior written consent of Agent and the Required Banks (which
shall not be unreasonably withheld), from time to time be further
amended, restated, supplemented or otherwise modified.
"Required Banks" shall mean the holders of at least sixty-six
and two-thirds percent (66-2/3%) of the Commitment, or, if there is any
borrowing hereunder, the holders of at least sixty-six and two-thirds
percent (66-2/3%) of the aggregate amount of Dollars outstanding under
the Notes; provided, however that if one (1) Bank has at least
sixty-six and two-thirds percent (66-2/3%) but less than one hundred
percent (100%) of the Commitment, or the amount outstanding, as
applicable, then Required Banks shall mean such Bank and one (1) other
Bank.
"Total Unused Credit Availability" shall mean, at any time,
the difference between (a) the sum of (i) the U.S. Borrowing Base, (ii)
the UK Borrowing Base and (iii) the Canadian Borrowing Base, minus (b)
the sum of (i) the Revolving Credit Exposure and (ii) such reserves
against availability that are provided for under this Agreement and
determined in accordance with this Agreement.
2. Article I of the Credit Agreement is hereby amended to delete the
definitions of "CAD Equivalent", "Canadian Base Rate", "Canadian Domestic Rate"
and "Derived Canadian Fixed Rate" therefrom in their entirety.
3. The Credit Agreement is hereby amended to delete the first paragraph
of Section 2.1A therefrom and to insert in place thereof the following:
SECTION 2.1. AMOUNT AND NATURE OF CREDIT. Subject to the terms
and conditions of this Agreement, each Bank shall participate to the
extent hereinafter provided in making Loans to and issuing Letters of
Credit at the request of Borrowers in such aggregate amount as
Borrowers shall request pursuant to the Commitment; provided, however,
that in no event shall the aggregate principal amount of all Loans and
Letters of Credit outstanding under this Agreement be in excess of the
Total Commitment Amount.
4. The Credit Agreement is hereby amended to delete subsections (d) and
(f) of Section 2.2 therefrom and to insert in place thereof, respectively, the
following:
(d) with respect to any Canadian Revolving Loan, receipt by
Agent of a Notice of Loan from a Canadian Borrower, such notice to be
received by 11:00 A.M. (Cleveland, Ohio time) on the proposed date of
borrowing or conversion with respect to a Canadian Base Rate Loan, and,
with respect to the making, conversion or continuation of any Canadian
Fixed Rate Loans, by 11:00 A.M. (Cleveland, Ohio time) three (3)
Business Days prior to the proposed date of borrowing, conversion or
continuation. Agent shall notify each
3
<PAGE> 4
Canadian Bank of the date, amount and Interest Period (if applicable)
promptly upon the receipt of such notice, and, in any event, by 2:00
P.M. (Cleveland, Ohio time) on the date such notice is received. On the
date that any such Canadian Revolving Loan is to be made, each Canadian
Bank shall provide Agent, at the Designated Lending Office not later
than 3:00 P.M. (Cleveland, Ohio time), with the Dollar amount in
federal or other immediately available funds required of it;
(f) each request of (i) U.S. Borrower for a U.S. Base Rate
Loan shall be in an amount of not less than Five Hundred Thousand
Dollars ($500,000), increased by increments of One Hundred Thousand
Dollars ($100,000), and a Eurodollar Loan shall be in an amount of not
less than Five Million Dollars ($5,000,000), increased by increments of
Five Hundred Thousand Dollars ($500,000), (ii) a UK Borrowers for a UK
Base Rate Loan shall be in an amount of not less than Five Hundred
Thousand Dollars ($500,000), increased by increments of One Hundred
Thousand Dollars ($100,000), and a UK Fixed Rate Loan shall be in an
amount of not less than One Million Dollars ($1,000,000), increased by
increments of Five Hundred Thousand Dollars ($500,000), and (iii) a
Canadian Borrower for a Canadian Base Rate Loan shall be in an amount
of not less than One Million Dollars ($1,000,000), increased by
increments of One Hundred Thousand Dollars ($100,000), and a Canadian
Fixed Rate Loan shall be in an amount of not less than One Million
Dollars ($1,000,000), increased by increments of One Hundred Thousand
Dollars ($100,000);
5. The Credit Agreement is hereby amended to delete subsection 3 of
Section 2.1A therefrom and to insert in place thereof the following:
3. Canadian Credit Facility.
(a) Canadian Revolving Loans.
Subject to the terms and conditions of this Agreement, during
the Commitment Period (but subject to Section 2.11 hereof), the
Canadian Banks shall make a Canadian Revolving Loan or Canadian
Revolving Loans to Canadian Borrowers in such amount or amounts as
Canadian Borrowers may from time to time request. Canadian Borrowers
shall not request a Canadian Revolving Loan (and the Canadian Banks
shall not be obligated to make a Canadian Revolving Loan) if, after
giving effect thereto, (a) the Canadian Exposure would exceed the
Canadian Revolving Credit Commitment, or (b) the sum of (i) the UK
Exposure, (ii) the U.S. Revolving Exposure, (iii) the Canadian Exposure
and (iv) the U.S. Letter of Credit Exposure would exceed the Maximum
Revolving Credit Commitment Amount.
Canadian Borrowers shall have the option, subject to the terms
and conditions set forth herein, to borrow Canadian Revolving Loans,
maturing on the last day of the Commitment Period, by means of any
combination of (a) Canadian Base Rate Loans, or (b) Canadian Fixed Rate
Loans.
4
<PAGE> 5
Canadian Borrowers shall pay interest on the unpaid principal
amount of Canadian Base Rate Loans outstanding from time to time from
the date thereof until paid at the Base Rate from time to time in
effect. Interest on such Canadian Base Rate Loans shall be payable,
commencing June 1, 1999, and on the 1st day of each succeeding month
thereafter, and at the maturity thereof.
Canadian Borrowers shall pay interest on the unpaid principal
amount of each Canadian Fixed Rate Loan outstanding from time to time,
from the date thereof until paid, at the Derived Eurodollar Rate, fixed
in advance for each Interest Period as herein provided for each such
Interest Period. Interest on such Canadian Fixed Rate Loans shall be
payable on each Interest Adjustment Date with respect to an Interest
Period (provided that if an Interest Period exceeds three (3) months,
the interest must be paid every three (3) months, commencing three (3)
months from the beginning of such Interest Period).
At the request of Canadian Borrowers, subject to the notice
and other provisions of Section 2.2 hereof, the Canadian Banks shall
convert Canadian Base Rate Loans to Canadian Fixed Rate Loans at any
time and shall convert Canadian Fixed Rate Loans to Canadian Base Rate
Loans on any Interest Adjustment Date.
The obligation of Canadian Borrowers to repay the Canadian
Base Rate Loans and the Canadian Fixed Rate Loans made by each Canadian
Bank and to pay interest thereon shall be evidenced by a Canadian
Revolving Credit Note of Canadian Borrowers in the form of EXHIBIT C
hereto, and payable to the order of such Canadian Bank in the principal
amount of its pro rata share of the Canadian Revolving Credit
Commitment, or, if less, the aggregate unpaid principal amount of
Canadian Revolving Loans made hereunder by such Canadian Bank.
Subject to the provisions of this Agreement, Canadian
Borrowers shall be entitled under this subsection 3 of Section 2.1A to
borrow funds, repay the same in whole or in part and re-borrow
hereunder at any time and from time to time during the Commitment
Period.
(b) Canadian Letters of Credit.
Subject to the terms and conditions of this Agreement, during
the Commitment Period, such Canadian Bank as shall agree to be the
Fronting Bank for such Canadian Letter of Credit shall, in its own
name, but only as agent for the Canadian Banks, issue such Canadian
Letters of Credit for the account of a Canadian Borrower, as such
Canadian Borrower may from time to time request. No Canadian Borrower
shall request any Canadian Letter of Credit (and no Fronting Bank shall
be obligated to issue any Canadian Letter of Credit) if, after giving
effect thereto, (i) the Canadian Letter of Credit Exposure would exceed
the Canadian Letter of Credit Commitment, (ii) the Canadian Exposure
would exceed the amount of the Canadian Revolving Credit Commitment, or
(iii) the sum of (A) the Canadian Exposure, (B) the U.S. Revolving
Exposure, (C) the UK Exposure and (D) the U.S.
5
<PAGE> 6
Letter of Credit Exposure would exceed the Maximum Revolving Credit
Commitment Amount. The issuance of each Letter of Credit shall confer
upon each Canadian Bank the benefits and liabilities of a participation
consisting of an undivided pro rata interest in the Canadian Letter of
Credit to the extent of that Canadian Bank's percentage of the Canadian
Revolving Credit Commitment.
Each request for a Canadian Letter of Credit shall be
delivered to Agent not later than 11:00 A.M. (Cleveland, Ohio time)
three (3) Business Days prior to the day upon which the Canadian Letter
of Credit is to be issued. Each such request shall be in a form
acceptable to Agent and shall specify the face amount thereof, whether
such Canadian Letter of Credit is a commercial documentary or a standby
Letter of Credit, the account party, the beneficiary, the intended date
of issuance, the expiry date thereof, and the nature of the transaction
to be supported thereby. Concurrently with each such request, the
Canadian Borrower for whose benefit the Letter of Credit is to be
issued, shall execute and deliver to Agent an appropriate application
and agreement, being in the standard form of the Fronting Bank for such
letters of credit, as amended to conform to the provisions of this
Agreement if required by Agent. Agent shall give each Canadian Bank
notice of each such request for a Canadian Letter of Credit.
In respect of each Canadian Letter of Credit and the drafts
thereunder, if any, issued for the account of a Canadian Borrower,
Canadian Borrowers agree (i) to pay to Agent, for the pro rata benefit
of the Canadian Banks, (A) with respect to each Canadian Letter of
Credit that is a standby letter of credit, a commission based upon the
face amount of the Canadian Letter of Credit, which shall be paid
quarterly in arrears, on the first day of each July, October, January
and April, in an amount per annum equal to (1) the then current
Applicable Margin for Canadian Fixed Rate Loans (i.e. the Applicable
Margin for Canadian Fixed Rate Loans in effect on the date such
Canadian Letter of Credit is issued and, as to each quarterly payment
thereafter, the Applicable Margin for Canadian Fixed Rate Loans in
effect on the date of such quarterly payment), times (2) the average
undrawn face amount of such Canadian Letter of Credit during such
fiscal quarter, and (B) with respect to each Canadian Letter of Credit
that is a commercial documentary letter of credit, a non-refundable
commission based upon the face amount of the Canadian Letter of Credit,
which shall be paid on the date that any draw is made on a Canadian
Letter of Credit, in an amount equal to (1) the then current Applicable
Margin for Canadian Fixed Rate Loans, times (2) the amount drawn under
the Canadian Letter of Credit; (ii) to pay to Agent, for the sole
account of the Fronting Bank, an additional Canadian Letter of Credit
fee, which shall be paid on each date that such Canadian Letter of
Credit is issued or renewed at the rate of one-eighth percent (1/8 of
1%) of the face amount of such Canadian Letter of Credit; and (iii) to
pay to Agent for the sole account of the Fronting Bank, such other
issuance, amendment, negotiation, draw, acceptance, telex, courier,
postage and similar transactional fees as are generally charged by the
Fronting Bank under its fee schedule as in effect from time to time.
6
<PAGE> 7
Whenever a Canadian Letter of Credit is drawn, Canadian
Borrowers shall immediately reimburse the Fronting Bank for the amount
drawn. In the event that the amount drawn is not reimbursed by Canadian
Borrowers within one (1) Business Day of the drawing of such Canadian
Letter of Credit, at the sole option of Agent and the Fronting Bank,
Canadian Borrowers shall be deemed to have requested a Canadian
Revolving Loan, subject to the provisions of subsection 3(a) of Section
2.1A in the amount drawn. Such Canadian Revolving Loan shall be
evidenced by the Canadian Revolving Credit Notes. Each Canadian Bank
agrees to make a Canadian Revolving Loan on the date of such notice,
subject to no conditions precedent whatsoever. Each Canadian Bank
acknowledges and agrees that its obligation to make a Canadian
Revolving Loan pursuant to subsection 3(a) of Section 2.lA when
required by this subsection 3(b) of Section 2.1A is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, the occurrence and continuance of an
Unmatured Event of Default or Event of Default, and that its payment to
Agent, for the account of the Fronting Bank, of the proceeds of such
Canadian Revolving Loan shall be made without any offset, abatement,
recoupment, counterclaim, withholding or reduction whatsoever and
whether or not such Canadian Bank's Canadian Revolving Credit
Commitment shall have been reduced or terminated. Canadian Borrowers
irrevocably authorize and instruct Agent to apply the proceeds of any
borrowing pursuant to this subsection 3(b) of Section 2.1A to
reimburse, in full, the Fronting Bank for the amount drawn on such
Canadian Letter of Credit. Each such Canadian Revolving Loan shall be
deemed to be a Canadian Base Rate Loan unless otherwise requested by
and available to Canadian Borrowers hereunder. Each Canadian Bank is
hereby authorized to record on its records relating to its Canadian
Revolving Credit Note such Canadian Bank's pro rata share of the
amounts paid and not reimbursed on the Canadian Letters of Credit.
6. The Credit Agreement is hereby amended to delete subparts (a), (b),
(c), (e) and (f) of Section 2.5 therefrom and to insert in place thereof,
respectively, the following:
SECTION 2.5. PAYMENT ON NOTES, ETC.
(a) PAYMENTS IN DOLLARS. All payments of principal, interest
and commitment and other fees shall be made to Agent in Dollars and in
immediately available funds for the account of the Banks. Payments must
be received at the Designated Lending Office not later than 11:00 A.M.
(Cleveland, Ohio time) to be deemed to have been made and received on
that day.
(b) [Intentionally omitted.]
(c) [Intentionally omitted.]
(e) PAYMENTS NET OF TAXES.
7
<PAGE> 8
(i) GENERAL PROVISIONS. All payments under this
Agreement shall be made absolutely net of, without deduction
or offset for, and altogether free and clear of, any and all
present and future taxes, levies, deductions, charges and
withholdings and all liabilities with respect thereto, under
the laws of the United States of America or any foreign
jurisdiction (or any state or political subdivision thereof),
excluding income and franchise taxes imposed on any Bank (and
withholding relating thereto) under the laws of the United
States of America, the United Kingdom or Canada or any other
foreign jurisdiction (or any state or political subdivision
thereof). If any Borrower is compelled by law to deduct any
such taxes or levies (other than such excluded taxes) or to
make any such other deductions, charges or withholdings, then
such Borrower shall pay such additional amounts as may be
necessary in order that the net payments after such deduction,
and after giving effect to any United States or foreign
jurisdiction (or any state or political subdivision thereof)
income taxes required to be paid by the Banks in respect of
such additional amounts, shall equal the amount of interest
provided in Section 2.1 hereof for each Loan plus any
principal then due.
(ii) FOREIGN FACILITIES. In addition, and
specifically with respect to the Canadian Revolving Credit
Commitment and the UK Revolving Credit Commitment:
(A) All payments on account of principal, if
any, and interest shall be made without set-off or
counterclaim and, unless otherwise required by law,
shall be made free and clear of and without deduction
for withholding tax or similar tax, present or
future, imposed by any taxing authority in Canada,
the United Kingdom or otherwise (in this subsection
(ii) hereof, a Tax). If a Borrower is required to
withhold or pay any Tax, it shall make the required
withholding and payment in accordance with and within
the time allowed by law, and shall nonetheless pay to
the appropriate Bank such additional amounts as are
necessary to cause such Bank actually to receive in
full all amounts (after taking account of any further
deduction or withholding which is required to be made
as a consequence of the payment of such additional
amounts) on account of principal and interest or
other fees or amounts owing to it hereunder, as if
such Tax had not been paid. As soon as practicable
after the date any Tax becomes due and payable, such
Borrower shall give to such Bank the original or a
copy of a receipt for the payment of the Tax, or if
such receipts are not issued by or received from the
taxing authority to which the Tax was paid, a
certificate of an officer of such Borrower,
confirming the date and amount of the payment so made
and reasonable details of the calculation of the
amount due.
(B) Such Borrower shall indemnify and save
such Bank harmless from and against any claim,
liability, loss, cost, expense (including without
8
<PAGE> 9
limitation legal, accounting and other professional
fees, and interest and penalty charges or fines
imposed by any taxing authority in respect of or
arising from non-payment of such Tax) to which such
Bank may be exposed or which it may incur, by reason
of such Borrower's failure to make punctual payment
of any amount required to be paid to a taxing
authority pursuant to subsection (A) hereof.
(C) [Intentionally omitted.]
(D) [Intentionally omitted.]
(f) PAYMENTS TO BANKS. Upon Agent's receipt of payments
hereunder, Agent shall immediately distribute, in immediately available
funds, to each Bank its ratable share, if any, of the amount of
principal, interest, and facility and other fees received by it for the
account of such Bank. Each Bank shall record any principal, interest or
other payment, the principal amounts of the Loans, all prepayments and
the applicable dates, including Interest Periods, with respect to the
Loans made and payments received by such Bank, by such method as such
Bank may generally employ; provided, however, that failure to make any
such entry shall in no way detract from the obligations of the
respective Borrowers under each such Note. The aggregate unpaid amount
of Loans, types of Loans and Interest Periods with respect to such
Loans set forth on the records of Agent shall be rebuttably presumptive
evidence of the principal and interest owing and unpaid on each Note.
7. The Credit Agreement is hereby amended to delete Section 2.6(b)
therefrom in its entirety and to insert in place thereof the following:
(b) PREPAYMENT FEES.
(i) (A) If U.S. Borrower terminates the Revolving Credit
Commitment on or prior to the date that is three (3) years from the
Closing Date, then U.S. Borrower shall pay a prepayment fee to Agent,
for the pro rata benefit of the Banks, in an amount equal to two
percent (2%) times the Maximum Revolving Credit Commitment Amount, or
(B) if U.S. Borrower terminates the Term Loan Commitment on or prior to
the date that is three (3) years from the Closing Date, then U.S.
Borrower shall pay a prepayment fee to Agent, for the pro rata benefit
of the Banks, in an amount equal to two percent (2%) times the Maximum
Term Loan Commitment Amount; provided, however, that so long as Agent
remains Agent under any replacement credit facility, then the
prepayment fees set forth in this Section 2.6(b)(i) shall not apply;
(ii) Without limiting anything else herein, in any case of
prepayment of a Eurodollar Loan, U.S. Borrower agrees that if the
reinvestment rate for Eurodollars, as quoted by the money desk of Agent
(the "Reinvestment Rate"), shall be lower than the Eurodollar Rate
applicable to the Eurodollar Loan that is intended to be prepaid
(hereinafter,
9
<PAGE> 10
"Last Eurodollar"), then U.S. Borrower shall, upon written notice by
Agent, promptly pay to Agent, for the benefit of the Banks, in
immediately available funds, a prepayment fee equal to the product of
(A) a rate (the "Prepayment Rate") which shall be equal to the
difference between the Last Eurodollar and the Reinvestment Rate, times
(B) the principal amount of the Eurodollar Loan that is to be prepaid,
times (C) (i) the number of days remaining in the Interest Period of
the Eurodollar Loan that is to be prepaid divided by (ii) three hundred
sixty (360). In addition, U.S. Borrower shall immediately pay directly
to Agent, for the account of the Banks, the amount of any additional
costs or expenses (including, without limitation, reasonable or
standard costs of telex, wires, or cables) incurred by Agent or the
Banks in connection with the prepayment, upon U.S. Borrower's receipt
of a written statement from Agent;
(iii) Without limiting anything else herein, in the case of
prepayment of a Canadian Fixed Rate Loan, Canadian Borrowers agree that
if the reinvestment rate for Eurodollars, as quoted by the money desk
of Agent (the "Reinvestment Rate"), shall be lower than the Eurodollar
Rate applicable to the Canadian Fixed Rate Loan that is intended to be
prepaid (hereinafter, "Last Eurodollar"), then Canadian Borrowers
shall, upon written notice by Agent, promptly pay to Agent at the
appropriate Designated Lending Office, for the benefit of the Canadian
Banks, in immediately available funds, a prepayment fee equal to the
product of (A) a rate (the "Prepayment Rate") which shall be equal to
the difference between the Last Eurodollar and the Reinvestment Rate,
times (B) the principal amount of the Canadian Fixed Rate Loan that is
to be prepaid, times (C) (1) the number of days remaining in the
Interest Period of the Canadian Fixed Rate Loan which is to be prepaid
divided by (2) three hundred sixty (360); and
(iv) Without limiting anything else herein, in any case of
prepayment of a Eurodollar Loan, UK Borrowers agree that if the
reinvestment rate for Eurodollars, as quoted by the money desk of Agent
("Reinvestment Rate"), shall be lower than the Eurodollar Rate
applicable to the Eurodollar Loan that is intended to be prepaid
(hereinafter, "Last Eurodollar"), then UK Borrowers shall, upon written
notice by Agent, promptly pay to Agent, for the benefit of the Banks,
in immediately available funds, a prepayment fee equal to the product
of (A) a rate (the "Prepayment Rate") which shall be equal to the
difference between the Last Eurodollar and the Reinvestment Rate, times
(B) the principal amount of the Eurodollar Loan that is to be prepaid,
times (C) (1) the number of days remaining in the Interest Period of
the Eurodollar Loan that is to be prepaid divided by (2) three hundred
sixty (360). In addition, UK Borrowers shall immediately pay directly
to Agent, for the account of the Banks, the amount of any additional
costs or expenses (including, without limitation, reasonable or
standard costs of telex, wires, or cables) incurred by Agent or the
Banks in connection with the prepayment, upon UK Borrowers' receipt of
a written statement from Agent;
8. The Credit Agreement is hereby amended to delete Section 2.7
therefrom in its entirety and to insert in place thereof the following:
10
<PAGE> 11
SECTION 2.7. FACILITY AND OTHER FEES.
(a) U.S. Borrower shall pay to Agent, for the ratable account
of the Banks, as a consideration for the Revolving Credit Commitments
hereunder, a facility fee from the Closing Date until the last day of
the Commitment Period equal to (i) the Facility Fee Rate times (ii) (A)
the Maximum Revolving Credit Commitment Amount, less (B) the average
aggregate principal amount of all Revolving Loans outstanding for the
time period for which such payment is being made, less (C) the average
aggregate amount of all issued and outstanding Letters of Credit for
the time period for which such payment is being made. The facility fee
shall be payable, in arrears, on July 1, 1999, and on the first day of
each October, January, April and July thereafter and on the last day of
the Commitment Period.
(b) U.S. Borrower shall pay to Agent, for the sole benefit of
Agent, all fees set forth in the Agent Fee Letter.
9. The Credit Agreement is hereby amended to delete subsection (c) of
Section 2.10 therefrom in its entirety and to insert in place thereof the
following:
(c) If the Canadian Exposure at any time exceeds the Canadian
Revolving Credit Commitment, Canadian Borrowers shall, as promptly as
practicable, but in no event later than the next Business Day, prepay
an aggregate principal amount of Canadian Revolving Loans sufficient to
bring the Canadian Exposure within the Canadian Revolving Credit
Commitment.
10. The Credit Agreement is hereby amended to delete Section 2.11
therefrom in its entirety and to insert in place thereof the following:
SECTION 2.11. CANADIAN REVOLVING CREDIT COMMITMENT. Borrowers
acknowledge that, as of the Closing Date, no "Canadian Bank" exists
hereunder to make Canadian Revolving Loans or issue Canadian Letters of
Credit pursuant to the Canadian Revolving Credit Commitment. Despite
the lack of a "Canadian Bank" hereunder, and with the understanding by
Borrowers that one (1) or more of the Companies may incur adverse tax
consequences as a result thereof, Borrowers desire that Canadian
Borrowers utilize the Canadian Commitment and have requested of the
Banks, and the Banks hereby agree, that, on an interim basis only,
until such time as a "Canadian Bank" shall become a Canadian Bank
hereunder, the Banks that are not Canadian Banks will make the Canadian
Revolving Loans and Agent (or a Fronting Bank if Agent is not the
Fronting Bank) will issue Canadian Letters of Credit hereunder. Such
interim Canadian Revolving Loans shall for all purposes hereunder and
under the other Loan Documents be Canadian Revolving Loans. More
specifically, Borrowers agree with Agent and the Banks that the
Canadian Revolving Loans made to Canadian Borrowers and Canadian
Letters of Credit issued at the request of Canadian Borrowers by or on
behalf of all of the Banks on an interim basis as described above shall
be secured by all of the Collateral, as defined in the Security
Documents
11
<PAGE> 12
executed by the Canadian Borrowers, regardless of the fact that those
Security Documents refer to the extending of credit by "the Canadian
Banks". The Canadian Borrowers shall execute a Canadian Revolving
Credit Note payable to each Bank in the amount of each Bank's
Commitment Percentage of the amount of the Canadian Revolving Credit
Commitment. In addition, all indemnifications of the Canadian Banks by
Canadian Borrowers shall be applicable to the Banks making the Canadian
Revolving Loans and participating in the issuance of Canadian Letters
of Credit to the extent of the Canadian Revolving Credit Commitment.
Furthermore, at such time as a Canadian Bank becomes a Bank hereunder,
(a) each Borrower agrees with Agent and the Banks that, in the event
that such Canadian Bank requires an amendment to this Agreement in
order to clarify and conform the interest rate and similar terms used
in this Agreement with the normal procedures and term (including
interest rate) typically used by such Canadian Bank, then each
Borrower, Agent and the Banks shall promptly execute such amendment
agreement, and (b) each Canadian Borrower agrees, upon request of
Agent, to execute new Canadian Revolving Credit Notes in form and
substance satisfactory to Agent and the Canadian Banks.
11. The Credit Agreement is hereby amended to delete Section 3.2
therefrom in its entirety and to insert in place thereof the following:
SECTION 3.2. TAX LAW, ETC. In the event that by reason of any
law, regulation or requirement or in the interpretation thereof by an
official authority, or the imposition of any requirement of any central
bank whether or not having the force of law, any Bank shall, with
respect to this Agreement or any transaction under this Agreement, be
subjected to any tax, levy, impost, charge, fee, duty, deduction or
withholding of any kind whatsoever (other than any tax imposed upon the
total net income of such Bank) and if any such measures or any other
similar measure shall result in an increase in the cost to such Bank of
making or maintaining any Fixed Rate Loan or in a reduction in the
amount of principal, interest or facility fee receivable by such Bank
in respect thereof, then such Bank shall promptly notify the
appropriate Borrowers stating the reasons therefor. The applicable
Borrowers shall thereafter pay to such Bank, upon demand from time to
time on Interest Adjustment Dates with respect to such Fixed Rate Loan,
as additional consideration hereunder, such additional amounts as shall
fully compensate such Bank for such increased cost or reduced amount. A
certificate as to any such increased cost or reduced amount, setting
forth the calculations therefor, shall be submitted by such Bank to the
appropriate Borrowers and shall, in the absence of manifest error, be
conclusive and binding as to the amount thereof.
If any Bank determines that such Bank has actually received or
realized any tax refund or any reduction of, or credit against, such
Bank's tax liabilities in or with respect to the taxable year in which
the additional amount is paid pursuant to this Section 3.2, such Bank
shall pay to such Borrower an amount that such Bank shall, in its sole
discretion, determine is equal to the net benefit, after tax, which was
obtained by such Bank in such year as a consequence of such tax
benefit; provided, however, that any Bank may determine in its
12
<PAGE> 13
sole discretion consistent with the policies of such Bank whether to
seek a tax benefit, and nothing in this Section 3.2 shall require a
Bank to disclose any confidential information to any Borrower
(including, without limitation, its tax returns). If a Bank later
determines, based on an audit or otherwise, that it was not entitled to
the full amount of any refund reimbursed to any Borrower as aforesaid
or that its net income taxes are not reduced by a credit or deduction
for the full amount of taxes reimbursed to any Borrower as aforesaid,
such Borrower, upon demand of such Bank, shall promptly pay to such
Bank the amount so refunded to which such Bank was not so entitled, or
the amount by which the net income taxes of such Bank were not so
reduced, as the case may be.
Notwithstanding any other provision of this Agreement, after
any such demand for compensation by any Bank, the appropriate
Borrowers, upon at least three (3) Business Days' prior written notice
to such Bank through Agent, may prepay any affected Fixed Rate Loan in
full or convert such Fixed Rate Loan to a Base Rate Loan regardless of
the Interest Period of any thereof. Any such prepayment or conversion
shall be subject to the prepayment fees set forth in Section 2.6
hereof.
12. The Credit Agreement is hereby amended to delete Section 3.3
therefrom in its entirety and to insert in place thereof the following:
SECTION 3.3. FIXED RATE LOANS UNAVAILABLE OR INTEREST RATE
UNASCERTAINABLE. In respect of any Fixed Rate Loan, in the event that
Agent shall have determined that dollar deposits of the relevant amount
for the relevant Interest Period for such Fixed Rate Loan are not
available to Agent in the applicable eurodollar market, or that, by
reason of circumstances affecting such market, adequate and reasonable
means do not exist for ascertaining the interest rate applicable to
such Interest Period, Agent shall promptly give notice of such
determination to the affected Borrowers and (a) any notice of a new
Fixed Rate Loan (or conversion of an existing Loan to a Fixed Rate
Loan) previously given by such Borrowers and not yet borrowed (or
converted, as the case may be) shall be deemed a notice to make a Base
Rate Loan, and (b) the affected Borrowers shall be obligated either to
prepay, or to convert to a Base Rate Loan, any outstanding Fixed Rate
Loan on the last day of the then current Interest Period with respect
thereto.
13. The Credit Agreement is hereby amended to add new subparts (j), (k)
and (l) to Section 5.3 thereof as follows:
(j) as frequently as Agent may request, but no less frequently
than monthly, a Borrowers' Certificate prepared by a Financial Officer
of U.S. Borrower;
(k) within twenty (20) days after the end of each month, an
accounts aging report and an inventory report of each Company, in form
and substance satisfactory to Agent and the Required Banks; and
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<PAGE> 14
(l) a weekly delivery of Borrowers' assignment of sales.
14. The Credit Agreement is hereby amended to delete subpart (c) of
Section 8.5 therefrom and to insert in place thereof the following:
(c) Except as set forth in Section 2.11 of this Agreement,
only the Canadian Banks shall be obligated, upon the terms and
conditions set forth in this Agreement, to fund Canadian Revolving
Loans and participate in the issuance of Canadian Letters of Credit;
provided that, anything in this Agreement to the contrary
notwithstanding, upon the earlier of (i) the occurrence of an Event of
Default specified in Section 7.12 hereof, or (ii) the acceleration of
the Debt pursuant to Section 8.2 hereof (hereinafter, a "Equalization
Event"), each Bank agrees with the other Banks that if it, at any time,
shall obtain any Advantage over the other Banks, or any thereof, in
respect of the Debt (except under Article III hereof) then outstanding,
then such Bank having an Advantage shall purchase from the other Banks,
including the Canadian Banks, for cash and at par, such additional
participation in the Debt as shall be necessary to nullify the
Advantage. As used herein, "Equalization Date" shall mean the date that
the Equalization Event occurs.
15. The Credit Agreement is hereby amended to delete Schedule 1 thereto
in its entirety and to insert in place thereof a new Schedule 1 in the form of
Schedule 1 attached hereto.
16. The Credit Agreement is hereby amended to delete Exhibit C thereto
in its entirety and to substitute in place thereof a new Exhibit C in the form
of Exhibit C attached hereto.
17. Concurrently with the execution of this First Amendment Agreement:
(a) Canadian Borrowers shall execute and deliver to Agent for delivery
to the Banks new Canadian Revolving Credit Notes dated as of August 17, 1999,
and such Canadian Revolving Credit Notes shall be in the form and substance of
Exhibit C attached hereto; provided, however, that, upon each Bank's receipt of
a new Canadian Revolving Credit Note from Canadian Borrowers, such Bank shall
mark its Canadian Revolving Credit Note being replaced thereby "Replaced" and
return the same to Agent for delivery to Canadian Borrowers;
(b) Borrowers shall cause each Guarantor of Payment to consent and
agree to and acknowledge the terms of this First Amendment Agreement;
(c) Borrowers shall deliver such other documents as may reasonably be
required by Agent in connection with this First Amendment Agreement; and
(d) Borrowers shall pay all legal fees and expenses of Agent in
connection with this First Amendment Agreement.
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<PAGE> 15
18. Borrowers hereby represent and warrant to Agent and the Banks that
(a) each Borrower has the legal power and authority to execute and deliver this
First Amendment Agreement; (b) the officers executing this First Amendment
Agreement have been duly authorized to execute and deliver the same and bind
such Borrower with respect to the provisions hereof; (c) the execution and
delivery hereof by Borrowers and the performance and observance by Borrowers of
the provisions hereof do not violate or conflict with the organizational
agreements of any Borrower or any law applicable to any Borrower or result in a
breach of any provision of or constitute a default under any other agreement,
instrument or document binding upon or enforceable against any Borrower; (d) no
Unmatured Event of Default or Event of Default exists under the Credit
Agreement, nor will any occur immediately after the execution and delivery of
this First Amendment Agreement or by the performance or observance of any
provision hereof; (e) neither Borrower nor any Guarantor of Payment is aware of
any claim or offset against, or defense or counterclaim to, any of Borrowers' or
any Guarantor of Payment's obligations or liabilities under the Credit Agreement
or any Related Writing; and (f) this First Amendment Agreement constitutes a
valid and binding obligation of each Borrower in every respect, enforceable in
accordance with its terms.
19. Each reference that is made in the Credit Agreement or any other
writing to the Credit Agreement shall hereafter be construed as a reference to
the Credit Agreement as amended hereby. Except as herein otherwise specifically
provided, all provisions of the Credit Agreement shall remain in full force and
effect and be unaffected hereby. This First Amendment Agreement is a Related
Writing as defined in the Credit Agreement.
20. Each Borrower and each Guarantor of Payment, by signing below,
hereby waives and releases Agent and each of the Banks and their respective
directors, officers, employees, attorneys, affiliates and subsidiaries from any
and all such claims, offsets, defenses and counterclaims of which any Borrower
and any Guarantor of Payment is aware, such waiver and release being with full
knowledge and understanding of the circumstances and effect thereof and after
having consulted legal counsel with respect thereto.
21. This First Amendment Agreement may be executed in any number of
counterparts, by different parties hereto in separate counterparts and by
facsimile signature, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
22. The rights and obligations of all parties hereto shall be governed
by the laws of the State of Ohio, without regard to principles of conflicts of
laws.
[Remainder of Page Intentionally Left Blank]
15
<PAGE> 16
23. JURY TRIAL WAIVER. BORROWERS, AGENT AND EACH OF THE BANKS WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AMONG ANY BORROWER, AGENT AND THE BANKS, OR ANY
THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT
IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY AGENT'S OR ANY BANK'S ABILITY
TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION
CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT AMONG
BORROWERS, AGENT AND THE BANKS, OR ANY THEREOF.
ADVANCED LIGHTING TECHNOLOGIES, INC.
By: /s/ Nicholas R. Sucic
---------------------------------------
Nicholas R. Sucic, Vice President
VENTURE LIGHTING POWER SYSTEMS, CANADIAN LIGHTING SYSTEMS
NORTH AMERICA INC. (f.k.a. HOLDING, INCORPORATED
Ballastronix Incorporated)
By: /s/ R. G. Douglas Oulton By: /s/ R. G. Douglas Oulton
--------------------------------- -------------------------------
Title: VP Finance Title: VP Finance
------------------------------ ----------------------------
PARRY POWER SYSTEMS LIMITED VENTURE LIGHTING EUROPE LTD.
By: /s/ S. D. Weaver By: /s/ W. Ian Wilkinson
--------------------------------- -------------------------------
Title: Sales Director Title: Director
------------------------------ ----------------------------
PNC BANK, NATIONAL ASSOCIATION, BANKBOSTON, N.A., as a Bank
as Agent and as a Bank
By: /s/ Richard Muse, Jr. By: /s/ Paul R. Crimlisk
--------------------------------- -------------------------------
Title: Vice President Title: Vice President
------------------------------ ----------------------------
16
<PAGE> 17
SCHEDULE 1
<TABLE>
<CAPTION>
Financial Commitment Revolving Canadian UK Revolving Term Loan Maximum
Institution Percentage Credit Revolving Credit Commitment Amount
Commitment Credit Commitment Amount
Amount Commitment Amount
Amount
<S> <C> <C> <C> <C> <C> <C>
PNC Bank, 80% $40,000,000 $4,800,000 $4,800,000 $20,000,000 $60,000,000
National
Association
- -------------------------------------------------------------------------------------------------------------------------
BankBoston, 20% $10,000,000 $1,200,000 $1,200,000 $ 5,000,000 $15,000,000
N.A.
- -------------------------------------------------------------------------------------------------------------------------
Total 100% $50,000,000 $6,000,000 $6,000,000 $25,000,000 $75,000,000
- -------------------------------------------------------------------------------------------------------------------------
Maximum $50,000,000
Revolving
Credit
Commitment
Amount
- -------------------------------------------------------------------------------------------------------------------------
Maximum $25,000,000
Term Loan
Commitment
Amount
- -------------------------------------------------------------------------------------------------------------------------
Total $75,000,000
Commitment
Amount
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
EXHIBIT C
CANADIAN REVOLVING CREDIT NOTE
$________________ Cleveland, Ohio
August ___, 1999
FOR VALUE RECEIVED, the undersigned, VENTURE LIGHTING POWER SYSTEMS,
NORTH AMERICA INC. (f.k.a. Ballastronix Incorporated) and CANADIAN LIGHTING
SYSTEMS HOLDING, INCORPORATED (collectively "Canadian Borrowers", and
individually "Canadian Borrower"), jointly and severally, promise to pay on the
last day of the Commitment Period, as defined in the Credit Agreement (as
hereinafter defined), to the order of _________ ("Canadian Bank") at the
Designated Lending Office, as defined in the Credit Agreement, the principal sum
of
...................................................................... DOLLARS
or the aggregate unpaid principal amount of all Canadian Revolving Loans made by
Canadian Bank to Canadian Borrowers pursuant to subsection 3 of Section 2.1A of
the Credit Agreement, whichever is less, in lawful money of the United States of
America. As used herein, "Credit Agreement" means the Credit Agreement dated as
of May 21, 1999, among Advanced Lighting Technologies, Inc., as U.S. Borrower,
Canadian Borrowers and certain Subsidiaries as UK Borrowers, the banks named
therein and PNC Bank, National Association, as Agent, as the same may from time
to time be restated, amended or otherwise modified. Capitalized terms used
herein shall have the meanings ascribed to them in the Credit Agreement.
Canadian Borrowers also promise to pay interest on the unpaid principal
amount of each Canadian Revolving Loan from time to time outstanding, from the
date of such Canadian Revolving Loan until the payment in full thereof, at the
rates per annum which shall be determined in accordance with the provisions of
subsection 3 of Section 2.1A of the Credit Agreement. Such interest shall be
payable on each date provided for in such subsection 3 of Section 2.1A;
provided, however, that interest on any principal portion which is not paid when
due shall be payable on demand.
The portions of the principal sum hereof from time to time representing
Canadian Base Rate Loans and Canadian Fixed Rate Loans, and payments of
principal thereof, shall be shown on the records of Canadian Bank by such method
as Canadian Bank may generally employ; provided, however, that failure to make
any such entry shall in no way detract from the obligations of Canadian
Borrowers under this Note.
If this Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time or by operation of any provision for
acceleration of maturity contained in the Credit Agreement, the principal hereof
and the unpaid interest thereon shall bear interest, until paid, at a rate per
annum
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<PAGE> 19
which shall be the Default Rate. All payments of principal of and interest on
this Note shall be made in immediately available funds.
This Note is one of the Canadian Revolving Credit Notes referred to in
the Credit Agreement. Reference is made to the Credit Agreement for a
description of the right of the undersigned to anticipate payments hereof, the
right of the holder hereof to declare this Note due prior to its stated
maturity, and other terms and conditions upon which this Note is issued.
Except as expressly provided in the Credit Agreement, each Canadian
Borrower expressly waives presentment, demand, protest and notice of any kind.
This Note shall be governed by and construed in accordance with the
laws of the State of Ohio and the respective rights and obligations of Canadian
Borrower and Canadian Bank shall be governed by Ohio law, without regard to
principles of conflict of laws. Each Canadian Borrower hereby irrevocably
submits to the non-exclusive jurisdiction of any Ohio state or federal court
sitting in Cleveland, Ohio, over any action or proceeding arising out of or
relating to this Note, and each Canadian Borrower hereby irrevocably agrees that
all claims in respect of such action or proceeding may be heard and determined
in such Ohio state or federal court. Each Canadian Borrower, on behalf of itself
and its Subsidiaries, hereby irrevocably waives, to the fullest extent permitted
by law, any objection it may now or hereafter have to the laying of venue in any
action or proceeding in any such court as well as any right it may now or
hereafter have to remove such action or proceeding, once commenced, to another
court on the grounds of FORUM NON CONVENIENS or otherwise. Each Canadian
Borrower agrees that a final, nonappealable judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgement or in any other manner provided by law.
[Remainder of page intentionally left blank.]
19
<PAGE> 20
EACH CANADIAN BORROWER WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG
BORROWERS, AGENT AND THE BANKS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED THERETO.
VENTURE LIGHTING POWER SYSTEMS,
NORTH AMERICA INC. (f.k.a. Ballastronix
Incorporated)
By:_____________________________________
Title:__________________________________
and_____________________________________
Title:__________________________________
CANADIAN LIGHTING SYSTEMS
HOLDING, INCORPORATED
By:_____________________________________
Title:__________________________________
and_____________________________________
Title:__________________________________
20
<PAGE> 21
GUARANTOR ACKNOWLEDGMENT
Each of the undersigned consents and agrees to and acknowledges the
terms of the foregoing First Amendment Agreement. Each of the undersigned
further agrees that the obligations of each of the undersigned pursuant to the
Guaranty of Payment executed by each of the undersigned shall remain in full
force and effect and be unaffected hereby.
ADLT Realty Corp. I, Inc.
ADLT Services, Inc.
Advanced Lighting, Inc.
Advanced Lighting Systems, Inc.
APL Engineered Materials, Inc.
Ballastronix (Delaware), Inc.
Bio Light, Inc.
Bright Ideas Advertising and Design, Inc.
Energy Efficient Products, Inc.
HID Recycling, Inc.
Light Resources International, Inc.
Metal Halide Controls, Inc.
Metal Halide Technologies, Inc.
Microsun Technologies, Inc.
Specialty Discharge Lighting, Inc.
Venture Lighting International, Inc.
By: /s/ Nicholas R. Sucic
--------------------------------------
Nicholas R. Sucic, Vice President of
each of the companies listed above
Deposition Sciences, Inc.
Kramer Lighting, Inc.
Ruud Lighting, Inc.
By: /s/ Nicholas R. Sucic
--------------------------------------
Nicholas R. Sucic, signing for each of
companies listed above by Power of
Attorney
21
<PAGE> 1
Exhibit 10.4
SECOND AMENDMENT AGREEMENT
This Second Amendment Agreement is effective as of the 18th day of
August, 1999, by and among ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio
corporation ("U.S. Borrower"), VENTURE LIGHTING POWER SYSTEMS, NORTH AMERICA
INC. (f.k.a. Ballastronix Incorporated), a corporation organized under the laws
of the Province of Nova Scotia, CANADIAN LIGHTING SYSTEMS HOLDING, INCORPORATED,
a corporation organized under the laws of the Province of Nova Scotia
(collectively, "Canadian Borrowers" and, individually, "Canadian Borrower"),
PARRY POWER SYSTEMS LIMITED (Company No. 2833448, f.k.a. Venture Lighting Europe
Ltd.), incorporated under the laws of England, VENTURE LIGHTING EUROPE LTD.
(Company No. 3341889, f.k.a. Parry Power Systems Limited), incorporated under
the laws of England (collectively, "UK Borrowers" and, individually, "UK
Borrower"; and together with U.S. Borrower and Canadian Borrowers, collectively,
"Borrowers" and, individually, "Borrower"), the banking institutions listed on
Schedule 1 to the Credit Agreement, as hereinafter defined ("Banks"), and PNC
BANK, NATIONAL ASSOCIATION, as agent for the Banks ("Agent"):
WHEREAS, Borrowers, Agent and the Banks are parties to a certain Credit
Agreement dated as of May 21, 1999, as amended, that provides, among other
things, for loans aggregating Seventy- Five Million Dollars ($75,000,000), all
upon certain terms and conditions stated therein ("Credit Agreement");
WHEREAS, Borrowers, Agent and the Banks desire to amend the Credit
Agreement to reduce the amount of the credit facility and to add and modify
certain provisions thereof; and
WHEREAS, each term used herein shall be defined in accordance with the
Credit Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other valuable considerations, Borrowers,
Agent and the Banks hereby agree as follows:
1. Article I of the Credit Agreement is hereby amended to delete the
definitions of "Applicable Margin", "Canadian Revolving Credit Commitment",
"Commitment Percentage", "Equity Event", "Maximum Amount", "Maximum Revolving
Credit Commitment Amount", "Maximum Term Loan Commitment Amount", "Revolving
Credit Commitment", "Term Loan Commitment" and "Total Commitment Amount" in
their entirety and to insert in place thereof the following:
"Applicable Margin" shall mean:
(a) for the period from the Closing Date through August 17,
1999, (i) two hundred fifty (250) basis points for Revolving Loans, and
(ii) three hundred (300) basis points for the Term Loan;
1
<PAGE> 2
(b) for the period from August 18, 1999 until the day that the
Fixed Charge Coverage Ratio equals or exceeds 1.00 to 1.00 for the most
recently completed four (4) fiscal quarters, (i) two hundred
seventy-five (275) basis points for Revolving Loans, and (ii) three
hundred twenty-five (325) basis points for the Term Loan; and
(c) commencing on the day that the Fixed Charge Coverage Ratio
equals or exceeds 1.00 to 1.00 for the most recently completed four (4)
fiscal quarters and thereafter, (i) two hundred twenty-five (225) basis
points for Revolving Loans, and (ii) two hundred seventy-five (275)
basis points for the Term Loan.
"Canadian Revolving Credit Commitment" shall mean the
obligation hereunder of the Canadian Bank to make Canadian Revolving
Loans and to participate in the issuance of Canadian Letters of Credit
up to an aggregate principal amount outstanding at any time equal to
the lesser of (a) (i) from the Closing Date through September 29, 1999,
Six Million Dollars ($6,000,000), and (ii) on September 30, 1999 and
thereafter, Four Million Dollars ($4,000,000), or (b) the Canadian
Borrowing Base (or such lesser amount as shall be determined pursuant
to Section 2.8 hereof).
"Commitment Percentage" shall mean, for each Bank, the
percentage set forth opposite such Bank's name under the applicable
column headed "Commitment Percentage" as set forth in SCHEDULE 1
hereto.
"Equity Event" shall mean the occurrence of both of the
following events: (a) U.S. Borrower shall have received the General
Electric Equity, and (b) the proceeds of the General Electric Equity
shall have been applied to the repayment of the Debt pursuant to
Section 2.10 hereof.
"Maximum Amount" shall mean, for each Bank, the amount set
forth opposite such Bank's name under the applicable column headed
"Maximum Amount" as listed on SCHEDULE 1 hereto.
"Maximum Revolving Credit Commitment Amount" shall mean (a)
from the Closing Date through September 29, 1999, Fifty Million Dollars
($50,000,000), (b) from September 30, 1999 through the day before the
Equity Date, Thirty Five Million Dollars ($35,000,000), and (c) on the
Equity Date and thereafter, Forty Million Dollars ($40,000,000); or
such lesser amounts as shall be determined pursuant to Section 2.8
hereof.
"Maximum Term Loan Commitment Amount" shall mean (a) from the
Closing Date through the day before the Equity Date, Twenty Five
Million Dollars ($25,000,000), and (b) on the Equity Date and
thereafter, Twenty Million Dollars ($20,000,000).
"Revolving Credit Commitment" shall mean the obligation
hereunder, during the applicable Commitment Period (but, with respect
to the Canadian Revolving Credit
2
<PAGE> 3
Commitment, subject to the provisions of Section 2.11 hereof), of (a)
each Bank to participate in the making of U.S. Revolving Loans pursuant
to the U.S. Revolving Credit Commitment up to an aggregate amount set
forth opposite such Bank's name under the applicable column headed
"Revolving Commitment Amount" as set forth on SCHEDULE 1 hereto, (b)
each Canadian Bank to participate in the making of Canadian Revolving
Loans and the issuance of Canadian Letters of Credit pursuant to the
Canadian Revolving Credit Commitment up to an aggregate amount set
forth opposite such Canadian Bank's name under the applicable column
headed "Canadian Revolving Credit Commitment Amount" as set forth on
SCHEDULE 1 hereto, (c) each Bank to participate in the making of UK
Revolving Loans and the issuance of UK Letters of Credit pursuant to
the UK Revolving Credit Commitment up to an aggregate amount set forth
opposite such Bank's name under the applicable column headed "UK
Revolving Credit Commitment Amount" as set forth on SCHEDULE 1 hereto,
and (d) each Bank to participate in the issuance of U.S. Letters of
Credit pursuant to the U.S. Letter of Credit Commitment
"Term Loan Commitment" shall mean the obligation hereunder of
each Bank to participate in the making of the Term Loan, up to the
amount set forth opposite such Bank's name under the applicable column
headed "Term Loan Commitment Amount" as set forth on SCHEDULE 1 hereto.
"Total Commitment Amount" shall mean (a) from the Closing Date
through September 29, 1999, Seventy Five Million Dollars ($75,000,000),
and (b) on September 30, 1999 and thereafter, Sixty Million Dollars
($60,000,000); or such lesser amounts as shall be determined pursuant
to Section 2.8 hereof.
2. Article I of the Credit Agreement is hereby amended to add the
following new definition thereto:
"Equity Date" shall mean the date on which the Equity Event
occurs.
3. The Credit Agreement is hereby amended to delete Section 5.7(b)
therefrom in its entirety and to insert in place thereof the following:
(b) The Total Unused Credit Availability shall be at least
(i) Ten Million Dollars ($10,000,000) at all times from the Closing
Date through September 29, 1999, and (ii) Fifteen Million Dollars
($15,000,000) on September 30, 1999 and thereafter; provided, however,
that the requirements of this Section 5.7(b) shall terminate at such
time as the Fixed Charge Coverage Ratio equals or exceeds 1.00 to 1.00
for the most recently completed four (4) fiscal quarters.
4. The Credit Agreement is hereby amended to delete Section 5.11(viii)
therefrom in its entirety.
3
<PAGE> 4
5. With the exception of the "Commitment Percentage" definition set
forth in Article I of the Credit Agreement, the Credit Agreement is hereby
amended to add the word "applicable" in front of the words "Commitment
Percentage" wherever "Commitment Percentage" appears.
6. The Credit Agreement is hereby amended to delete Schedule 1 thereto
in its entirety and to insert in place thereof a new Schedule 1 in the form of
Schedule 1 attached hereto.
7. Borrowers, Agent and the Banks hereby agree that:
(a) if the Equity Event shall not have occurred on or before
September 30, 1999, U.S. Borrower shall execute and deliver to Agent for
delivery to the Banks on or before September 30, 1999, new Revolving Credit
Notes dated as of September 30, 1999, and such Revolving Credit Notes shall be
in the form and substance of Exhibit A to the Credit Agreement, reflecting the
respective change, as of September 30, 1999, in the Revolving Credit Commitment
of each Bank; provided, however, that, upon each Bank's receipt of a new
Revolving Credit Note from U.S. Borrower, such Bank shall mark its Revolving
Credit Note being replaced thereby "Replaced" and return the same to Agent for
delivery to U.S. Borrower;
(b) Canadian Borrowers shall execute and deliver to Agent for
delivery to the Banks on or before September 30, 1999, new Canadian Revolving
Credit Notes dated as of September 30, 1999, and such Canadian Revolving Credit
Notes shall be in the form and substance of Exhibit C to the Credit Agreement,
reflecting the respective change, as of September 30, 1999, in the Canadian
Revolving Credit Commitment of each Bank; provided, however, that, upon each
Bank's receipt of a new Canadian Revolving Credit Note from Canadian Borrowers,
such Bank shall mark its Canadian Revolving Credit Note being replaced thereby
"Replaced" and return the same to Agent for delivery to Canadian Borrowers; and
(c) on or immediately after the Equity Date, Borrowers shall
execute and deliver to Agent for delivery to the Banks new Revolving Credit
Notes and new Term Notes, in the form and substance of Exhibit A and Exhibit D,
respectively, to the Credit Agreement, each reflecting the respective change, as
of the Equity Date, in the Revolving Credit Commitment and the Term Loan
Commitment.
8. Concurrently with the execution of this Second Amendment Agreement:
(a) Borrowers shall pay to Agent, for the pro rata benefit of
the Banks, an amendment fee of One Hundred Thousand Dollars ($100,000);
(b) Borrowers shall cause each Guarantor of Payment to
consent and agree to and acknowledge the terms of this Second Amendment
Agreement;
(c) Borrowers shall deliver such other documents as may
reasonably be required by Agent in connection with this Second Amendment
Agreement; and
4
<PAGE> 5
(d) Borrowers shall pay all legal fees and expenses of Agent
in connection with this Second Amendment Agreement.
9. Borrowers hereby represent and warrant to Agent and the Banks that
(a) each Borrower has the legal power and authority to execute and deliver this
Second Amendment Agreement; (b) the officers executing this Second Amendment
Agreement have been duly authorized to execute and deliver the same and bind
such Borrower with respect to the provisions hereof; (c) the execution and
delivery hereof by Borrowers and the performance and observance by Borrowers of
the provisions hereof do not violate or conflict with the organizational
agreements of any Borrower or any law applicable to any Borrower or result in a
breach of any provision of or constitute a default under any other agreement,
instrument or document binding upon or enforceable against any Borrower; (d) no
Unmatured Event of Default or Event of Default exists under the Credit
Agreement, nor will any occur immediately after the execution and delivery of
this Second Amendment Agreement or by the performance or observance of any
provision hereof; (e) neither Borrower nor any Guarantor of Payment is aware of
any claim or offset against, or defense or counterclaim to, any of Borrowers' or
any Guarantor of Payment's obligations or liabilities under the Credit Agreement
or any Related Writing; and (f) this Second Amendment Agreement constitutes a
valid and binding obligation of each Borrower in every respect, enforceable in
accordance with its terms.
10. Each reference that is made in the Credit Agreement or any other
writing to the Credit Agreement shall hereafter be construed as a reference to
the Credit Agreement as amended hereby. Except as herein otherwise specifically
provided, all provisions of the Credit Agreement shall remain in full force and
effect and be unaffected hereby. This Second Amendment Agreement is a Related
Writing as defined in the Credit Agreement.
11. Each Borrower and each Guarantor of Payment, by signing below,
hereby waives and releases Agent and each of the Banks and their respective
directors, officers, employees, attorneys, affiliates and subsidiaries from any
and all claims, offsets, defenses and counterclaims of which any Borrower and
any Guarantor of Payment is aware, such waiver and release being with full
knowledge and understanding of the circumstances and effect thereof and after
having consulted legal counsel with respect thereto.
12. This Second Amendment Agreement may be executed in any number of
counterparts, by different parties hereto in separate counterparts and by
facsimile signature, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
13. The rights and obligations of all parties hereto shall be governed
by the laws of the State of Ohio, without regard to principles of conflicts of
laws.
5
<PAGE> 6
14. JURY TRIAL WAIVER. BORROWERS, AGENT AND EACH OF THE BANKS WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AMONG ANY BORROWER, AGENT AND THE BANKS, OR ANY
THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT
IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY AGENT'S OR ANY BANK'S ABILITY
TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION
CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT AMONG
BORROWERS, AGENT AND THE BANKS, OR ANY THEREOF.
ADVANCED LIGHTING TECHNOLOGIES,
INC.
By: /s/ Nicholas R. Sucic
---------------------------------------
Nicholas R. Sucic, Vice President
VENTURE LIGHTING POWER SYSTEMS, CANADIAN LIGHTING SYSTEMS
NORTH AMERICA INC. (f.k.a. HOLDING, INCORPORATED
Ballastronix Incorporated)
By: /s/ R. G. Douglas Oulton By: /s/ R. G. Douglas Oulton
-------------------------------- ------------------------------
Title: VP Finance Title: VP Finance
----------------------------- ---------------------------
PARRY POWER SYSTEMS LIMITED VENTURE LIGHTING EUROPE LTD.
By: /s/ W. Ian Wilkinson By: /s/ R. M. Heyworth
-------------------------------- ------------------------------
Title: Director Title: Director
----------------------------- ---------------------------
PNC BANK, NATIONAL ASSOCIATION, BANKBOSTON, N.A., as a Bank
as Agent and as a Bank
By: /s/ Richard Muse, Jr. By: /s/ Paul R. Crimlisk
-------------------------------- ------------------------------
Title: Vice President Title: Vice President
----------------------------- ---------------------------
6
<PAGE> 7
SCHEDULE 1
<TABLE>
<CAPTION>
Financial Commitment Revolving Credit Canadian UK Revolving Term Loan Maximum Amount
Institution Percentage Commitment Revolving Credit Credit Commitment (from 08/17/99
Amount Commitment Commitment Amount through 09/29/99)
(from 08/17/99 Amount Amount (from 08/17/99
through 09/29/99 (from 08/17/99 (from 08/17/99 through 09/29/99)
through 09/29/99) through 09/29/99)
<S> <C> <C> <C> <C> <C> <C>
PNC Bank, 80% $40,000,000 $4,800,000 $4,800,000 $20,000,000 $60,000,000
National
Association
- -----------------------------------------------------------------------------------------------------------------------------------
BankBoston, N.A. 20% $10,000,000 $1,200,000 $1,200,000 $ 5,000,000 $15,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
Total 100% $50,000,000 $6,000,000 $6,000,000 $25,000,000 $75,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
Maximum $50,000,000
Revolving Credit
Commitment
Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Maximum Term $25,000,000
Loan Commitment
Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Total Commitment $75,000,000
Amount
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1 of 3
7
<PAGE> 8
SCHEDULE 1
<TABLE>
<CAPTION>
Financial Commitment Revolving Canadian UK Revolving Term Loan Maximum
Institution Percentage Credit Revolving Credit Credit Commitment Amount (from
Commitment Commitment Commitment Amount (from 09/30/99
Amount (from Amount Amount 09/30/99 through the
09/30/99 (from 09/30/99 (from 09/30/99 through the day prior to
through the through the day through the day day prior to the Equity
day prior to prior to the prior to the the Equity Date)
the Equity Equity Date) Equity Date) Date)
Date)
<S> <C> <C> <C> <C> <C> <C>
PNC Bank, 80% $28,000,000 $3,200,000 $4,800,000 $20,000,000 $48,000,000
National
Association
- ------------------------------------------------------------------------------------------------------------------
BankBoston, N.A. 20% $ 7,000,000 $ 800,000 $1,200,000 $ 5,000,000 $12,000,000
- ------------------------------------------------------------------------------------------------------------------
Total 100% $35,000,000 $4,000,000 $6,000,000 $25,000,000 $60,000,000
- ------------------------------------------------------------------------------------------------------------------
Maximum $35,000,000
Revolving Credit
Commitment
Amount
- ------------------------------------------------------------------------------------------------------------------
Maximum Term $25,000,000
Loan Commitment
Amount
- ------------------------------------------------------------------------------------------------------------------
Total Commitment $60,000,000
Amount
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2 of 3
8
<PAGE> 9
SCHEDULE 1
<TABLE>
<CAPTION>
Financial Commitment Revolving Credit Canadian UK Revolving Term Loan Maximum Amount
Institution Percentage Commitment Revolving Credit Credit Commitment (on the Equity Date
Amount (on the Commitment Commitment Amount (on the and thereafter)
Equity Date and Amount (on the Amount (on the Equity Date
thereafter) Equity Date Equity Date and thereafter)
and thereafter) and thereafter)
<S> <C> <C> <C> <C> <C> <C>
PNC Bank, 80% $32,000,000 $3,200,000 $4,800,000 $16,000,000 $48,000,000
National
Association
- -------------------------------------------------------------------------------------------------------------------------------
BankBoston, N.A. 20% $ 8,000,000 $ 800,000 $1,200,000 $ 4,000,000 $12,000,000
- -------------------------------------------------------------------------------------------------------------------------------
Total 100% $40,000,000 $4,000,000 $6,000,000 $20,000,000 $60,000,000
- -------------------------------------------------------------------------------------------------------------------------------
Maximum $40,000,000
Revolving Credit
Commitment
Amount
- -------------------------------------------------------------------------------------------------------------------------------
Maximum Term $20,000,000
Loan Commitment
Amount
- -------------------------------------------------------------------------------------------------------------------------------
Total Commitment $60,000,000
Amount
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3 of 3
9
<PAGE> 10
GUARANTOR ACKNOWLEDGMENT
------------------------
Each of the undersigned consents and agrees to and acknowledges the
terms of the foregoing Second Amendment Agreement. Each of the undersigned
further agrees that the obligations of each of the undersigned pursuant to the
Guaranty of Payment executed by each of the undersigned shall remain in full
force and effect and be unaffected hereby.
ADLT Realty Corp. I, Inc.
ADLT Services, Inc.
Advanced Lighting, Inc.
Advanced Lighting Systems, Inc.
APL Engineered Materials, Inc.
Ballastronix (Delaware), Inc.
Bio Light, Inc.
Bright Ideas Advertising and Design, Inc.
Energy Efficient Products, Inc.
HID Recycling, Inc.
Light Resources International, Inc.
Metal Halide Controls, Inc.
Metal Halide Technologies, Inc.
Microsun Technologies, Inc.
Specialty Discharge Lighting, Inc.
Venture Lighting International, Inc.
By: /s/ Nicholas R. Sucic
--------------------------------------
Nicholas R. Sucic, Vice President of
each of the companies listed above
Deposition Sciences, Inc.
Kramer Lighting, Inc.
Ruud Lighting, Inc.
By: /s/ Nicholas R. Sucic
--------------------------------------
Nicholas R. Sucic, signing for each of
companies listed above by Power of
Attorney
11
<PAGE> 1
Exhibit 10.5
[CONFORMED COPY]
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
September 28, 1999, is between Advanced Lighting Technologies, Inc., an Ohio
corporation (the "Company"), and General Electric Company, a New York
corporation ("Purchaser").
The parties hereto agree as follows:
SECTION 1
DEFINITIONS
The following terms when used in this Agreement shall, except
where the context otherwise requires, have the following meanings (such
definitions to be equally applicable to the singular and plural forms thereof):
"AFFILIATE" shall mean, as applied to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGREEMENT" shall mean this Stock Purchase Agreement as
originally executed and as amended, modified or supplemented from time to time.
"AMENDED ARTICLES" shall have the meaning provided in Section
2.1.
"AMENDMENT TO ARTICLES" shall have the meaning provided in
Section 2.1.
"ANNUAL FINANCIAL STATEMENTS" shall have the meaning provided
in clause a of Section 7.4.
"BOARD OF DIRECTORS" shall mean the board of directors of the
Company.
"BUSINESS" shall mean the business of (a) designing,
manufacturing, marketing and selling metal halide lighting products and metal
halide and other HID lamp system components used in the production of lamps and
other components for lighting systems, (b) manufacturing, marketing and selling
metal halide fixtures, (c) manufacturing, marketing and selling photometric
measuring equipment and (d) designing, manufacturing, marketing and selling
coatings and coatings equipment.
"CLOSING" and "CLOSING DATE" shall have the meanings provided
in Section 3.1.
<PAGE> 2
"COLLATERAL AGREEMENTS" shall have the meaning provided in
clause g of Section 4.1.
"COMMISSION" means the Securities and Exchange
Commission.
"COMMON SHARES" shall mean the Common Shares, par value
$.001, of the Company.
"COMPANY" shall mean Advanced Lighting Technologies, Inc., an
Ohio corporation.
"CONTINGENT SHARES" shall mean Common Shares to be issued upon
the exercise of the First Contingent Warrant and the Second Contingent Warrant
pursuant to the Contingent Warrant Agreement.
"CONTINGENT WARRANT AGREEMENT" shall mean the contingent
warrant agreement in the form of EXHIBIT 2.2 attached hereto for the issuance of
the First Contingent Warrant and the Second Contingent Warrant.
"CONVERSION SHARES" shall mean the Common Shares to be issued
upon the conversion of Series A Shares.
"CREDIT AGREEMENT" shall mean the Credit Agreement dated as of
May 21, 1999, among the Company, certain Subsidiaries and PNC Bank, National
Association.
"DISCLOSURE STATEMENT" shall mean the Supplemental Disclosure
Statement, dated as of the date of this Agreement, provided by the Company to
the Purchaser in connection with certain representations and warranties made in
this Agreement.
"ENVIRONMENTAL, HEALTH AND SAFETY LAWS" shall mean any
federal, state, or local statute, law, ordinance, code, order, injunction,
decree, ruling; any regulations promulgated thereunder, or any common law theory
of liability which regulates or controls (i) pollution, contamination, or the
condition of groundwater, surface water, soil, sediment, air or the workplace or
(ii) a spill, leak, emission, discharge, release or disposal into groundwater,
surface water, soil, sediment, air or the workplace, including without
limitation the federal Comprehensive, Environmental Response, Compensation, and
Liability Act ("CERCLA"), 42 U.S.C. Sec. 9601 et seq., as amended; the federal
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Sec. 6901 et seq., as
amended; the Hazardous Materials Transportation Act ("HMTA"), 49 U.S.C. Sec.
1801 et seq., as amended; the Toxic Substances Control Act ("TSCA"), 15 U.S.C.
Sec. 2601 et seq., as amended; the Clean Air Act ("CAA"), 42 U.S.C Sec. 7401 et
seq. as amended; the Clean Water Act ("CWA"), 33 U.S.C. Sec. 1251 et seq. as
amended; the Safe Drinking Water Act ("SDWA"), 42 U.S.C. Sec. 300F et seq., as
amended; the Emergency Planning and Community Right to Know Act ("EPCRA"), 42
U.S.C. Sec. 11001 et seq., as amended; the Federal, Insecticide, Fungicide and
Rodenticide Act ("FIFRA"), 7 U.S.C. Sec. 136 et seq., as amended; the
Occupational Safety and Health Act ("OSHA"), 29 U.S.C. Sec. 651 et seq., as
amended; the National Environmental Policy Act ("NEPA"), 42 U.S.C. Sec. 4321 et
seq., as amended; any similar state or local statutes or ordinances, and the
regulations promulgated thereunder.
2
<PAGE> 3
"EVENT OF DEFAULT" shall mean any default by the Company under
this Agreement or any Collateral Agreement beyond any applicable cure period.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"FIRST CONTINGENT WARRANT" shall have the meaning provided in
the Contingent Warrant Agreement.
"GAAP" shall mean generally accepted accounting principles as
in effect on the date hereof and consistently applied and maintained throughout
the period indicated. Whenever any accounting term is used herein which is not
otherwise defined, it shall have the meaning ascribed thereto under GAAP.
"GOVERNMENTAL BODY" shall mean any nation or government, any
state or other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, in each case to the extent the same has jurisdiction over the
Person or property in question, including, but not limited to, any governmental
authority, agency, board, commission, court, department or instrumentality of
the United States, any State of the United States or any political subdivision
thereof, and any tribunal or arbitrator(s) of competent jurisdiction, and any
self-regulatory groups of which the Company, any Subsidiary or Purchaser is a
member or is subject.
"HAZARDOUS SUBSTANCES" shall mean any toxic substance,
hazardous substance, hazardous waste, hazardous material, solid waste, residual
waste, infectious waste, contaminant, pollutant, or constituent thereof, whether
solid, semi-solid, liquid or gaseous, which are regulated, listed or controlled
by Environmental, Health and Safety Laws.
"HELLMAN LTD." shall have the meaning provided in clause m of
Section 4.1.
"HELLMAN LTD. SHARES" shall mean the Common Shares of the
Company held, of record or beneficially, by Hellman, Ltd.
"HELLMAN VOTING TRUST" shall mean the Voting Trust Agreement,
dated as of October 10, 1995, as amended, between Wayne R. Hellman, as voting
trustee, and certain shareholders of the Company. As used herein, the term
Hellman Voting Trust shall include any irrevocable proxies granted to Wayne R.
Hellman with respect to shares withdrawn from the Hellman Voting Trust and
deposited in margin accounts by the beneficial holders thereof.
"INDEBTEDNESS FOR BORROWED MONEY" shall mean as to any Person,
at a particular time, all items which constitute, without duplication (a)
indebtedness for borrowed money, (b) indebtedness in respect of the deferred
purchase price of property, (c) indebtedness evidenced by notes, bonds,
debentures or similar instruments, (d) capital lease obligations (i.e.,
obligations with respect to leases which are required to be capitalized for
financial reporting purposes in accordance with GAAP), (e) all obligations of
such Person in respect of capital stock subject to mandatory redemption or
redemption at the option of the holder thereof, in whole or in part, and (f) all
contingent obligations of such Person in respect of any of the foregoing. As to
the Company and any Subsidiary, the term Indebtedness for Borrowed Money shall
not include indebtedness to the Company from any Subsidiary, indebtedness to any
Subsidiary from the Company or indebtedness to any Subsidiary from any
Subsidiary.
3
<PAGE> 4
"INDENTURE" shall mean the Indenture, dated as of March 18,
1998, between the Company and The Bank of New York, Trustee, as supplemented as
of September 25, 1998, relating to the 8% Senior Notes due 2008 of the Company.
"OPTION AGREEMENT" shall have the meaning provided in the
Contingent Warrant Agreement.
"PERMITTED LIENS" shall mean: (a) Security Interests existing
on the Closing Date and disclosed to the Purchaser in writing prior to the date
hereof; (b) Security Interests securing indebtedness which is incurred to
refinance indebtedness secured by Security Interests; provided that such liens
do not extend to or cover any property or assets of the Company or any
Subsidiary other than the property or assets securing the indebtedness being
refinanced; (c) liens for taxes, assessments, governmental charges or claims
that are being contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and for which a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made; (d) statutory and common law liens of landlords and carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen or other similar
liens arising in the ordinary course of business and with respect to amounts not
yet delinquent or being contested in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made; (e) liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance and
other types of social security; (f) liens incurred or deposits made to secure
the performance of tenders, bids, leases, statutory or regulatory obligations,
bankers' acceptances, surety and appeal bonds, government contracts, performance
and return-of-money bonds and other obligations of a similar nature incurred in
the ordinary course of business (exclusive of obligations for the payment of
borrowed money); (g) easements, rights-of-way, municipal and zoning ordinances
and similar charges, encumbrances, title defects or other irregularities that do
not materially interfere with the ordinary course of business of the Company or
any of its Subsidiaries; (h) liens (including extensions and renewals thereof)
upon real or personal property acquired after the Closing Date; provided that
(i) the principal amount of the indebtedness secured by such lien does not
exceed 100% of such cost and (ii) any such lien shall not extend to or cover any
property or assets other than such item of property or assets and any
improvements on such item; (i) leases or subleases granted to others that do not
materially interfere with the ordinary course of business of the Company and its
Subsidiaries, taken as a whole; (j) liens encumbering property or assets under
construction arising from progress or partial payments by a customer of the
Company or its Subsidiaries relating to such property or assets; (k) any
interest or title of a lessor in the property subject to any capitalized lease
or operating lease; (l) liens arising from filing Uniform Commercial Code
financing statements regarding leases; (m) liens on property of, or on shares of
capital stock or indebtedness of, any Person existing at the time such Person
becomes, or becomes a part of, any Subsidiary; provided that such liens do not
extend to or cover any property or assets of the Company or any Subsidiary other
than the property or assets acquired; (n) liens in favor of the Company or any
Subsidiary; (o) liens arising from the rendering of a final judgment or order
against the Company or any Subsidiary that does not give rise to an Event of
Default (as defined in the Credit Agreement); (p) liens securing reimbursement
obligations with respect to letters of credit that encumber documents and other
property relating to such letters of credit and the products and proceeds
thereof; (q) liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection
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with the importation of goods; (r) liens encumbering customary initial deposits
and margin deposits, and other liens that are within the general parameters
customary in the industry and incurred in the ordinary course of business, in
each case, securing indebtedness under interest rate agreements and currency
agreements and forward contracts, options, future contracts, future options or
similar agreements or arrangements designed solely to protect the Company or any
of its Subsidiaries form fluctuations in interest rates, currencies or the price
of commodities; (s) liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by the
Company or any of its Subsidiaries in the ordinary course of business in
accordance with the past practices of the Company and its Subsidiaries prior to
the Closing Date; and (t) liens on or sales of receivables.
"PERSON" shall mean any natural person, corporation, firm,
partnership, association, government, governmental agency or other entity,
whether acting in an individual, fiduciary or other capacity.
"PREFERRED SHARES" shall mean the Series A Shares.
"PURCHASED SHARES" shall have the meaning provided in Section
2.1.
"PURCHASER" shall mean General Electric Company, a New York
corporation.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration
Rights Agreement delivered pursuant to Section 4.1(g)(ii).
"RUUD VOTING TRUST" shall mean the Voting Trust Agreement,
dated as of January 2, 1998, as amended, between Alan J. Ruud, as voting
trustee, and certain shareholders of the Company. As used herein, the term Ruud
Voting Trust shall include any irrevocable proxies granted to Alan J. Ruud with
respect to shares withdrawn from the Ruud Voting Trust and deposited in margin
accounts by the beneficial holders thereof.
"SECOND CONTINGENT WARRANT" shall have the meaning provided in
the Contingent Warrant Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SECURITY INTEREST" shall mean any lien, pledge, mortgage,
encumbrance, charge or security interest of any kind whatsoever (including,
without limitation, the lien or retained security title of a conditional vendor)
whether arising under a security instrument or as a matter of law, judicial
process or otherwise or the agreement by any Person to grant any lien, security
interest or pledge, mortgage or encumber any asset.
"SERIES A SHARES" shall mean shares of Series A Convertible
Preferred Stock, par value $.001, of the Company.
"STOCK PLANS" shall mean the Company's 1995 Incentive Award
Plan, the Company's Billion Dollar Market Capitalization Incentive Award Plan,
the Company's 1998 Incentive Award Plan, the Company's Employee Stock Purchase
Plan and the Company's 401(k) Retirement and Savings Plan.
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"SUBSIDIARY" of the Company shall mean any other corporation
of which more than 50% of the outstanding shares of capital stock having
ordinary voting power for the election of directors is owned directly or
indirectly by the Company, by the Company and one or more Subsidiaries, or by
one or more other Subsidiaries.
"WARRANT" shall mean the warrant in the form of EXHIBIT 1
attached hereto for the right to purchase additional Common Shares.
"WARRANT SHARES" shall mean Common Shares to be issued upon
exercise of the Warrant.
"YEAR 2000 COMPLIANT" shall mean that, with respect to data
entry controlled by those modules of a party's intellectual property which are
(i) proprietary to such party ("Party Proprietary Modules") and (ii) used in
accordance with that party's user documentation or as instructed by that party:
(a) such Party Proprietary Modules will accurately process, provide and/or
receive all date/time data (including calculating, comparing, sequencing,
processing, and outputting), within, from, into, and between centuries
(including the twentieth and twenty-first centuries and the years 1999 and
2000), including leap year calculations; (b) neither the performance nor the
functionality of the Party Proprietary Modules will be affected by any
dates/times, prior to, on, after, or spanning January 1, 2000; (c) the design of
the Party Proprietary Modules includes proper date/time data century recognition
and recognition of 1999 and 2000, calculations that accommodate single century
and multi-century formulae, and date/time values before, on, after and spanning
January 1, 2000, and date/time data interface values that reflect the century,
1999, and 2000; (d) no value for current date/time will cause any error,
interruption, or decreased performance in or of the Party Proprietary Modules;
(e) all manipulations of date and time related data (including calculating,
comparing, sequencing, processing, and outputting) will produce correct results
for all valid dates and times when used independently; (f) date/time elements in
interfaces and data storage will specify the century to eliminate date ambiguity
without human intervention, including leap year calculations; (g) where any
date/time element is represented without a century, the correct century will be
unambiguous for all manipulations involving that element; and (h) authorization
codes, passwords, and zaps (purge functions) will function normally and in the
same manner during, prior to, on, and after January 1, 2000, including the
manner in which they function with respect to expiration dates and CPU serial
numbers.
SECTION 2
PURCHASE OF THE PURCHASED SHARES
2.1 AUTHORIZATION OF THE PURCHASED SHARES AND WARRANT. The
Company has authorized the issuance and sale on the terms and subject to the
conditions of this Agreement of (a) 761,250 Series A Shares (the "Purchased
Shares") having the rights, restrictions, privileges and preferences as set
forth in the amendment ("Amendment to Articles"), attached hereto as EXHIBIT
2.1, to the Second Amended and Restated Articles of Incorporation of the Company
(the Articles, as so amended, the "Amended Articles") and (b) a Warrant for the
right to purchase 1,000,000 Common Shares for an exercise price of $.01 per
share in accordance with the form of Warrant set forth in EXHIBIT 1 attached
hereto. In addition, the Company has authorized the
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issuance and sale of the First Contingent Warrant and the Second Contingent
Warrant and an additional number of Common Shares issuable upon the exercise by
Purchaser of the First Contingent Warrant and the Second Contingent Warrant on
the terms and subject to the conditions of the Contingent Warrant Agreement, and
at a purchase price established in accordance with the Contingent Warrant
Agreement. The Company shall adopt and file the Amendment to Articles with the
Office of the Secretary of the State of Ohio on or before the Closing Date.
2.2 PURCHASE OF THE PURCHASED SHARES; AGREEMENT TO ISSUE
SECURITIES AND PROVIDE FINANCIAL ACCOMMODATION. Subject to the terms and
conditions of this Agreement, and in reliance upon the representations,
warranties, covenants and agreements contained in this Agreement, the Company
agrees to sell to Purchaser and Purchaser agrees to purchase from the Company,
761,250 Series A Shares for the purchase price of $27.00 per share, and the
Company agrees to issue to Purchaser the Warrant in the form of EXHIBIT 1
attached hereto for the right to purchase additional Common Shares. This
Agreement is and is intended to be an agreement for the issuance of securities
by the Company and the providing of financial accommodation to the Company
within the meaning of Section 365(c)(2) of Title 11 of the United States Code.
SECTION 3
CLOSING
3.1 CLOSING. The closing ("Closing") of the sale and purchase
of the Purchased Shares and the issuance of the Warrant under this Agreement
shall take place at the offices of Baker & Hostetler LLP, 3200 National City
Center, 1900 East Ninth Street, Cleveland, Ohio 44114-3485, on September 30,
1999 (the "Closing Date"), or such other date that is mutually agreeable to the
Company and Purchaser. At the Closing, the Company shall deliver to Purchaser
certificates for the Purchased Shares and the Warrant described in Section 2.2,
registered in the name of Purchaser, against payment to the Company of the
purchase price therefor, by wire transfer, check or other method acceptable to
the Company. If at the time of the Closing any of the conditions specified in
Sections 4.1 or 4.2 shall not have been fulfilled, Purchaser or the Company,
respectively, shall, at its election, be relieved of all of its obligations
under this Agreement without thereby waiving any other rights it may have by
reason of such failure or such nonfulfillment.
SECTION 4
CONDITIONS
4.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of
Purchaser to purchase the Purchased Shares are subject to the satisfaction of
each of the following conditions precedent, to the extent applicable, on or
before the Closing Date, unless waived by Purchaser in writing:
a. PERFORMANCE OF THE COMPANY. The Company shall have
performed all obligations and agreements and complied with all covenants and
other items contained in this Agreement required to be performed or fulfilled by
the Company on or before the Closing Date.
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b. REPRESENTATIONS TRUE. All of the representations and
warranties made by the Company to Purchaser in this Agreement shall be true and
correct when made and, in all material respects, as of the Closing Date.
c. NO DEFAULT. There shall exist as of the Closing Date no
condition or event that constitutes, or that after notice or lapse of time, or
both, would constitute, an Event of Default under this Agreement or the
Collateral Agreements.
d. CONSENTS. The waiver of any preemptive or first refusal
rights by the Shareholders of the Company or any third party with respect to the
Purchased Shares, the Warrant, the Warrant Shares, the First Contingent Warrant,
the Second Contingent Warrant, the Contingent Shares, the Conversion Shares and
the Hellman Ltd. Shares shall have been duly made or obtained on terms and
conditions satisfactory to Purchaser.
e. NO MATERIAL ADVERSE CHANGE. Except as disclosed in reports
filed pursuant to the Exchange Act or otherwise disclosed in writing to
Purchaser, since March 31, 1999, there shall have been no material adverse
change to the business, assets or condition (financial or otherwise), earnings,
results of operations or prospects of the Company and its Subsidiaries taken as
a whole.
f. PROCEEDINGS. All corporate and other proceedings and all
documents incidental to the transactions involved in the purchase of the
Purchased Shares, the issuance of the Warrant, the issuance of the Conversion
Shares upon conversion of the Purchased Shares, the issuance of the Warrant
Shares upon exercise of the Warrant, the issuance of the First Contingent
Warrant and the Second Contingent Warrant and the issuance of the Contingent
Shares upon exercise of the First Contingent Warrant or the Second Contingent
Warrant shall be reasonably satisfactory in substance and form to Purchaser and
Purchaser and its counsel shall have received all such counterpart originals or
certified or other copies of such documents as Purchaser or its counsel may
reasonably request, including, without limitation, the following:
(i) Amendment to Articles, certified by the Secretary of State
of the State of Ohio;
(ii) a Certificate, as of the most recent practicable date
prior to the Closing, as to the corporate good standing of the Company issued by
the Secretary of State of the State of Ohio;
(iii) the Code of Regulations of the Company, certified by its
Secretary or Assistant Secretary as of the Closing Date; and
(iv) resolutions of the Board of Directors of the Company,
authorizing and approving all matters in connection with this Agreement and the
transactions contemplated hereby, including, without limitation, a specific
resolution adopted in accordance with Section 1704.05(D)(1) of the Ohio Revised
Code authorizing and approving the issuance of the Warrant Shares upon exercise
of the Warrant, the Conversion Shares upon conversion of the Purchased Shares
and the Contingent Shares upon exercise of the First Contingent Warrant or the
Second Contingent Warrant, certified by the Secretary or Assistant Secretary of
the Company as of the Closing Date.
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g. COLLATERAL AGREEMENTS. The Company shall have delivered
duly executed originals of the following agreements to Purchaser, each of which
shall be in form and substance satisfactory to Purchaser:
(i) the Contingent Warrant Agreement;
(ii) a Registration Rights Agreement; and
(iii) a Lamp Materials Purchase Agreement and related
License Agreement.
(The agreements set forth in this clause g. of this Section 4.1, collectively,
the "Collateral Agreements".)
h. BOARD OF DIRECTORS/AMENDED CODE OF REGULATIONS. The Code of
Regulations of the Company shall be amended, if necessary, to provide that the
Board of Directors shall consist of ten members. The Purchaser shall have the
right to propose five individuals none of whom are directors, executive
officers, employees or the beneficial owner of 10% or more of any class of
equity securities of Purchaser as potential members of the Board of Directors of
the Company (the "Purchaser's Nominees"). The Company shall cause to be
appointed to the Board of Directors that number of the Purchaser's Nominees
necessary to give Purchaser representation equaling 20% of the total members of
the Board of Directors.
i. AMENDMENT TO ARTICLES. The Board of Directors, on behalf of
the Company, shall have adopted the Amendment to Articles and filed the
Amendment to Articles with the Secretary of State of the State of Ohio.
j. OPINION OF COUNSEL. Purchaser shall have received an
opinion from Cowden, Humphrey & Sarlson Co., L.P.A., counsel for the Company,
dated as of the Closing Date, addressed to it, in form and substance reasonably
satisfactory to Purchaser.
k. FINANCIAL DUE DILIGENCE. Purchaser shall be satisfied, in
its sole and absolute discretion, with its financial due diligence review of the
Company.
l. REGULATORY APPROVALS. Purchaser and the Company shall have
received all governmental and other approvals required under any applicable
laws, statutes, orders, rules, regulations or policies, or any guidelines
promulgated thereunder, including, without limitation, under the
Hart-Scott-Rodino Antitrust Improvements Act, as amended.
m. PROXIES. Purchaser shall have received from each of Wayne
R. Hellman and Alan J. Ruud a proxy, duly executed in blank, entitling Purchaser
to vote all Common Shares held by Messrs. Hellman and Ruud, individually, and
all shares as to which they have voting power as voting trustee of the Hellman
Voting Trust and the Ruud Voting Trust, respectively, on all matters submitted
to a vote of the shareholders of the Company, in accordance with and subject to
the provisions of the Contingent Warrant Agreement. Purchaser shall have
received from Hellman Ltd., an Ohio limited liability company ("Hellman Ltd."),
a proxy, duly executed in blank, entitling Purchaser to vote all of the Hellman
Ltd. Shares on all
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matters submitted to a vote of the shareholders of the Company, in accordance
with and subject to the provisions of the Contingent Warrant Agreement.
n. NO PROCEEDINGS. There shall be no action or proceeding,
pending or threatened, before any Governmental Body (i) against Purchaser or the
Company for the purpose of enjoining or preventing the consummation of this
Agreement or the transactions contemplated hereby, or otherwise claiming that
this Agreement or the consummation of the transactions contemplated hereby is
illegal, or (ii) against any beneficial owner of 5% or more of any class of
equity securities of the Company (a "Beneficial Owner") seeking to adjudicate
him or her a bankrupt or insolvent or seeking the appointment of a receiver,
trustee, custodian or other similar official for him or her or for any
substantial part of his or her assets or (iii) in which any Beneficial Owner
shall seek protection or relief under any law relating to bankruptcy,
insolvency, relief or protection of debtors.
o. NO EVENT OF DEFAULT. There shall exist as of the Closing
Date no condition or event that constitutes, or that after notice or lapse of
time, or both, would constitute, an event of default under the Indenture, the
Credit Agreement or any other agreement evidencing any Indebtedness for Borrowed
Money in excess of $250,000.
p. WARRANT. The Company shall have executed and delivered to
Purchaser the Warrant.
q. INDEPENDENT CPA. The Company shall have retained as its
auditor an independent certified public accounting firm acceptable to Purchaser
and such independent certified public accounting firm shall have accepted such
engagement.
r. OPTION AGREEMENT. Wayne R. Hellman and Alan J. Ruud shall
have executed and delivered to Purchaser the Option Agreement.
s. RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT. Wayne R.
Hellman, Hellman Ltd. and Alan J. Ruud shall have executed and delivered to
Purchaser a Right of First Refusal and Co-Sale Agreement in form and substance
reasonably satisfactory to Purchaser.
4.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations
of the Company to sell the Purchased Shares are subject to the satisfaction of
each of the following conditions precedent, to the extent applicable, on or
before the Closing Date, unless waived by the Company in writing:
a. PERFORMANCE OF PURCHASER. Purchaser shall have performed
all obligations and agreements and complied with all covenants and other items
contained in this Agreement required to be performed or fulfilled by Purchaser
on or before the Closing Date.
b. REPRESENTATIONS TRUE. All of the representations and
warranties made by Purchaser to the Company in this Agreement shall be true and
correct when made and, in all material respects, as of the Closing Date.
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c. COLLATERAL AGREEMENTS. Purchaser shall have delivered duly
executed originals of the Collateral Agreements referred to in clauses (i) and
(iii) of Subsection 4.1(g) to the Company, each of which shall be in form and
substance satisfactory to the Company.
d. REGULATORY APPROVALS. Purchaser and the Company shall have
received all governmental and other approvals required under any applicable
laws, statutes, orders, rules, regulations or policies, or any guidelines
promulgated thereunder, including, without limitation, under the
Hart-Scott-Rodino Antitrust Improvements Act, as amended.
e. NO PROCEEDINGS. There shall be no action, pending or
threatened, against Purchaser or the Company for the purpose of enjoining or
preventing the consummation of this Agreement or the transactions contemplated
hereby, or otherwise claiming that this Agreement or the consummation of the
transactions contemplated hereby hereof is illegal.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser as follows:
5.1 ORGANIZATION; AUTHORITY. Each of the Company and each
Subsidiary: (a) is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of its incorporation and (b) has all
requisite corporate power and authority to own its properties and to carry on
its business as now being conducted. Each of the Company and each Subsidiary is
qualified to do business in each state in which the nature of its business makes
such qualification necessary, except where failure to so qualify would not have
a material adverse effect on the Company. The Company has all requisite
corporate power and authority to enter into this Agreement and the Collateral
Agreements, to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby. All necessary
corporate action has been (or will timely be) taken by and on behalf of the
Company and its shareholders with respect to the execution, delivery, and
performance by the Company of this Agreement and the Collateral Agreements and
the consummation of the transactions contemplated hereby and thereby. This
Agreement and the Collateral Agreements constitute (or will constitute when
executed and delivered) legal, valid, and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms.
Neither the execution, delivery, and performance of this Agreement, the
Collateral Agreements, and the other instruments and transactions contemplated
hereby, nor the issuance of the Purchased Shares, the Warrant, the Warrant
Shares, the First Contingent Warrant, the Second Contingent Warrant, the
Contingent Shares or the Conversion Shares, will violate any provision of any
law (provided, with respect to the Warrant Shares, the Contingent Shares and the
Conversion Shares, that the Purchaser complies with applicable provisions of the
Ohio Control Share Acquisition Act), any order of any court or other agency of
government, the Amended Articles or Code of Regulations of the Company or any
agreement or instrument to which the Company is a party or by which the Company
is bound, or be in conflict with, result in a breach of, or constitute (with
notice or lapse of time, or both) a default under any such agreement or
instrument provided, however, that the purchase or redemption of Purchased
Shares upon exercise of the Put Option (as defined in the Amendment to Articles)
would violate (i) the terms of the Credit Agreement,
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unless prior consent of the lenders thereunder is obtained and (ii) the terms of
the Indenture, unless Restricted Payments (as defined in the Indenture) in an
amount equal to the purchase price are then permitted pursuant to the terms of
the Indenture.
5.2 CAPITALIZATION. The authorized capital stock of the
Company consists of (a) 80,000,000 Common Shares, of which 20,237,706 were
issued and outstanding on April 1, 1999, and (b) 1,000,000 Preferred Shares,
none of which are issued or outstanding. All of the issued and outstanding
Common Shares are duly authorized, validly issued, fully paid and nonassessable,
and were issued in conformity with all applicable state and federal securities
laws. All of the Preferred Shares are duly authorized. The Purchased Shares
shall have the rights, preferences and privileges set forth in the Amended
Articles. Except for the 3,279,254 Common Shares reserved for issuance under the
Stock Plans, the Company has no other equity securities of any class authorized,
issued, reserved for issuance, or outstanding. Except for the conversion right
contained in the Preferred Shares, the purchase rights contained in the
Contingent Warrant Agreement, and options and rights to shares issued under the
Stock Plans, there are no outstanding options, offers, warrants, conversion
rights, agreements, or other rights to subscribe for or to purchase from the
Company, or, except for Common Shares issued or to be issued in respect of
acquisitions of securities or assets of any Persons in connection with contracts
entered into prior to the date hereof (which in the aggregate do not exceed
110,000 Common Shares), commitments by the Company to issue, transfer, or sell
(either written or oral, formal or informal, firm or contingent) shares of or
interests in the capital stock or, except for the Company's obligations to use
its best efforts to effect the registration under the Securities Act of 8%
Senior Notes to be issued in exchange for 8% Senior Notes of the Company issued
in a private offering, other securities of the Company (whether debt, equity, or
a combination thereof) or obligating the Company to grant, extend or enter into
any such agreement or commitment. No securities of the Company carry, and no
shareholder of the Company has been granted, any preemptive rights. The Company
is not obligated under any agreement, arrangement or understanding to redeem or
otherwise purchase any of its shares of capital stock. SCHEDULE 5.2 to the
Disclosure Statement lists, by creditor, the total Indebtedness for Borrowed
Money of the Company and its Subsidiaries as of May 1, 1999.
5.3 FINANCIAL STATEMENTS AND REPORTS; ABSENCE OF UNDISCLOSED
LIABILITIES. The Company has filed all forms, reports and documents with the
Securities and Exchange Commission required to be filed by it pursuant to the
Exchange Act, and the rules and regulations promulgated thereunder, all of which
have complied in all material respects with the applicable requirements of the
Exchange Act, and such rules and regulations (hereinafter collectively referred
to as the "Company Reports"). None of the Company Reports, at the time filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the Company
Reports complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission applied
on a consistent basis (except as otherwise noted in such financial statements)
and present fairly in all material respects the financial position, results of
operations, cash flows and changes in financial position of the Company and its
consolidated Subsidiaries as of the dates stated or the periods indicated,
subject, in the case of unaudited interim consolidated financial statements, to
normal year-end adjustments. Except as reflected in the most recent financial
statements of the Company included in the Company Reports or obligations
incurred for the payment of money
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only in the ordinary course of business consistent with past practice since the
date of the most recent balance sheet included in the Company Reports, the
Company does not have any material liabilities or obligations of any nature,
whether accrued, contingent or otherwise and whether due or to become due.
5.4 SECURITIES. The Conversion Shares issuable upon conversion
of the Purchased Shares have been duly authorized and reserved for issuance and,
following issuance and delivery of the Purchased Shares in accordance with this
Agreement, upon conversion in accordance with the terms of the Purchased Shares,
the Conversion Shares shall be validly issued, fully paid, and nonassessable and
will be free of restrictions on transfers other than restrictions contained in
this Agreement and under applicable state and federal securities laws. The
Warrant Shares issuable upon exercise of the Warrant and the Contingent Shares
issuable upon exercise of the First Contingent Warrant and the Second Contingent
Warrant have been duly authorized and reserved for issuance and, when payment is
made therefor in accordance with the Warrant or the First Contingent Warrant or
the Second Contingent Warrant, as the case may be, shall be validly issued,
fully paid, and nonassessable and will be free of restrictions on transfers
other than restrictions contained in this Agreement and under applicable state
and federal securities laws and subject to applicable provisions of the Ohio
Control Share Acquisition Act.
5.5 SECURITIES LAWS. No consent, authorization, approval,
permit, or order of or filing with any governmental or regulatory authority is
required under current laws and regulations in connection with the execution and
delivery of either this Agreement, or the offer, issuance, sale, or delivery of
the Purchased Shares, the Warrant, the Warrant Shares, the First Contingent
Warrant, the Second Contingent Warrant, the Contingent Shares or the Conversion
Shares to Purchaser (assuming the Conversion Shares are issued to Purchaser in
conformity with the terms hereof and thereof) other than the qualification
thereof or notification with respect thereto, if required, under applicable
federal and state securities laws, which qualification or notification has been
or will be effected as a condition of such sales. The Company has not: (a)
issued any securities in violation of the requirements of Section 5 of the
Securities Act or any other law; (b) violated any rule, regulation or
requirement under the Securities Act or the Exchange Act; (c) issued any
securities in violation of any state securities laws; or (d) redeemed any
securities in violation of any applicable state or federal securities law or any
agreement or contract governing the redemption of such securities.
5.6 NO PREEMPTIVE RIGHTS. No Person has any right of first
refusal or any preemptive rights in connection with the issuance of the
Purchased Shares or the Warrant, the issuance of the Warrant Shares upon
exercise of the Warrant, the issuance of the Contingent Shares upon exercise of
the First Contingent Warrant or the Second Contingent Warrant, the issuance of
the Conversion Shares upon conversion of the Purchased Shares, or any future
issuances of securities by the Company.
5.7 REGISTRATION RIGHTS. Except as set forth in SCHEDULE 5.7
to the Disclosure Statement and in the Registration Rights Agreement, the
Company is not under any contractual obligation to register with the Commission
any of its currently outstanding securities or any of its securities that may
hereafter be issued, other than the Company's obligation to use its best efforts
to effect the registration under the Securities Act of 8% Senior Notes.
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5.8 COMPLIANCE WITH LAWS. Each of the Company and each
Subsidiary is and has been in compliance in all respects with all applicable
laws, ordinances, regulations and orders, including, without limitation
Environmental, Health and Safety Laws, except to the extent that any such
noncompliance would not have a material adverse effect on the business, assets,
condition (financial or otherwise), earnings, results of operations or prospects
of the Company.
5.9 LITIGATION. Except as described in SCHEDULE 5.9 to the
Disclosure Statement, there is no claim, litigation, action, suit, proceeding,
investigation or inquiry, administrative or judicial, at law, in equity or
before or by any Governmental Body, pending or, to the best knowledge of the
Company, threatened against or affecting the Company or any of its properties or
assets, which if adversely determined would have a material adverse effect on
the Company. There is no claim, litigation, action, suit or proceeding pending
or, to the best knowledge of the Company, threatened against the Company for the
purpose of enjoining or preventing the consummation of the transactions
contemplated by this Agreement, or otherwise claiming that this Agreement, the
transactions contemplated hereby, or the consummation thereof are improper. The
Company and its properties and assets are not subject to any order, writ,
injunction or decree of any court or any Governmental Body.
5.10 MATERIAL ADVERSE CHANGE. Except as disclosed in the
Company Reports, there has not been any material adverse change in the business,
assets, condition (financial or otherwise), earnings, results of operations or
prospects of the Company and its Subsidiaries taken as a whole, since the date
of the latest balance sheet filed in connection with the Company Reports.
5.11 YEAR 2000 COMPLIANCE. The Company and each Subsidiary are
or will be, prior to December 31, 1999, Year 2000 Compliant.
5.12 SUBSIDIARIES. Except as set forth on SCHEDULE 5.12 to the
Disclosure Statement, the Company has no subsidiaries and does not otherwise own
or control, directly or indirectly, any interest in any corporation,
partnership, limited liability company, joint venture or other entity or
business concern.
5.13 MATERIAL CONTRACTS AND AGREEMENTS. SCHEDULE 5.13 to the
Disclosure Statement lists all contracts, agreements, leases, commitments,
instruments, arrangements and understandings, whether written or oral, to which
the Company is a party and which are considered material contracts for purposes
of Item 601 of Regulation S-K promulgated by the Commission under the Securities
Act (the "Material Contracts"). The Material Contracts are valid and binding,
are in full force and effect and are enforceable in accordance with their
respective terms. Except for Permitted Liens, the Company has not assigned,
mortgaged, pledged, encumbered or otherwise hypothecated any of its right, title
and interest under the Material Contracts. Except as set forth on SCHEDULE 5.13
to the Disclosure Statement, neither the Company nor, to the best knowledge of
the Company, any other party thereto is in violation of, or in default, in any
material respect, in respect of any Material Contract. No notice has been
received by the Company claiming any such violation or default by the Company or
indicating the desire or intention of any other party thereto to amend, modify,
rescind or terminate the same.
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5.14 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company
has good and marketable title to its properties and assets and good title to all
its leasehold estates, in each case subject to no mortgage, pledge, lien,
encumbrance or charge, other than Permitted Liens. With respect to the property
and assets the Company leases, the Company is in compliance in all material
respects with all terms of each such lease and holds a valid leasehold interest
free of any liens, claims or encumbrances, other than Permitted Liens.
5.15 TAXES. The amount shown on the most recent financial
statements included in the Company Reports as provision for taxes is sufficient
in all material respects for payment of all accrued and unpaid federal, state,
county, local and foreign taxes for the period then ended and all prior periods.
The Company has filed or has obtained presently effective extensions with
respect to all federal, state, county, local and foreign tax returns which have
been required to be filed by it, such returns are true and correct and all taxes
shown thereon to be due have been timely paid with exceptions not material to
the Company. Except as set forth on SCHEDULE 5.15 to the Disclosure Statement,
federal income tax returns of the Company have not been audited by the Internal
Revenue Service, and no controversy with respect to taxes of any type is pending
or, to the best of the Company's knowledge, threatened.
5.16 PROPRIETARY RIGHTS. SCHEDULE 5.16 to the Disclosure
Statement lists or describes all material patents, trademarks, service names,
trade names, copyrights, licenses, trade secrets or other proprietary rights
necessary to its business as now conducted or proposed to be conducted (the
"Proprietary Rights"), together with a description of the Company's rights
therein. The Company owns, or has the right to use all of the Proprietary
Rights, and has taken all actions reasonably necessary to protect the
Proprietary Rights. The Company has not received a notice that it is infringing
upon or otherwise acting adversely to the right or claimed right of any Person
under or with respect to any of the foregoing, and to the best knowledge of the
Company there is no basis for any such claim. Except as set forth on Schedule
5.16 to the Disclosure Statement, the Company is not aware of any violation by a
third party of any of the Proprietary Rights. The Company is not aware that any
of its employees is obligated under any contract (including licenses, covenants
or commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
their duties to the Company or that would conflict with the Company's business
as proposed to be conducted. The Company does not believe it is or will be
necessary to utilize any inventions of any of its employees made prior to their
employment by the Company, except for inventions that have been assigned to the
Company.
5.17 AGREEMENTS OF EMPLOYEES. Except as set forth on SCHEDULE
5.17 to the Disclosure Statement, to the best knowledge of the Company, no
officer, director, stockholder, or employee of the Company is a party to or
bound by any agreement, contract, or commitment that materially and adversely
affects the business, assets, condition (financial or otherwise), earnings,
results of operations or prospects of the Company, or the right of any such
person to participate in the Company's affairs and perform the duties of his
office or capacity in connection therewith, or that obligates any such person to
perform any duty for any prior employer or principals.
5.18 EMPLOYEES. To the best knowledge of the Company, no
employee of or consultant to the Company is in violation of any term of any
employment contract or any other contract or agreement relating to the
relationship of any such person with the Company or any other party because of
the nature of the business conducted or to be conducted by the Company.
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To the best of knowledge of the Company, there is no information that is
proprietary to another party that the Company is now utilizing that was provided
by any employee of the Company. The Company is not aware of any key employee of
the Company who has any plans to terminate his or her employment with the
Company.
5.19 LABOR AGREEMENTS AND ACTIONS. Except as set forth on
SCHEDULE 5.19 to the Disclosure Statement, the Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the best knowledge of
the Company, has sought to represent any of the employees, representatives or
agents of the Company. Except as described on SCHEDULE 5.19 to the Disclosure
Statement, there is no strike or other labor dispute involving the Company
pending, or, to the best knowledge of the Company, threatened, nor is the
Company aware of any labor organization activity involving employees of the
Company.
5.20 ENVIRONMENTAL MATTERS. Except as disclosed to Purchaser,
the Company's ownership, operation and use of its properties have been and
currently are in compliance in all respects with all applicable Environmental,
Health and Safety Laws, except to the extent that any such noncompliance would
not have a material adverse effect on the business, assets, condition (financial
or otherwise), earnings, results of operations or prospects of the Company.
Except as disclosed to Purchaser: (i) the Company is not currently liable for
any penalties, fines, liens or forfeitures for its failure to comply with any
Environmental, Health and Safety Laws, (ii) to the best of its knowledge, the
Company does not have any liability under any Environmental Health and Safety
Laws for personal injury, property damage, natural resource damage or cleanup
obligations at or in connection with any of its properties, (iii) the Company is
in compliance with, and is not in breach of or default under any writ, order,
judgment, injunction, or decree issued pursuant to Environmental, Health and
Safety Laws, (iv) the Company has obtained, or caused to be obtained, and is in
compliance with all licenses, certificates, permits, approvals and registrations
("Licenses") required by Environmental, Health and Safety Laws for the Company's
ownership of its properties and the operation of its business as presently
conducted, (v) the Company is in compliance in all material respects with all
terms, conditions and requirements of the Licenses, (vi) there are no
administrative or judicial investigations, notices, claims or other proceedings
pending or, to the Company's knowledge, threatened by any governmental
authorities or third parties against the Company, its business, operations or
any of the Company's property which question the validity or entitlement of the
Company to any License required by the Environmental, Health and Safety Laws for
the ownership of the property and the operations of the Company's business,
(vii) the Company has not performed, arranged for or allowed, by any method or
procedure, the generation, manufacture, use, transportation, transfer, storage,
treatment, spillage, leakage, dumping, pouring, emitting, discharging, releasing
or disposing of Hazardous Substances or other waste in contravention of any
Environmental, Health and Safety Laws or in a manner which would subject any of
the Company's property or the Company to liability, (viii) the Company has not
received notice that in relation to any of its property the Company is a
potentially responsible party for a federal or state environmental cleanup site
or for corrective action under CERCLA, RCRA or any other applicable
Environmental, Health and Safety Laws, (ix) the Company has not received any
written request for information in connection with any federal or state
environmental cleanup site, or in connection with any of the sites where it has
transported, transferred or disposed of Hazardous Substances or other wastes
from any of the Company's property, and (x) to the extent
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that information has been disclosed to Purchaser under this SECTION 5.20, Seller
has fully complied with all informational requests or demands arising under
Environmental, Health and Safety Laws relating to such disclosure.
5.21 ERISA AND BENEFITS MATTERS. The most recent financial
statements contained in the Company Reports reflects the approximate total
pension, group health and other benefit expense for all "employee benefit plans"
(within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) and all "employee pension benefit plans"
(within the meaning of Section 3(2) of ERISA) of the Company for the 12-month
period then ended, and no material funding changes or irregularities exist in
said 12-month period which would cause such period not to be representative of
most prior periods. Except (and to the extent) expressly set forth on SCHEDULE
5.21 to the Disclosure Statement, full payment has been made or accrued in the
most recent financial statements contained in the Company Reports of all amounts
which the Company is required to pay under the employee benefit plans and the
employee pension benefit plans as of the last day of the most recent fiscal year
of each of such plans ending prior to the date of this Agreement; and no
accumulated funding deficiencies (as defined in Section 302 of ERISA and Section
412 of the Internal Revenue Code of 1986, as amended (the "Code") , exist as of
such date, whether or not waived. No transaction prohibited under Code Section
4975 and/or prohibited under ERISA Sections 406, 407 or 502(i) has occurred, nor
is alleged by any third party to have occurred, with respect to the Company's
employee benefit plans or employee pension benefit plans. A favorable
determination letter has been issued by the Internal Revenue Service with
respect to the tax-qualified status under Code Section 401(a) of each plan which
is an employee pension benefit plan. With respect to the Company's benefit plans
and any other employee pension benefit plan maintained by any member of a
"controlled group" (as defined in ERISA Section 4001(a)(14)) which includes the
Company, the Company does not have any direct or indirect liability under ERISA
Title IV whatsoever to the Pension Benefit Guaranty Corporation or otherwise,
including any withdrawal liability or other obligation to contribute to any
"multiemployer pension plan" (as defined in ERISA Section 4001(a)(14)).
5.22 REPRESENTATIONS COMPLETE. No representation or warranty
of the Company made in this Agreement or any Collateral Agreement, or in any
schedule, document or certificate furnished pursuant to this Agreement or any
Collateral Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
any statement of fact contained herein or therein not misleading. There is no
fact or circumstance which is not disclosed in this Agreement or the schedules
to the Disclosure Statement which could reasonably be expected to have a
material adverse effect on the Company's financial condition, operating results,
assets, supplier relations, customer relations, employee relations or business
prospects.
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SECTION 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants as follows to the Company:
6.1 AUTHORITY. Purchaser has full power and authority to enter
into this Agreement and the Collateral Agreements to which it is a party, to
perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby.
6.2 ACCREDITED INVESTOR. Purchaser is an "Accredited Investor"
as that term is defined in Rule 501 of Regulation D promulgated under the
Securities Act. Purchaser is able to bear the economic risk of the purchase of
the Purchased Shares pursuant to the terms of this Agreement, including a
complete loss of Purchaser's investment in the Purchased Shares.
6.3 INVESTMENT. Purchaser is acquiring the Purchased Shares
and the Warrant for investment for Purchaser's own account, not as a nominee or
agent and not with the view to, or for resale in connection with, any
distribution thereof. Purchaser understands that none of the Purchased Shares,
the Warrant Shares or the Conversion Shares have been, nor will they be (other
than in accordance with the terms of the Registration Rights Agreement referred
to in Section 4.1(g)(ii)), registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act that
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of Purchaser's representations as expressed herein. Purchaser
has not been formed for the specific purpose of acquiring the Purchased Shares,
the Warrant, the Warrant Shares or the Conversion Shares.
6.4. RESTRICTIVE LEGENDS.
(a) Except as otherwise provided in this Section 6.4, each
certificate for Purchased Shares, Warrant Shares initially issued upon the
exercise of the Warrant, Conversion Shares initially issued upon the conversion
of Series A Shares, and each certificate for Purchased Shares, Warrant Shares or
Conversion Shares issued to any subsequent transferee of any such certificate,
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be transferred in violation of such Act or the rules
and regulations thereunder."
(b) Except as otherwise provided in this Section 6.4, the
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"This Warrant and the securities represented hereby have not
been registered under the Securities Act of 1933, as amended,
and may not be transferred in violation of such Act, the
rules and regulations thereunder or the provisions of this
Warrant."
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SECTION 7
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company, for itself and for each Subsidiary (including
those that are hereafter formed or acquired), covenants to and agrees with
Purchaser that, until the date on which Purchaser no longer owns any Common
Shares or the date which is eleven (11) years from the Closing Date, whichever
is earlier:
7.1 CORPORATE EXISTENCE. The Company, and each Subsidiary,
shall maintain in full force and effect their respective corporate existences,
rights, and franchises, and all material licenses, permits, authorizations,
trademarks, trade names, copyrights, patents, or processes owned or possessed by
them and necessary to the conduct of the Business and shall comply with all
applicable laws and regulations, whether now in effect or hereafter enacted or
promulgated by any governmental authority having jurisdiction.
7.2 TAXES. The Company and each Subsidiary shall timely pay
and discharge, or cause to be timely paid and discharged, all taxes (including
all employment and payroll taxes), assessments, and other governmental charges
imposed upon them or any of their properties or in respect of their franchises
or income; provided, however, that no such tax or charge need be paid if being
contested in good faith by proceedings diligently conducted and if such
reservation or other appropriate provisions, if any, as shall be required by
GAAP shall have been made therefor.
7.3 INSURANCE. The Company and each Subsidiary shall maintain
or cause to be maintained insurance with respect to their properties and
businesses against such casualties and contingencies and in such types and
amounts as is customary or as may be required by law in the case of corporations
engaged in the same or similar Business. Certificates evidencing such insurance
shall be delivered to Purchaser upon request.
7.4 FINANCIAL STATEMENTS. The Company shall deliver the
following to Purchaser :
(a) As soon as available and in any event within ninety (90)
days after the end of each fiscal year of the Company: (i) a consolidated
balance sheet of the Company and each Subsidiary as of the end of such year, a
consolidated statement of income and of surplus for such year and a consolidated
statement of changes in financial position during such year (collectively the
"Annual Financial Statements") and annual financial statements which set forth
in comparative form, if practicable, the corresponding figures for the preceding
year and the budgeted figures for the then-current year; and (ii) an audit
report on the Annual Financial Statements prepared by an accounting firm of
nationally recognized standing reasonably satisfactory to Purchaser stating that
(x) the examination by such accountants with respect to the consolidated Annual
Financial Statements was made in accordance with generally accepted auditing
standards and (y) in the opinion of such accountants, the consolidated Annual
Financial Statements present fairly the consolidated financial position of the
Company, the consolidated results of its operations, and the changes in its
consolidated financial position as of the dates and for the periods of time
covered thereby in conformity with GAAP.
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(b) As soon as available and in any event within forty-five
(45) days after the end of the first three quarters of each fiscal year of the
Company, a consolidated balance sheet of the Company and each Subsidiary as of
the end of such period(s), a consolidated statement of income and surplus for
such period(s) and the fiscal year to that date, and a consolidated statement of
changes in financial position for the fiscal year to that date, subject to
changes resulting from normal year-end adjustments, setting forth in each case
in comparative form, if possible, the corresponding figures for the
corresponding period of the preceding fiscal year and the corresponding figures
for sales, gross profit, net income and the heading titled "EBIT" for the
corresponding period for the budget for the current fiscal year. Such balance
sheet and statements are to be certified by an officer of the Company as
complete and accurate to the best of his information and belief, subject to
normal year-end adjustments.
(c) Concurrent with the furnishing of the Annual Financial
Statements pursuant to paragraph (a) and each of the quarterly statements
pursuant to paragraph (b), a certificate of an officer of the Company which
shall contain a statement, in form and substance satisfactory to Purchaser, to
the effect that, to the best of his knowledge and belief, no Event of Default,
or any event that, upon notice or lapse of time, or both, would constitute an
Event of Default, has occurred without having been waived by Purchaser in
writing, or if there shall have been an Event of Default not previously waived
in writing pursuant to the provisions hereof, or an event that upon notice or
lapse of time, or both, would constitute an Event of Default, such certificate
shall disclose the details thereof. In each such certificate the officer of the
Company shall also certify that the financial statements furnished pursuant to
(a) and (b) above were prepared in accordance with GAAP (except for the lack of
footnotes).
(d) Within ten (10) days after transmission thereof, copies
of all financial statements, proxy statements, reports and any other written
communications which the Company sends to its shareholders and copies of all
registration statements and all regular, special or periodic reports which it
files with the Commission or with any securities exchange on which any of its
securities are then listed, and copies of all press releases and other
statements made available generally by the Company to the public concerning
material developments in the Company's business.
(e) As soon as practicable after a request by Purchaser, the
Company shall provide Purchaser with such information as it may reasonably
require in order to effect timely and proper filing of any reports that
Purchaser is required to submit to any governmental authority in connection with
the business of the Company or any Subsidiary.
7.5 NOTICE OF DEFAULT. In the event that all or any portion of
any Indebtedness for Borrowed Money of the Company or any Subsidiary shall be
declared due and payable before its express maturity, or if the Company or any
Subsidiary shall otherwise be in default under any agreement with respect to
Indebtedness for Borrowed Money, the Company shall give written notice thereof
to Purchaser within ten (10) days of the occurrence of each such event.
7.6 NOTICE OF COMMENCEMENT OF PROCEEDINGS OR CHANGE IN
CONDITION. The Company shall give notice to Purchaser as soon as practicable and
in any event within ten (10) days after the occurrence of any of the following
events, stating in detail the nature thereof: (a) any proceeding instituted
against the Company or any Subsidiary by or in any federal or state court or
before any commission, board, or other regulatory body, federal, state, or
local, that
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would be required to be disclosed under Section 5.9 if it had been in existence
on or prior to the date of this Agreement; or (b) any condition or event which
may have a materially adverse effect on the Company's business, assets,
condition (financial or otherwise), earnings, results of operations or
prospects.
7.7 APPLICATION OF PROCEEDS. The Company shall use the
proceeds from the issuance of the Purchased Shares for reduction of outstanding
indebtedness and general business purposes.
7.8 COMPLIANCE WITH LAW. The Company will comply in all
material respects with all applicable laws (whether federal, state or local and
whether statutory, administrative or judicial or other) and with every
applicable lawful governmental order (whether administrative or judicial).
7.9 RULE 144A INFORMATION. The Company shall, upon the written
request of Purchaser, provide to Purchaser and to any prospective institutional
transferee designated by Purchaser, such financial and other information as is
available to the Company or can be obtained by the Company without material
expense and as Purchaser may reasonably determine is required to permit such
transfer to comply with the requirements of Rule 144A promulgated under the
Securities Act.
7.10 SECURITIES FILINGS. The Company will file all required
forms, reports and documents with the Securities and Exchange Commission
required to be filed by it pursuant to the Securities Act and the Exchange Act,
and the rules and regulations promulgated thereunder, all of which will comply
in all material respects with the applicable requirements of the Securities Act
and the Exchange Act, respectively, and such rules and regulations (hereinafter
collectively referred to as the "Subsequent Reports"). None of the Subsequent
Reports, at the time filed, will contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The financial statements of the Company included
in the Subsequent Reports will comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the Securities and Exchange Commission applied on a consistent basis (except as
otherwise noted in such financial statements) and will present fairly in all
material respects the financial position, results of operations, cash flows and
changes in financial position of the Company and its consolidated Subsidiaries
as of the dates stated or the periods indicated, subject, in the case of
unaudited interim consolidated financial statements, to normal year-end
adjustments.
7.11 REGULATORY FILINGS. The Company shall file all
Notification and Report Forms and related materials the Company may be required
to file with the Federal Trade Commission and the Antitrust Division of the
United States Department of Justice under the Hart Scott Rodino Antitrust
Improvements Act.
7.12 BOARD REPRESENTATION. The Company shall at all times
cause the number of Purchaser's Nominees serving on the Board of Directors of
the Company to be equal to the greater of (i) 20% of the number of members of
the Board of Directors, or (ii) that number of members of the Board of Directors
that corresponds most nearly to Purchaser's percentage ownership interest in the
Company.
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7.13 AMENDMENT TO ARTICLES. The Company shall submit to a vote
of its shareholders at its 1999 annual meeting a proposal to amend its Articles
of Incorporation to provide that Section 1701.831 of the Ohio Revised Code shall
not apply to "control share acquisitions" (as defined in Section 1701.01 of the
Ohio Revised Code) of shares of capital stock of the Company (the "Control Share
Acquisition Proposal"). The Board of Directors shall recommend to the
shareholders of the Company that they vote in favor of and adopt the Control
Share Acquisition Proposal.
SECTION 8
NEGATIVE COVENANTS OF THE COMPANY
The Company, for itself and for each Subsidiary (including those that are
hereafter formed or acquired), covenants to and agrees with Purchaser that,
until the date on which Purchaser no longer owns any Common Shares or the date
which is eleven (11) years from the Closing Date, whichever is earlier, neither
the Company nor any Subsidiary shall do any of the following without the prior
written consent of Purchaser:
8.1 CORPORATE CHARTER; PURCHASED SHARES. The Company shall
not, and shall not permit any of its Subsidiaries to, (a) amend its Articles of
Incorporation or Code of Regulations, (b) amend, alter, change or modify in any
way the preferences or rights of the Purchased Shares, the Warrant Shares, the
Contingent Shares, the Conversion Shares or any class of equity securities of
the Company having rights and preferences in parity with or senior to the Series
A Shares or (c) adopt or approve what is commonly referred to as a "shareholder
rights plan" or "poison pill".
8.2 INTENTIONALLY OMITTED.
8.3 DISSOLUTION OR LIQUIDATION. The Company shall not adopt
any plan or arrangement for the dissolution or liquidation of the Company.
8.4 BOARD OF DIRECTORS. Subject to the Company's fulfillment
of the condition contained in Section 4.1(h) hereof, the Company shall not
increase or decrease the authorized number of directors constituting the Board
of Directors.
8.5 DIVIDENDS AND DISTRIBUTIONS. The Company shall not, and
shall not permit any of its Subsidiaries to, (a) declare or pay dividends or
make other distributions (whether by reduction of capital or otherwise) with
respect to the capital stock of the Company or any Subsidiary other than the
Preferred Shares and dividends from the Subsidiaries to the Company; (b)
purchase, redeem, retire or otherwise acquire any of its Common Shares or other
capital stock now or hereafter outstanding, other than in a transaction or
related transactions involving (i) payment by the Company of less than $250,000
in the aggregate or (ii) payment by any Subsidiary to its parent; (c) incur any
indebtedness for the purpose of paying dividends or making other distributions;
or (d) recapitalize, reorganize or restructure.
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8.6 ENCUMBRANCES. The Company shall not, and shall not permit
any Subsidiary to, create, incur, assume, or permit to exist, any Security
Interest on any of its properties or assets whether now owned or hereafter
acquired, other than Permitted Liens.
8.7 INTENTIONALLY OMITTED.
8.8 INCONSISTENT AGREEMENTS. The Company shall not, and shall
not permit any of its Subsidiaries to, enter into any agreement containing any
provision which would be violated or breached by the performance by the Company
of its obligations under this Agreement or the Collateral Agreements or which
would be inconsistent with the obligations of the Company under this Agreement
or the Collateral Agreements.
8.9 REGISTRATION RIGHTS. Except as provided in the
Registration Rights Agreement, the Company shall not grant to any of its
shareholders rights to register with the Commission any of the Company's
securities.
SECTION 9
REMEDIES
9.1 INDEMNIFICATION. The Company shall defend, indemnify, and
hold harmless Purchaser against all liability, loss, cost, damages, claims or
expenses (including reasonable attorneys' fees) arising out of the breach by the
Company of any of its representations and warranties hereunder or the
nonfulfillment by the Company of any of its covenants contained herein.
SECTION 10
MISCELLANEOUS
10.1 EXPENSES. The Company will pay, or reimburse Purchaser
and hold Purchaser harmless against liability for the payment of, all stamp and
other taxes which may be payable in respect of the execution and delivery of
this Agreement or the issuance, purchase and delivery of the Purchased Shares
and Warrant.
10.2 BINDING AGREEMENT; ASSIGNMENT. The provisions of this
Agreement shall be binding upon and inure to the benefit of the successors and
permitted assigns of the parties hereto. Purchaser shall not have the right to
assign this Agreement or any of its rights and obligations hereunder without the
prior written consent of the Company; provided, however, that Purchaser may
assign this Agreement or any of its rights and obligations hereunder to any
Affiliate of Purchaser without having to obtain the consent of the Company.
10.3 NOTICES. All notices and other communications required or
permitted under this Agreement shall be deemed to have been duly given and made
if in writing and if served either by personal delivery to the party for whom
intended (which shall include delivery by Federal Express or similar service) or
three (3) business days after being deposited, postage prepaid, certified or
registered mail, return receipt requested, in the United States mail bearing
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the address shown in this Agreement for, or such other address as may be
designated in writing hereafter by, such party:
(a) If to Purchaser:
GE Lighting
1975 Noble Rd.
Cleveland, OH 44112
Attention: President and Chief
Executive Officer
Facsimile: (216) 266-8699
with a copy to:
GE Lighting
1975 Noble Rd.
Cleveland, OH 44112
Attention: General Counsel
Facsimile: (216) 266-3856
(b) If to the Company:
Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
Attention: CEO
with a copy to:
Cowden, Humphrey & Sarlson Co., L.P.A.
1414 Terminal Tower
Cleveland, Ohio 44113
Attention: James S. Hogg, Esq.
Facsimile: (216) 241-2881
10.4 WAIVER. No delay on the part of any party hereto with
respect to the exercise of any right, power, privilege, or remedy under this
Agreement or the Collateral Agreements shall operate as a waiver thereof, nor
shall any exercise or partial exercise of any such right, power, privilege, or
remedy preclude any further exercise thereof or the exercise of any other right,
power, privilege, or remedy. No modification or waiver by either party hereto of
any provision of this Agreement, the Collateral Agreements, the Warrant or of
the Purchased Shares, or consent to any departure by the other party therefrom,
shall be effective in any event unless in writing as set forth in Section 10.14,
and then only in the specific instance and for the purpose for which given.
Notwithstanding the foregoing, each party hereto shall have the right to waive
compliance by the other party with any of the provisions hereof, or to modify
such provisions to a less restrictive obligation of the other party on such
terms as such party shall determine, with or without prior notice to the other
party.
24
<PAGE> 25
10.5 REMEDIES. The rights, powers, privileges, and remedies
hereunder, and under the Purchased Shares, the Warrant and the Collateral
Agreements, are cumulative and not exclusive of any other right, power,
privilege, or remedy the parties hereto would otherwise have.
10.6 ENTIRE AGREEMENT. This Agreement and the Collateral
Agreements constitute the entire agreement and understanding among Purchaser and
the Company, and supersede all prior agreements and understandings relating to
the subject matter hereof.
10.7 LAW GOVERNING. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law.
10.8 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
10.9 SEVERABILITY. Any provision of this Agreement or any
Collateral Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions of this
Agreement or Collateral Agreement affecting the validity or enforceability of
such provision in any other jurisdiction.
10.10 CROSS-REFERENCES. References in this Agreement or in any
Collateral Agreement to any section are, unless otherwise specified, to such
section of this Agreement or such Collateral Agreement, as the case may be.
10.11 HEADINGS. The various headings of this Agreement are
inserted for convenience only and shall not affect the meaning or interpretation
of this Agreement or any provisions hereof.
10.12 EXHIBITS AND SCHEDULES INCORPORATED. The exhibits and
schedules to this Agreement are incorporated into and constitute an integral
part of this Agreement.
10.13 CONFLICT. In the event, and to the extent, that any
terms or provisions of the Company's Articles of Incorporation or Code of
Regulations are amended after the date hereof in violation of Section 8.1
contrary to the terms of this Agreement, the terms of this Agreement shall
control.
10.14 AMENDMENT AND WAIVER. Except as otherwise provided
herein, no modification, amendment or waiver of any provision of this Agreement
will be effective unless such modification, amendment or waiver is approved in
writing by the Company and Purchaser. The failure of any party to enforce any of
the provisions of this Agreement will in no way be construed as a waiver of such
provisions and will not affect the right of such party thereafter to enforce
each and every provision of this Agreement.
25
<PAGE> 26
10.15 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company and Purchaser hereunder shall
survive the Closing for a period of three (3) years commencing on the Closing
Date.
10.16 COVENANTS OF CERTAIN SHAREHOLDERS. Alan J. Ruud shall
vote all Common Shares held, beneficially and of record, by him individually and
all Common Shares as to which he has voting power as voting trustee of the Ruud
Voting Trust in favor of the Control Share Acquisition Proposal. Hellman Ltd.
shall vote all Common Shares held, beneficially and of record, by it in favor of
the Control Share Acquisition Proposal.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
26
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have each caused this
Agreement to be executed in the name and on behalf of each of them by one of
their respective officers, thereunto duly authorized, as of the date first above
written.
THE COMPANY:
ADVANCED LIGHTING TECHNOLOGIES, INC.
By: /s/ Wayne Hellman
---------------------------------
Name: Wayne Hellman
------------------------------
Title: CEO
-----------------------------
PURCHASER:
GENERAL ELECTRIC COMPANY
By: /s/ MS Zafirovski
---------------------------------
Name: Mike S. Zafirovski
------------------------------
Title: President and CEO
-----------------------------
GE Lighting
-----------------------------
For valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the following shareholders of the Company are signing this
Agreement solely for the purpose of evidencing their intent and agreement to be
bound by the provisions of Section 10.16 hereof:
Hellman Ltd.
By: /s/ Wayne Hellman
---------------------------------
Its: Managing Member
--------------------------------
/s/ Alan J. Ruud
------------------------------------
Alan J. Ruud
/s/ Alan J. Ruud
------------------------------------
Alan J. Ruud, as voting trustee under Voting
Trust Agreement dated January 2, 1998, as
amended
27
<PAGE> 28
EXHIBITS
1 Form of 1,000,000 Share Warrant
2.1 Amendment to Articles
2.2 Contingent Warrant Agreement
SCHEDULES TO DISCLOSURE STATEMENT
5.2 Indebtedness for Borrowed Money
5.7 Registration Rights
5.9 Material Litigation
5.12 List of Subsidiaries
5.13 Material Contracts
5.15 IRS Audits
5.16 Proprietary Rights
5.17 Certain Employee Agreements
5.19 Labor Agreements
5.21 Benefits Matters
28
<PAGE> 29
EXHIBIT 1
---------
SERIES A1 WARRANT
to Purchase Common Shares of
ADVANCED LIGHTING TECHNOLOGIES, INC.
<PAGE> 30
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
1. DEFINITIONS .....................................................................1
2. EXERCISE OF WARRANT..............................................................5
2.1. Manner of Exercise......................................................5
2.2. Payment of Taxes........................................................6
2.3. Fractional Shares.......................................................6
2.4. Continued Validity......................................................6
3. TRANSFER, DIVISION AND COMBINATION...............................................7
3.1. Transfer................................................................7
3.2. Division and Combination................................................7
3.3. Expenses................................................................7
3.4. Maintenance of Books....................................................7
4. ADJUSTMENTS......................................................................7
4.1. Share Dividends, Subdivisions and Combinations..........................7
4.2 Certain Other Distributions and Adjustments.............................8
4.3. Issuance of Additional Common Shares....................................8
4.4. Issuance of Warrants or Other Rights....................................9
4.5. Issuance of Convertible Securities......................................9
4.6. Superseding Adjustment.................................................10
4.7. Other Provisions Applicable to Adjustments Under This Section .........11
4.8. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets..................................................13
4.9. Other Action Affecting Common Shares...................................13
5. NOTICES TO WARRANT HOLDERS......................................................14
5.1. Notice of Adjustments..................................................14
5.2. Notice of Corporate Action.............................................14
6. NO IMPAIRMENT...................................................................15
7. RESERVATION AND AUTHORIZATION OF COMMON SHARES; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY..................................15
8. TAXING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS..............................16
9. RESTRICTIONS ON TRANSFERABILITY.................................................16
9.1. Restrictive Legend.....................................................16
9.2. Notice of Proposed Transfers; Requests for Registration................16
10. SUPPLYING INFORMATION...........................................................17
11. LOSS OR MUTILATION..............................................................17
12. OFFICE OF THE COMPANY...........................................................17
13. FINANCIAL AND BUSINESS INFORMATION..............................................17
13.1. Quarterly Information..................................................17
13.2. Annual Information.....................................................18
13.3. Filings................................................................18
14. LIMITATION OF LIABILITY.........................................................18
15. MISCELLANEOUS...................................................................18
15.1. Nonwaiver and Expenses.................................................18
15.2. Notice Generally.......................................................19
</TABLE>
-i-
<PAGE> 31
<TABLE>
<S> <C> <C>
15.3. Remedies...............................................................19
15.4. Successors and Assigns.................................................19
15.5. Amendment..............................................................19
15.6. Severability...........................................................20
15.7. Headings...............................................................20
15.8. Governing Law..........................................................20
</TABLE>
SIGNATURES
EXHIBITS
Exhibit A - Subscription Form
Exhibit B - Assignment Form
-ii-
<PAGE> 32
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF
THIS WARRANT.
SERIES A1 WARRANT
To Purchase Common Shares of
ADVANCED LIGHTING TECHNOLOGIES, INC.
THIS IS TO CERTIFY THAT GENERAL ELECTRIC COMPANY, or
registered assigns, is entitled, at any time during the Exercise Period (as
hereinafter defined), to purchase from ADVANCED LIGHTING TECHNOLOGIES, INC., an
Ohio corporation (the "Company"), up to 1,000,000 Common Shares (as hereinafter
defined and subject to adjustment as provided herein) as described herein, in
whole or in part, including fractional parts, at a purchase price of $.01 per
share (subject to adjustment as provided herein) all on the terms and conditions
and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
-----------
Terms used in this Warrant have the respective meanings set
forth below:
"Additional Issuance" shall have the meaning set forth in
Section 4.3(a).
"Additional Common Shares" shall mean all Common Shares issued
by the Company after the date hereof, other than Conversion Shares, Contingent
Shares or Warrant Shares.
"Appraised Value" shall mean, in respect of any Common Share
on any date herein specified, the fair saleable value of such Common Share
(determined without giving affect to the discount for (i) a minority interest or
(ii) any lack of liquidity of the Common Share or (iii) to the fact that the
Company may have no class of equity registered under the Exchange Act) based on
the equity value of the Company, as determined by an investment banking or
valuation firm selected in accordance with the following sentences, divided by
the number of Common Shares outstanding on a Fully Diluted Basis as determined
in accordance with GAAP (assuming the payment of the exercise prices for such
shares). The determination of the Appraised Value per Common Share shall be made
by an investment banking or valuation firm of nationally recognized standing
selected by the Company and acceptable to the Majority Holders. If the
investment banking or valuation firm selected by Company is not acceptable to
the Majority Holders and the Company and the Majority Holders cannot agree on a
mutually acceptable investment banking or valuation firm, then the Majority
Holders and the Company shall each choose one such investment banking or
valuation firm and the respective chosen firms shall
<PAGE> 33
agree on another investment banking or valuation firm which shall make the
determination. The Company shall retain, at its sole cost, such investment
banking or valuation firm as may be necessary for the determination of Appraised
Value required by the terms of this Warrant.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required to be closed in the State of New
York.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act, the Exchange
Act and other federal securities laws.
"Common Share" shall mean (except where the context otherwise
indicates) a Common Share, $0.001 par value, of the Company as constituted on
the date hereof, and any capital stock into which such Common Share may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
Common Shares upon any reclassification thereof which is also not preferred as
to dividends or assets over any other class of capital stock of the Company and
which is not subject to redemption and (ii) capital stock of any successor or
acquiring corporation (as defined in Section 4.8) received by or distributed to
the holders of Common Shares of the Company in the circumstances contemplated by
Section 4.8.
"Contingent Shares" shall mean Common Shares to be issued upon
the exercise of any right to purchase Common Shares pursuant to the Contingent
Warrant Agreement.
"Contingent Warrant Agreement" shall mean the Contingent
Warrant Agreement of even date herewith between the Company and General Electric
Company.
"Conversion Shares" shall mean the Common Shares issued or
issuable upon the conversion of the Series A Shares.
"Convertible Securities" shall mean evidences of indebtedness,
shares of capital stock or other securities that are convertible into or
exchangeable, with or without payment of additional consideration in cash or
property, for Additional Common Shares, either immediately or upon the
occurrence of a specified date or a specified event.
"Current Market Price" shall mean, in respect of any Common
Share on any date herein specified, if there shall then be a public market for
the Common Shares, the average of the daily market prices for 20 consecutive
Business Days immediately preceding such date or, if there is no such public
market, the Appraised Value per Common Share. The daily market price for each
such Business Day shall be (i) the last sale price on such day on the principal
stock exchange or NASDAQ-NMS on which such Common Shares are then listed or
admitted to trading, or (ii) if no sale takes place on such day on any such
exchange or NASDAQ-NMS, the average of the last reported closing bid and asked
prices on such day as officially quoted on any such exchange or NASDAQ-NMS, or
(iii) if the Common Shares are not then listed or admitted to trading on any
stock exchange or NASDAQ-NMS, the average of the last reported closing bid and
asked prices on such day in the over-the-counter market, as furnished by the
NASDAQ or
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<PAGE> 34
the National Quotation Bureau, Inc., or (iv) if neither such corporation at the
time is engaged in the business of reporting such prices, as furnished by any
similar firm then engaged in such business, or (v) if there is no such firm, as
furnished by any member of the NASD selected mutually by the Majority Holders
and the Company or, if they cannot agree upon such selection, as selected by two
such members of the NASD, one of which shall be selected by the Majority Holders
and one of which shall be selected by the Company.
"Current Warrant Price" shall mean $.01 per Common Share.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1.
"Expiration Date" shall mean September 30, 2009.
"Fully Diluted Basis" means, with respect to any determination
or calculation, that such determination or calculation is performed on a fully
diluted basis (assuming the issuance of all Common Shares issuable under any
then outstanding options, warrants or convertible securities of any kind)
determined in accordance with GAAP for purposes of determining book value or net
income per share.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
"GE" shall mean General Electric Company, a New York
corporation.
"Holder" shall mean the Person in whose name the Warrant set
forth herein is registered on the books of the Company maintained for such
purpose.
"HSR Triggered Put" shall mean a put right under Section
VII(c) of the Company's Second Amended and Restated Articles of Incorporation.
"Majority Holders" shall mean the holders of Warrants
exercisable for in excess of 50% of the aggregate number of Common Shares then
purchasable upon exercise of all Warrants, whether or not then exercisable.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
"NASDAQ" shall mean the National Association of Securities
Dealers Automated Quotation System.
-3-
<PAGE> 35
"NASDAQ Approval" shall mean approval of the transactions
contemplated by the Stock Purchase Agreement by the shareholders of the Company
pursuant to NASDAQ Rule 4460(i)(D).
"NASDAQ-NMS" shall mean the NASDAQ National Market System.
"Other Property" shall have the meaning set forth in Section
4.8.
"Permitted Issuances" shall mean (a) the issuance or
conversion of options issued to employees pursuant to any stock option plan or
employee incentive plan approved by the Company's board of directors, (b) the
issuance of Warrant Shares, Contingent Shares or Conversion Shares and (c) the
issuance of Common Shares to satisfy obligations in respect of acquisitions of
securities or assets of any Person, provided that (i) such contracts were
entered into prior to September 30, 1999, and (ii) the number of Common Shares
subject to this Subparagraph (c) shall not exceed 110,000 in the aggregate.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, incorporated
organization, association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
"Purchase Price" shall mean $6.75 per Common Share (as the
same may be adjusted from time to time to take into account any action taken by
the Company in respect of its Common Shares, including, without limitation,
stock splits, dividends, combinations and reclassifications).
"Registration Statement" shall have the meaning set forth in
Section 9.4.
"Restricted Common Shares" shall mean Common Shares that are,
or upon their issuance on the exercise of this Warrant would be, evidenced by a
certificate bearing the restrictive legend set forth in Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Series A Shares" shall mean shares of Series A Convertible
Preferred Stock, par value $.001, of the Company.
"Stock Purchase Agreement" shall mean the Stock Purchase
Agreement, of even date herewith, between GE and the Company.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, association or other business entity
in respect of which that Person owns securities or other ownership interests
having ordinary voting power to elect a majority of
-4-
<PAGE> 36
the board of directors, partnership committee, board of managers or trustees or
other managerial body thereof, whether directly or indirectly through one or
more of the other Subsidiaries of such Person or a combination thereof. Unless
otherwise specified, "Subsidiary" means a Subsidiary of the Company and
"Subsidiaries" means all Subsidiaries of the Company.
"Transfer" shall mean any disposition of any Warrant or
Warrant Share or of any interest in either thereof that would constitute a sale
thereof within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section
9.2.
"Warrants" shall mean this Warrant and all warrants issued
upon transfer, division or combination of, or in substitution for, this Warrant.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of Common Shares for which they may be exercised.
"Warrant Price" shall mean an amount equal to (i) the number
of Common Shares being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Shares" shall mean the Common Shares issued or
issuable to the Holders of Warrants upon exercise of the Warrants.
2. EXERCISE OF WARRANT
-------------------
2.1. MANNER OF EXERCISE. From and after the date hereof and
until 5:00 P.M., New York time, on the Expiration Date (the "Exercise Period"),
subject to the last sentence of this Section 2.1, Holder may exercise this
Warrant, on any Business Day, for all or any part of 1,000,000 Common Shares. In
order to exercise this Warrant, in whole or in part, Holder shall deliver to the
Company at its principal office at 32000 Aurora Road, Solon, Ohio 44139, or at
the office or agency designated by the Company pursuant to Section 12: (i) a
written notice of Holder's election to exercise this Warrant, which notice shall
specify the number of Common Shares to be purchased, (ii) payment of the Warrant
Price and (iii) this Warrant. Such notice shall be substantially in the form of
the subscription form appearing at the end of this Warrant as Exhibit A, duly
executed by Holder or its agent or attorney. Upon receipt thereof, the Company
shall, as promptly as practicable, and in any event within five Business Days
thereafter, execute or cause to be executed and deliver or cause to be delivered
to Holder a certificate or certificates representing the aggregate number of
full Common Shares issuable upon such exercise, together with cash in lieu of
any fraction of a share, as hereinafter provided. The share certificate or
certificates so delivered shall be, to the extent possible, in such denomination
or denominations as such Holder shall request in the notice and shall be
registered in the name of Holder or, subject to Section 9, such other name as
shall be designated in the notice. This Warrant shall be deemed to have been
exercised and such certificate or certificates shall be deemed to have been
issued, and Holder or any other Person so designated to be named therein shall
be deemed to have become a holder of record of such shares for all purposes, as
of the date the notice, together with the cash or check or other payment as
provided below and this Warrant, is received by the
-5-
<PAGE> 37
Company as described above and all taxes required to be paid by Holder, if any,
pursuant to Section 2.2 prior to the issuance of such shares have been paid. If
this Warrant shall have been exercised in part, the Company shall, at the time
of delivery of the certificate or certificates representing Warrant Shares,
deliver to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased Common Shares called for by this Warrant, which new Warrant shall in
all other respects be identical with this Warrant, or, at the request of Holder,
appropriate notation may be made on this Warrant and the same returned to
Holder. Payment of the Warrant Price shall be made at the option of Holder by
(i) certified or official bank check, and/or (ii) by Holder's surrender to the
Company of that number of Warrant Shares (or the right to receive such number of
shares) or Common Shares having an aggregate Current Market Price equal to or
greater than the Current Warrant Price for all shares then being purchased
(including those being surrendered), or (iii) any combination thereof, duly
endorsed by or accompanied by appropriate instruments of transfer duly executed
by Holder or by Holder's attorney duly authorized in writing. This Warrant and
Holder's right to exercise this Warrant shall, to the extent not previously
exercised, terminate at such time as GE has received the Put Option Purchase
Price (as defined in Section VII(c) of the Company's Second Amended and Restated
Articles) upon an HSR Triggered Put.
2.2. PAYMENT OF TAXES. All Common Shares issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon Holder, in which case such
taxes or charges shall be paid by Holder. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for Common Shares issuable upon
exercise of this Warrant in any name other than that of Holder, and in such case
the Company shall not be required to issue or deliver any share certificate
until such tax or other charge has been paid or it has been established to the
reasonable satisfaction of the Company that no such tax or other charge is due.
2.3. FRACTIONAL SHARES. The Company shall not be required to
issue a fractional Common Share upon exercise of any Warrant. If any fraction of
a share would, but for this Section, be issuable upon exercise of this Warrant,
in lieu of such fractional share, the Company may, at its option, pay a cash
adjustment in respect of such final fraction in an amount equal to the same
fraction of the Current Market Price per Common Share on the date of exercise
or, if there is no Current Market Price on such date, $6.75 per whole Common
Share, adjusted to reflect equitably share dividends, subdivisions and
combinations after the date hereof.
2.4. CONTINUED VALIDITY. A holder of Common Shares issued upon
the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the Securities Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 9, 10 and
15 of this Warrant. The Company will, at the time of each exercise of this
Warrant, in whole or in part, upon the request of the holder of the Common
Shares issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation
-6-
<PAGE> 38
to afford to such holder all such rights; PROVIDED, HOWEVER, that if such holder
shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
----------------------------------
3.1. TRANSFER. Subject to compliance with Section 9 hereof,
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company referred to in
Section 2.1 or the office or agency designated by the Company pursuant to
Section 12, together with a written assignment of this Warrant substantially in
the form of Exhibit B hereto duly executed by Holder or its agent or attorney
and funds sufficient to pay any transfer taxes payable upon the making of such
transfer. Upon such surrender and, if required, such payment, the Company shall,
subject to Section 9, execute and deliver a new Warrant or Warrants in the name
of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned in compliance with
Section 9, may be exercised by a new Holder for the purchase of Common Shares
without having a new Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
3.1 and with Section 9, as to any transfer that may be involved in such division
or combination, the Company shall execute and deliver a new Warrant or Warrants
in exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver at
its own expense (other than transfer taxes) the new Warrant or Warrants under
this Section 3.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at
its aforesaid office or agency, books for the registration and the registration
of transfer of the Warrants.
4. ADJUSTMENTS
-----------
Subject to NASDAQ Approval, the number of Common Shares for
which this Warrant is exercisable shall be subject to adjustment from time to
time as set forth in this Section 4. The Company shall give each Holder notice
of any event described below in accordance with Section 5.1.
4.1. SHARE DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any
time the Company shall:
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<PAGE> 39
(a) take a record of the holders of its Common Shares for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Common Shares,
(b) subdivide its outstanding Common Shares into a larger
number of Common Shares, or
(c) combine its outstanding Common Shares into a smaller
number of Common Shares,
then the number of Common Shares for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of Common Shares that a record holder of the same number of Common
Shares for which this Warrant is exercisable immediately prior to the occurrence
of such event would own or be entitled to receive after the happening of such
event.
4.2 CERTAIN OTHER DISTRIBUTIONS AND ADJUSTMENTS. (a) If at any
time the Company shall take a record of the holders of its Common Shares for the
purpose of entitling them to receive any dividend or other distribution of:
(i) cash,
(ii) any evidences of its indebtedness, any shares of its
stock or any other securities or property of any nature whatsoever
(other than cash, Convertible Securities or Additional Common Shares),
or
(iii) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Common Shares),
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised this Warrant.
(b) A reclassification of the Common Shares (other than a
change in par value, or from par value to no par value or from no par value to
par value) into Common Shares and shares of any other class of stock shall be
deemed a distribution by the Company to the holders of its Common Shares of such
shares of such other class of stock within the meaning of paragraph (a) above
and, if the outstanding Common Shares shall be changed into a larger or smaller
number of Common Shares as a part of such reclassification, such change shall be
deemed a subdivision or combination, as the case may be, of the outstanding
Common Shares within the meaning of Section 4.1.
4.3. ISSUANCE OF ADDITIONAL COMMON SHARES. (a) If at any time
the Company shall (except as hereinafter provided) issue or sell any Additional
Common Shares or any security convertible or exchangeable into Additional Common
Shares (an "Additional Issuance"), other than Permitted Issuances, in exchange
for consideration in an amount per
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<PAGE> 40
Additional Common Share less than either the Purchase Price or the Current
Market Price on the date of such Additional Issuance (before giving effect to
such Additional Issuance), then, effective upon such Additional Issuance, the
number of Common Shares subject to purchase upon exercise of this Warrant shall
be increased to a number determined by multiplying the number of Common Shares
subject to purchase immediately before such Additional Issuance by a fraction,
the numerator of which shall be the number of Common Shares outstanding
immediately prior to such Additional Issuance plus the number of Additional
Common Shares so issued and the denominator of which shall be the number of
Common Shares outstanding immediately prior to such issuance of Additional
Common Shares plus the number of Common Shares which the aggregate consideration
received by the Company for the total number of Additional Common Shares so
issued would purchase at the greater of the Purchase Price or the Current Market
Value at the time of such Additional Issuance. In computing adjustments under
this paragraph, fractional interests in Common Shares shall be taken into
account to the nearest one-thousandth of a share.
(b) The provision of paragraph (a) of Section 4.3 shall not
apply to any issuance of Additional Common Shares for which an adjustment is
provided under Section 4.1 or 4.2. No adjustment of the number of Common Shares
for which this Warrant shall be exercisable shall be made under paragraph (a) of
Section 4.3 upon the issuance of any Additional Common Shares that are issued
pursuant to the exercise of any warrants or other subscription or purchase
rights or pursuant to the exercise of any conversion or exchange rights in any
Convertible Securities, if any such adjustment shall previously have been made
upon the issuance of such warrants or other rights or upon the issuance of such
Convertible Securities (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 4.4 or Section 4.5.
4.4. ISSUANCE OF WARRANTS OR OTHER RIGHTS. If at any time the
Company shall take a record of the holders of its Common Shares for the purpose
of entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any warrants or other rights to subscribe for or
purchase any Additional Common Shares or any Convertible Securities, whether or
not the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which a Common Share is issuable upon the exercise
of such warrants or other rights or upon conversion or exchange of such
Convertible Securities shall be less than either the Purchase Price or the
Current Market Price on the date of such issue or sale, then the number of
Common Shares for which this Warrant is exercisable shall be adjusted as
provided in Section 4.3 on the basis that the maximum number of Additional
Common Shares issuable pursuant to all such warrants or other rights necessary
to effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued and outstanding and the Company shall be deemed to
have received all of the consideration payable therefor, if any, as of the date
of the issuance of such warrants or other rights. No further adjustments of the
number of Common Shares for which this Warrant is exercisable shall be made upon
the actual issue of such Common Shares or of such Convertible Securities upon
exercise of such warrants or other rights or upon the actual issue of such
Common Shares upon such conversion or exchange of such Convertible Securities.
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the
Company shall take a record of the holders of its Common Shares for the purpose
of entitling them to receive a
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<PAGE> 41
distribution of, or shall in any manner (whether directly or by assumption in a
merger in which the Company is the surviving corporation) issue or sell, any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which a
Common Share is issuable upon such conversion or exchange shall be less than
either the Purchase Price or the Current Market Price on the date of such issue
or sale, then the number of Common Shares for which this Warrant is exercisable
shall be adjusted as provided in Section 4.3 on the basis that the maximum
number of Additional Common Shares necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
and outstanding and the Company shall have received all of the consideration
payable therefor, if any, as of the date of issuance of such Convertible
Securities. No adjustment of the number of Common Shares for which this Warrant
is exercisable shall be made under this Section 4.5 upon the issuance of any
Convertible Securities that are issued pursuant to the exercise of any warrants
or other subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights
pursuant to Section 4.4. No further adjustments of the number of Common Shares
for which this Warrant is exercisable shall be made upon the actual issue of
such Common Shares upon conversion or exchange of such Convertible Securities
and, if any issue or sale of such Convertible Securities is made upon exercise
of any warrant or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the number of Common Shares for
which this Warrant is exercisable have been or are to be made pursuant to other
provisions of this Section 4, no further adjustments of the number of Common
Shares for which this Warrant is exercisable and the Current Warrant Price shall
be made by reason of such issue or sale.
4.6. SUPERSEDING ADJUSTMENT. If, at any time after any
adjustment of the number of Common Shares for which this Warrant is exercisable
shall have been made pursuant to Section 4.4 or Section 4.5 as the result of any
issuance of warrants, rights or Convertible Securities,
(a) such warrants or rights, or the right of conversion or
exchange in such other Convertible Securities, shall expire, and all or a
portion of such warrants or rights, or the right of conversion or exchange with
respect to all or a portion of such other Convertible Securities, as the case
may be, shall not have been exercised, or
(b) the consideration per share for which Common Shares are
issuable pursuant to such warrants or rights, or the terms of such other
Convertible Securities, shall be increased solely by virtue of provisions
therein contained for an automatic increase in such consideration per share upon
the occurrence of a specified date or event,
then for each outstanding Warrant such previous adjustment shall be rescinded
and annulled and the Additional Common Shares that were deemed to have been
issued by virtue of the computation made in connection with the adjustment so
rescinded and annulled shall no longer be deemed to have been issued by virtue
of such computation. Thereupon, a recomputation shall be made of the effect of
such rights or options or other Convertible Securities on the basis of
(c) treating the number of Additional Common Shares or other
property, if any, theretofore actually issued or issuable pursuant to the
previous exercise of any such
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<PAGE> 42
warrants or rights or any such right of conversion or exchange, as having been
issued on the date or dates of any such exercise and for the consideration
actually received and receivable therefor, and
(d) treating any such warrants or rights or any such other
Convertible Securities that then remain outstanding as having been granted or
issued immediately after the time of such increase of the consideration per
share for which Common Shares or other property are issuable under such warrants
or rights or other Convertible Securities; whereupon a new adjustment of the
number of Common Shares for which this Warrant is exercisable shall be made,
which new adjustment shall supersede the previous adjustment so rescinded and
annulled.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments of the number of Common Shares for which this Warrant is exercisable
and the Current Warrant Price provided for in this Section 4:
(a) COMPUTATION OF CONSIDERATION. To the extent that any
Additional Common Shares or any Convertible Securities or any warrants or other
rights to subscribe for or purchase any Additional Common Shares or any
Convertible Securities shall be issued for cash consideration, the consideration
received by the Company therefor shall be the amount of the cash received by the
Company therefor, or, if such Additional Common Shares or Convertible Securities
are offered by the Company for subscription, the subscription price, or, if such
Additional Common Shares or Convertible Securities are sold to underwriters or
dealers for public offering without a subscription offering, the initial public
offering price (in any such case subtracting any amounts paid or receivable for
accrued interest or accrued dividends and without taking into account any
compensation, discounts or expenses paid or incurred by the Company for and in
the underwriting of, or otherwise in connection with, the issuance thereof). To
the extent that such issuance shall be for a consideration other than cash,
then, except as herein otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of such consideration at the
time of such issuance as determined in good faith by the Board of Directors of
the Company. In case any Additional Common Shares or any Convertible Securities
or any warrants or other rights to subscribe for or purchase such Additional
Common Shares or Convertible Securities shall be issued in connection with any
merger in which the Company issues any securities, the amount of consideration
therefor shall be deemed to be the fair value, as determined in good faith by
the Board of Directors of the Company, of such portion of the assets and
business of the nonsurviving corporation as such Board in good faith shall
determine to be attributable to such Additional Common Shares, Convertible
Securities, warrants or other rights, as the case may be. The consideration for
any Additional Common Shares issuable pursuant to any warrants or other rights
to subscribe for or purchase the same shall be the consideration received by the
Company for issuing such warrants or other rights plus the additional
consideration payable to the Company upon exercise of such warrants or other
rights. The consideration for any Additional Common Shares issuable pursuant to
the term of any Convertible Securities shall be the consideration received by
the Company for issuing warrants or other rights to subscribe for or purchase
such Convertible Securities, plus the consideration paid or payable to the
Company in respect of the subscription for or purchase of such Convertible
Securities, plus the additional consideration, if any, payable to the Company
upon
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<PAGE> 43
the exercise of the right of conversion or exchange in such Convertible
Securities. In case of the issuance at any time of any Additional Common Shares
or Convertible Securities in payment or satisfaction of any dividends upon any
class of stock other than Common Shares, the Company shall be deemed to have
received for such Additional Common Shares or Convertible Securities a
consideration equal to the amount of such dividend so paid or satisfied.
(b) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by
this Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that any adjustment of the number of
Common Shares for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
Common Shares, as provided for in Section 4.1) up to, but not beyond the date of
exercise if such adjustment either by itself or with other adjustments not
previously made adds or subtracts less than 1% of the Common Shares for which
this Warrant is exercisable immediately prior to the making of such adjustment.
Any adjustment representing a change of less than such minimum amount (except as
aforesaid) that is postponed shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section 4 and not
previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be deemed
to have occurred at the close of business on the date of its occurrence.
(c) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Shares shall be taken into account to
the nearest 1/1000th of a share.
(d) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Shares for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to shareholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(e) ESCROW OF WARRANT SHARES. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Shares, but prior to the occurrence of the event for
which such record is taken, and Holder exercises this Warrant, any Additional
Common Shares issuable upon exercise by reason of such adjustment shall be
deemed the last Common Shares for which this Warrant is exercised
(notwithstanding any other provision to the contrary herein) and such shares or
other property shall be held in escrow for Holder by the Company to be issued to
Holder upon and to the extent that the event actually takes place, upon payment
of the then Current Warrant Price. Notwithstanding any other provision to the
contrary herein, if the event for which such record was taken fails to occur or
is rescinded, then such escrowed shares shall be cancelled by the Company and
escrowed property returned to the Company.
(f) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board
of Directors of the Company shall be required to make a determination in good
faith of the fair value of any
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<PAGE> 44
item under this Section 4, such determination may be challenged in good faith by
the Majority Holders, and any dispute shall be resolved by an investment banking
or valuation firm of recognized national standing selected by the Company and
acceptable to the Majority Holders.
(g) PROHIBITION ON ADJUSTMENT. The provisions of Section 4.3,
4.4 and 4.5 shall not operate to reduce the number of Common Shares subject to
purchase upon exercise of this Warrant.
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION
OR DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Shares), or sell,
transfer or otherwise dispose of all or substantially all its property, assets
or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, Common Shares of the successor or acquiring corporation, or any cash,
shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Shares
of the Company, then each Holder shall have the right thereafter to receive,
upon exercise of such Warrant, the number of Common Shares of the successor or
acquiring corporation or of the Company, if it is the surviving corporation, and
Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of Common Shares for which this Warrant is exercisable immediately
prior to such event. In case of any such reorganization, reclassification,
merger, consolidation or disposition of assets, the successor or acquiring
corporation (if other than the Company) shall expressly assume the due and
punctual observance and performance of each and every covenant and condition of
this Warrant to be performed and observed by the Company and all the obligations
and liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of Common Shares for which this
Warrant is exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 4. For purposes of this Section 4.8,
"common stock of the successor or acquiring corporation" shall include stock of
such corporation of any class that is not preferred as to dividends or assets
over any other class of stock of such corporation and that is not subject to
redemption and shall also include any evidences of indebtedness, shares of stock
or other securities that are convertible into or exchangeable for any such
stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe for
or purchase any such stock. The foregoing provisions of this Section 4.8 shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
4.9. OTHER ACTION AFFECTING COMMON SHARES. In case at any time
or from time to time the Company shall take any action in respect of its Common
Shares, other than any action described in this Section 4, then, unless such
action will not have a materially adverse effect upon the rights of Holders, the
number of Common Shares or other stock for which this Warrant is exercisable
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances.
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<PAGE> 45
5. NOTICES TO WARRANT HOLDERS
--------------------------
5.1. NOTICE OF ADJUSTMENTS. Not less than 10 nor more than 30
days prior to the record date or effective date, as the case may be, of any
action that requires or might require an adjustment or readjustment pursuant to
Section 4, the Company shall forthwith prepare and deliver to each Holder a
signed copy of a certificate executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment
and the method by which such adjustment was calculated (including a description
of the basis on which the Board of Directors of the Company determined the fair
value of any evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights referred to in
Section 4.7 (a)), specifying the number of Common Shares for which this Warrant
is exercisable and (if such adjustment was made pursuant to Section 4.8 or 4.9)
describing the number and kind of any other shares of stock or Other Property
for which this Warrant is exercisable, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. The Company
shall keep at its office or agency designated pursuant to Section 12 copies of
all such certificates and cause the same to be available for inspection at said
office during normal business hours by any Holder or any prospective purchaser
of a Warrant designated by a Holder thereof.
5.2. NOTICE OF CORPORATE ACTION. If at any time
(a) the Company shall take a record of the holders of its
Common Shares for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation, person or entity, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 30 days prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Shares
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale,
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<PAGE> 46
transfer, disposition, dissolution, liquidation or winding up is to take place
and the time, if any such time is to be fixed, as of which the holders of Common
Shares shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 15.2.
6. NO IMPAIRMENT
-------------
The Company shall not by any action, including, without
limitation, amending its articles of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Common Shares upon the exercise of this Warrant, including
taking such action as is necessary for the Current Warrant Price to be not less
than the par value of the Common Shares issuable upon exercise of this Warrant,
and (b) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON SHARES;
-----------------------------------------------
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
-----------------------------------------------------------
From and after the date hereof, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued Common Shares as will be sufficient to permit the
exercise in full of all outstanding Warrants. All Common Shares that shall be so
issuable, when issued upon exercise of any Warrant and payment therefor in
accordance with the terms of such Warrant, shall be duly and validly issued and
fully paid and nonassessable, and not subject to preemptive rights.
Before taking any action that would result in an adjustment in
the number of Common Shares for which this Warrant is exercisable, the Company
shall obtain all such authorizations or exemptions thereof, or consents thereto,
as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
If any Common Shares required to be reserved for issuance upon
exercise of Warrants require registration or qualification with any governmental
authority or other governmental approval or filing under any federal or state
law (otherwise than as provided in
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<PAGE> 47
Section 9) before such shares may be so issued, the Company will in good faith
and as expeditiously as possible and at its expense endeavor to cause such
shares to be duly registered or such approval to be obtained or filing made.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
--------------------------------------------------
In the case of all dividends or other distributions by the
Company to the holders of its Common Shares with respect to which any provision
of Section 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY; REGISTRATIONS
----------------------------------------------
The Warrants and the Warrant Shares shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Share. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. (a) Except as otherwise provided in
this Section 9, each certificate for Warrant Shares initially issued upon the
exercise of this Warrant, and each certificate for Warrant Shares issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended,
and may not be transferred in violation of such Act
or the rules and regulations thereunder."
(b) Except as otherwise provided in this Section 9, each
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"This warrant and the securities represented hereby have not
been registered under the Securities Act of 1933, as amended,
and may not be transferred in violation of such Act, the rules
and regulations thereunder or the provisions of this Warrant."
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION.
Prior to any Transfer of any Warrant or any Restricted Common Share, the holder
of such Warrant or Restricted Common Share shall give written notice (a
"Transfer Notice") to the Company of such Transfer. Each certificate, if any,
evidencing such Restricted Common Share issued upon such Transfer shall bear the
restrictive legend set forth in Section 9.1(a), and each Warrant issued upon
such Transfer shall bear the restrictive legend set forth in Section 9.1(b),
unless in the
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<PAGE> 48
opinion of counsel to such holder that is reasonably acceptable to the Company
such legend is not required in order to ensure compliance with the Securities
Act.
9.3. REGISTRATION. Each holder of Warrant Shares has certain
registration rights under the Registration Rights Agreement of even date
herewith between the Company and General Electric Company, as amended from time
to time. Any Holder may obtain a copy of such agreement by notice to the
Company.
10. SUPPLYING INFORMATION
---------------------
The Company shall cooperate with each Holder of a Warrant and
each holder of Restricted Common Shares in supplying such information as may be
reasonably necessary for such holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Shares.
11. LOSS OR MUTILATION
------------------
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably satisfactory
to it (it being understood that the written agreement of GE shall be sufficient
indemnity), and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like tenor
to such Holder; PROVIDED, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company for
cancellation.
12. OFFICE OF THE COMPANY
---------------------
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive offices
of the Company) where the Warrants may be presented for exercise, registration
of transfer, division or combination as provided in this Warrant.
13. FINANCIAL AND BUSINESS INFORMATION
----------------------------------
13.1. QUARTERLY INFORMATION. The Company will deliver to each
Holder, as soon as practicable after the end of each of the first three quarters
of the Company, and in any event within 45 days thereafter, one copy of an
unaudited consolidated balance sheet of the Company and its subsidiaries as at
the close of such quarter, and the related unaudited consolidated statements of
income and cash flows of the Company for such quarter and, in the case of the
second and third quarters, for the portion of the fiscal year ending with such
quarter, setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year. Such financial statements
shall be prepared by the Company in accordance with GAAP (without period-end
adjustments or footnotes) and accompanied by the certification of the Company's
chief executive officer or chief financial officer that such financial
statements are complete and correct and present fairly the consolidated
financial position, results of operations
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<PAGE> 49
and cash flows of the Company and its subsidiaries as at the end of such quarter
and for such year-to-date period, as the case may be.
13.2. ANNUAL INFORMATION. The Company will deliver to each
Holder as soon as practicable after the end of each fiscal year of the Company,
and in any event within 90 days thereafter, one copy of:
(a) an audited consolidated balance sheet of the Company and
its subsidiaries as at the end of such year, and
(b) audited consolidated statements of income and cash flows
of the Company and its subsidiaries for such year;
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all prepared in accordance with GAAP, and
which audited financial statements shall be accompanied by (i) an opinion
thereon of the independent certified public accountants regularly retained by
the Company, or any other firm of independent certified public accountants of
recognized national standing selected by the Company and (ii) a report of such
independent certified public accountants confirming any adjustment made pursuant
to Section 4 during such year.
13.3. FILINGS. The Company will file with the Commission all
regular or periodic reports required pursuant to the Exchange Act and will
deliver to Holder promptly upon their becoming available one copy of each
report, notice or proxy statement sent by the Company to its shareholders
generally, and of each regular or periodic report (pursuant to the Exchange
Act), filed by the Company with (i) the Commission or (ii) any securities
exchange on which Common Shares are listed.
14. LIMITATION OF LIABILITY
-----------------------
No provision hereof, in the absence of affirmative action by
Holder to purchase Common Shares, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of such Holder for
the purchase price of any Common Share or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
15. MISCELLANEOUS
-------------
15.1. NONWAIVER AND EXPENSES. No course of dealing or any
delay or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Holder's rights, powers
or remedies. If the Company fails to comply with any provision of this Warrant,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in enforcing any of
its rights, powers or remedies hereunder.
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<PAGE> 50
15.2. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid, or
by telecopy and confirmed by telecopy answerback, addressed as follows:
(a) If to any Holder or holder of Warrant Shares, at its last
known address appearing on the books of the Company maintained for such purpose.
(b) If to the Company at
Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
Attention: President
Telecopy Number: (440)519-0503
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback, one Business Day after the same shall have been delivered to a
nationally recognized courier service, or three Business Days after the same
shall have been deposited, postage prepaid, in the United States mail. Failure
or delay in receipt of copies of any notice, demand, request, approval,
declaration, delivery or other communication to the Person designated above
shall in no way adversely affect the effectiveness of such notice, demand,
request, approval, declaration, delivery or other communication.
15.3. REMEDIES. Each holder of a Warrant or a Warrant Share,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under Section 9 of this Warrant. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of Section 9 of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
15.4. SUCCESSORS AND ASSIGNS. Subject to the provisions of
Sections 3.1 and 9, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
successors and assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and, with
respect to Section 9 hereof, holders of Warrant Shares, and shall be enforceable
by any such Holder or holder of Warrant Shares.
15.5. AMENDMENT. This Warrant may be modified or amended or
the provisions hereof waived only with the written consent of the Company and
the Majority Holders; PROVIDED that no such Warrant may be modified or amended
to reduce the number of Common Shares for
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<PAGE> 51
which such Warrant is exercisable or to increase the price at which such Common
Shares may be purchased upon exercise of such Warrant (before giving effect to
any adjustment as provided therein) without the prior written consent of each
Holder.
15.6. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
15.7. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
15.8. GOVERNING LAW. This Warrant shall be governed by the
laws of the State of New York, without regard to the provisions thereof relating
to conflict of laws.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and attested by its Secretary or an Assistant Secretary.
Dated: ______________, 1999
ADVANCED LIGHTING TECHNOLOGIES, INC.
By:____________________________________
Name:
Title:
Attest:
By:__________________________________
Name:
Title:
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<PAGE> 52
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of ______ Common Shares of ADVANCED
LIGHTING TECHNOLOGIES, INC. and herewith makes payment therefor, all at the
price and on the terms and conditions specified in this Warrant and requests
that certificates for the Common Shares hereby purchased (and any securities or
other property issuable upon such exercise) be issued in the name of and
delivered to ______________________________ whose address is
____________________________ and, if such Common Shares shall not include all of
the Common Shares issuable as provided in this Warrant, that a new Warrant of
like tenor and date for the balance of the Common Shares issuable hereunder be
delivered to the undersigned.
_________________________________________
(Name of Registered Owner)
_________________________________________
(Signature of Registered Owner)
_________________________________________
(Street Address)
_________________________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within warrant in every
particular, without alteration or enlargement or any change
whatsoever.
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<PAGE> 53
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
Common Shares set forth below:
Name and Address of Assignee No. of Common Shares
---------------------------- --------------------
and does hereby irrevocably constitute and appoint ________________________
attorney-in-fact to register such transfer on the books of ADVANCED LIGHTING
TECHNOLOGIES, INC. maintained for the purpose, with full power of substitution
in the premises.
Dated:____________________ Print Name:_______________________
Signature:_________________________
Witness:___________________________
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
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<PAGE> 54
EXHIBIT 2.1
-----------
[INSERT TO ALT'S SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION]
-----------------------------------------------------------------------
The following should be inserted as Paragraph 3 to Part A of the Fourth
Article of ALT's Second Amended and Restated Articles of Incorporation:
3. Series A Convertible Preferred Shares.
I. DEFINITIONS. For purposes of this Paragraph 3 of this Part A of this
Article Fourth, the following terms shall have the following meanings:
(a) "Additional Common Shares" shall mean Common Shares issued by the
Corporation after the Effective Date.
(b) "Additional Issuance" shall have the meaning ascribed to such term
in Subsection V(c)(iii)(A) hereof.
(c) "Appraised Value" shall mean, in respect of any Common Share on any
date herein specified, the fair saleable value of such Common Share (determined
without giving affect to the discount for (i) a minority interest or (ii) any
lack of liquidity of the Common Share or (iii) the fact that the Corporation may
have no class of equity registered under the Exchange Act) based on the equity
value of the Corporation, as determined by an investment banking or valuation
firm selected in accordance with the following sentences, divided by the number
of Common Shares outstanding on a Fully Diluted Basis as determined in
accordance with GAAP (assuming the payment of the exercise prices for such
shares). The determination of the Appraised Value per Common Share shall be made
by an investment banking or valuation firm of nationally recognized standing
selected by the Corporation and acceptable to the Majority Holders. If the
investment banking or valuation firm selected by the Corporation is not
acceptable to the Majority Holders and the Corporation and the Majority Holders
cannot agree on a mutually acceptable investment banking or valuation firm, then
the Majority Holders and the Corporation shall each choose one such investment
banking or valuation firm and the respective chosen firms shall agree on another
investment banking or valuation firm which shall make the determination. The
Corporation shall retain, at its sole cost, such investment banking or valuation
firm as may be necessary for the determination of Appraised Value required by
the terms of these Third Amended and Restated Articles of Incorporation.
(d) "Business Day" shall mean any day that is not a Saturday or Sunday
or a day on which banks are required to be closed in the State of New York.
(e) "Closing Period" shall have the meaning ascribed to such term in
Subsection VII(f) hereof.
<PAGE> 55
(f) "Common Shares" shall mean the Common Shares, par value one
thousandth of one cent ($.001), of the Corporation.
(g) "Contingent Shares" shall mean the Common Shares issued upon
exercise of the Contingent Warrants.
(h) "Contingent Warrant Agreement" shall mean the Contingent Warrant
Agreement, dated the Effective Date, among the Original Purchaser, the
Corporation, Hellman, Ltd., Wayne R. Hellman, Wayne R. Hellman, as voting
trustee under Voting Trust Agreement dated October 10, 1995, Alan J. Ruud and
Alan J. Ruud, as voting trustee under Voting Trust Agreement dated January 2,
1998.
(i) "Contingent Warrants" shall mean the First Contingent Warrant and
the Second Contingent Warrant issued under the Contingent Warrant Agreement,
dated as of the Effective Date, between the Corporation and the Original
Purchaser.
(j) "Control Share Acquisition Resolution" shall mean the resolution to
be voted upon by the shareholders of the Corporation at the Corporation's 1999
annual meeting to amend the Corporation's Articles of Incorporation to provide
that Section 1701.831 of the Ohio Revised Code shall not apply to "control share
acquisitions" (as defined in Section 1701.01 of the Ohio Revised Code) of shares
of capital stock of the Corporation.
(k) "Conversion Ratio" shall have the meaning ascribed to such term in
Subsection V(a) hereof.
(l) "Conversion Shares" shall mean the Common Shares to be issued upon
the conversion of Series A Preferred Shares.
(m) "Convertible Securities" shall mean evidences of indebtedness,
shares of capital stock or other securities that are convertible into or
exchangeable, with or without payment of additional consideration in cash or
property, for Additional Common Shares, either immediately or upon the
occurrence of a specified date or a specified event.
(n) "Corporation Put Right Notice" shall have the meaning ascribed to
such term in Subsction VII(e) hereof.
(o) "Credit Agreements" shall have the meaning ascribed to such term in
Subsection VII(f) hereof.
(p) "Current Market Price" shall mean, in respect of any Common Share
on any date herein specified, if there shall then be a public market for the
Common Shares, the average of the daily market prices for 20 consecutive
Business Days immediately preceding such date or, if there is no such public
market, the Appraised Value per Common Share. The daily market price for each
such Business Day shall be (i) the last sale price on such day on the principal
stock exchange or NASDAQ-NMS on which such Common Shares are then listed or
admitted to trading, or (ii) if no sale takes place on such day on any such
exchange or NASDAQ-NMS, the
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<PAGE> 56
average of the last reported closing bid and asked prices on such day as
officially quoted on any such exchange or NASDAQ-NMS, or (iii) if the Common
Shares are not then listed or admitted to trading on any stock exchange or
NASDAQ-NMS, the average of the last reported closing bid and asked prices on
such day in the over-the-counter market, as furnished by the NASDAQ or the
National Quotation Bureau, Inc., or (iv) if neither such corporation at the time
is engaged in the business of reporting such prices, as furnished by any similar
firm then engaged in such business, or (v) if there is no such firm, as
furnished by any member of the NASD selected mutually by the Majority Holders
and the Corporation or, if they cannot agree upon such selection, as selected by
two such members of the NASD, one of which shall be selected by the Majority
Holders and one of which shall be selected by the Corporation.
(q) "Effective Date" shall mean the date on which the Amendment to
these Articles of Incorporation designating the Series A Preferred Shares became
effective.
(r) "Fully Diluted Basis" means, with respect to any determination or
calculation, that such determination or calculation is performed on a fully
diluted basis (assuming the issuance of all Common Shares issuable under any
then outstanding options, warrants or convertible securities of any kind)
determined in accordance with GAAP for purposes of determining book value or net
income per share.
(s) "Governmental Approval" shall have the meaning ascribed to such
term in Subsection VII(c) hereof.
(t) "Indebtedness for Borrowed Money" shall mean as to any Person, at a
particular time, all items which constitute, without duplication (a)
indebtedness for borrowed money, (b) indebtedness in respect of the deferred
purchase price of property, (c) indebtedness evidenced by notes, bonds,
debentures or similar instruments, (d) capital lease obligations (i.e.,
obligations with respect to leases which are required to be capitalized for
financial reporting purposes in accordance with GAAP), (e) all obligations of
such Person in respect of capital stock subject to mandatory redemption or
redemption at the option of the holder thereof, in whole or in part, and (f) all
contingent obligations of such Person in respect of any of the foregoing. As to
the Corporation and any Subsidiary, the term Indebtedness for Borrowed Money
shall not include indebtedness to the Corporation from any Subsidiary,
indebtedness to any Subsidiary from the Corporation or indebtedness to any
Subsidiary from any Subsidiary.
(u) "Liquidation Preference Amount" shall have the meaning ascribed to
such term in Subsection III(a) hereof.
(v) "Majority Holders" shall mean the holders of Series A Preferred
Shares convertible into more than 50% of the aggregate number of Conversion
Shares then issuable upon conversion of all then outstanding Series A Preferred
Shares.
(w) "NASDAQ Approval" shall mean approval of the transactions
contemplated by the Stock Purchase Agreement by the shareholders of the
Corporation pursuant to NASDAQ Rule 4460(i)(D).
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<PAGE> 57
(x) "Original Purchaser" shall mean General Electric Company, a New
York corporation.
(y) "Other Property" shall have the meaning ascribed to such term in
Subsection V(c)(viii) hereof.
(z) "Permitted Issuances" shall mean (i) the issuance or conversion of
options issued pursuant to any stock option plan, employee incentive plan,
employee stock purchase plan or employee retirement and savings plan approved by
the Corporation's Board of Directors, (ii) the issuance of Conversion Shares,
Contingent Shares or Warrant Shares, and (iii) the issuance of Common Shares to
satisfy obligations in respect of acquisitions of securities or assets of any
Person, provided (A) such contracts were entered into prior to September 30,
1999, and (B) the number of Common Shares subject to this subclause (iii) shall
not exceed 110,000 in the aggregate.
(aa) "Person" shall mean any natural person, corporation, firm,
partnership, association, government, governmental agency or other entity,
whether acting in an individual, fiduciary or other capacity.
(bb) "Preferred Shares" shall mean the Series A Preferred Shares and
the shares of any other series of Preferred Shares created in accordance with
these Articles of Incorporation.
(cc) "Purchase Price" shall mean $6.75 per Common Share (as the same
may be adjusted from time to time to take into account any action by the
Corporation in respect of its Common Shares, including, without limitation,
stock splits, dividends, combinations and reclassifications).
(dd) "Put Option" shall have the meaning ascribed to such term in
Subsection VII(h) hereof.
(ee) "Put Option Date" shall have the meaning ascribed to such term in
Subsection VII(h) hereof.
(ff) "Put Option Notice" shall have the meaning ascribed to such term
in Subsection VII(h) hereof.
(gg) "Put Option Purchase Price" shall have the meaning ascribed to
such term in Subsection VII(h) hereof.
(hh) "Put Shares" shall have the meaning ascribed to such term in
Subsection VII(h) hereof.
(ii) "Redemption Date" shall have the meaning ascribed to such term in
Subsection VI(a) hereof.
(jj) "Redemption Notice" shall have the meaning ascribed to such term
in Subsection VI(c) hereof.
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<PAGE> 58
(kk) "Redemption Price" shall have the meaning ascribed to such term in
Subsection VI(a) hereof.
(ll) "Second Occurrence Failure" shall have the meaning ascribed
thereto in the Contingent Warrant Agreement.
(mm) "Series A Preferred Shares" shall mean the Series A Convertible
Preferred Shares, par value one thousandth of one cent ($.001), of the
Corporation.
(nn) "Stock Purchase Agreement" shall mean the Stock Purchase Agreement
dated September 28, 1999, between Advanced Lighting Technologies, Inc., an Ohio
corporation, and the Original Purchaser.
(oo) "Stock Plans" shall mean the Corporation's 1995 Incentive Award
Plan, the Corporation's Billion Dollar Market Capitalization Incentive Award
Plan, the Corporation's 1998 Incentive Award Plan, the Corporation's Employee
Stock Purchase Plan and the Corporation's 401(k) Retirement and Savings Plan.
(pp) "Subsequent Closing Period" shall have the meaning ascribed to
such term in Subsection VII(f) hereof.
(qq) "Subsidiaries" shall mean any other corporations of which more
than 50% of the outstanding shares of capital stock having ordinary voting power
for the election of directors is owned directly or indirectly by the
Corporation, by the Corporation and one or more Subsidiaries, or by one or more
other Subsidiaries.
(rr) "Warrant" shall mean the warrant in the form of EXHIBIT 1 attached
to the Stock Purchase Agreement for the right to purchase additional Common
Shares.
(ss) "Warrant Shares" shall mean Common Shares to be issued upon
exercise of the Warrant.
II. DIVIDENDS. No dividends shall be declared and set aside for any Series A
Preferred Shares of the Corporation except in the event that the Board of
Directors of the Corporation shall declare a dividend payable upon the then
outstanding Common Shares of the Corporation, in which event the holders of the
Series A Preferred Shares shall be entitled to the amount of dividends per share
as would be declared payable on the number of Common Shares into which each
Series A Preferred Share held by each holder thereof could be converted pursuant
to the provisions of Subsection V hereof, such number determined as of the
record date for the determination of holders of Common Shares entitled to
receive such dividend.
III. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) TREATMENT AT LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of Series A Preferred Shares shall be entitled to
receive, prior and in preference to any distribution
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of any of the assets or surplus funds of the Corporation to the holders of the
Common Shares by reason of their ownership thereof, the amount of $27.00 per
Series A Preferred Share (as adjusted for any stock dividends, combinations or
splits with respect to such shares), plus interest thereon calculated at a rate
per annum equal to 8% compounded annually from the date of issuance of each
Series A Preferred Share until the date of payment (the "Liquidation Preference
Amount"). Interest shall be determined on the basis of a 365 day year for the
actual number of days elapsed from the date of issuance until the date of
payment. If upon the occurrence of any liquidation, dissolution or winding up,
the assets and surplus funds required to be distributed among the Series A
Preferred Shares shall be insufficient to permit the payment to such holders of
the full preferential amount, then the entire assets and surplus funds of the
Corporation legally available for distribution shall be distributed among the
holders of the Series A Preferred Shares so that all holders of Series A
Preferred Shares shall receive an amount per share pro rata in accordance with
the preferential amount payable with respect to each Series A Preferred Share.
After payment to the holders of the Series A Preferred Shares of the amounts
set forth above, the entire remaining assets and funds of the Corporation
legally available for distribution, if any, shall be distributed among the
holders of the Common Shares in proportion to the Common Shares then held by
them; provided, however, that the holders of Series A Preferred Shares shall be
entitled by reason of their ownership thereof to participate in any such
distribution of any remaining assets or surplus funds to the holders of the
Common Shares as if the holders of the Series A Preferred Shares converted such
securities into Common Shares at the Conversion Ratio set forth in Subsection V
below (as adjusted as set forth herein) immediately prior to the date of such
event in addition to receipt of the amounts to which they are entitled on
account of their ownership of the Series A Preferred Shares as set forth above.
(b) TREATMENT OF REORGANIZATIONS, CONSOLIDATIONS, MERGERS, AND SALES
OF ASSETS. For purposes of this Section III, any acquisition of the Corporation
by means of (i) consolidation, merger or other form of corporate reorganization
in which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring
corporation or its subsidiary, or (ii) a sale of all or substantially all of
the assets of the Corporation, shall be treated as a liquidation, dissolution
or winding up of the Corporation and the holders of the Series A Preferred
Shares, at their option, shall have the right to receive, in lieu of the
preferential distributions described in this Section III, at the closing, the
same consideration per share payable to holders of the Common Shares as if the
holders of the Series A Preferred Shares converted such securities into Common
Shares at the Conversion Ratio set forth in Section V below (as adjusted as set
forth herein) immediately prior to the closing of such transaction.
(c) DISTRIBUTIONS OTHER THAN CASH. Whenever a distribution provided
for in this Section III shall be payable in securities or property other than
cash, the value of such distribution shall be the fair market value of such
securities or other property as determined in good faith by the Board of
Directors.
IV. VOTING.
(a) GENERAL. In addition to special voting rights provided by
applicable law, each holder of Series A Preferred Shares shall be entitled to
vote on all matters and shall be entitled to cast four (4) votes for each
Series A Preferred Share held at the record date for the determination
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of shareholders entitled to vote on such matter or, if no record date is
established, at the date such vote is taken or any written consent of
shareholders is first executed, such votes to be counted together with all
other shares of capital stock having general voting powers and not separately
as a class. Notwithstanding any adjustment to the Conversion Ratio (as defined
in Section V) pursuant to Section V, Section VI or Section VII hereof, no
holder of Series A Preferred Shares shall at any time be entitled to cast more
than four (4) votes for each Series A Preferred Share held by such holder. In
all cases where the holders of Series A Preferred Shares have the right to vote
separately as a class, such holders shall be entitled to one vote for each such
share held by them.
(b) SPECIAL MEETINGS. The holders of at least a majority of the
aggregate number of Series A Preferred Shares then outstanding (evidenced in
writing by such holders or by vote at a meeting of shareholders called for such
purpose) shall have the right at any time to call for a special meeting of the
Board of Directors of the Corporation for such specified purposes as such
holders may deem desirable. Such special meeting shall be convened in
accordance with the applicable notice provisions of the Corporation's Code of
Regulations.
V. CONVERSION. The holders of Series A Preferred Shares shall have
conversion rights as follows:
(a) OPTIONAL CONVERSION; FRACTIONAL SHARES. Each issued and outstanding
Series A Preferred Share shall be convertible, at the option of the holder
thereof, at any time and from time to time without the payment of additional
consideration, at the office of the Corporation or any transfer agent for such
stock, into 4 fully paid and nonassessable Common Shares (the "Conversion
Ratio"). The Corporation shall not be required to issue a fractional Common
Share upon conversion of any Series A Preferred Share. If any fraction of a
share would, but for this provision, be issuable upon conversion of a Series A
Preferred Share, in lieu of such fractional share, the Corporation may, at its
option, pay a cash adjustment in respect of such final fraction in an amount
equal to the same fraction of the Current Market Price per Common Share on the
date of conversion.
(b) RESERVATION OF COMMON SHARES. The Corporation shall at all times
reserve and keep available out of its authorized but unissued Common Shares,
solely for the purpose of issuance upon the conversion of the Series A
Preferred Shares, such number of Common Shares issuable upon the conversion of
all outstanding Series A Preferred Shares. All Common Shares which are so
issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Corporation shall
take all such actions as may be necessary to assure that all such Common Shares
may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon which
Common Shares may be listed (except for official notice of issuance which shall
be immediately delivered by the Corporation upon each such issuance).
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(c) ADJUSTMENTS. Subject to NASDAQ Approval, the following adjustments
shall apply as set forth in this Section V. The Corporation shall give each
holder of Preferred Shares notice of any event described below in accordance
with Section V(d) below.
(i) SHARE DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any
time the Corporation shall:
(A) take a record of the holders of its Common
Shares for the purpose of entitling them to receive a dividend
payable in, or other distribution of, Additional Common Shares,
(B) subdivide its outstanding Common Shares
into a larger number of Common Shares, or
(C) combine its outstanding Common Shares into
a smaller number of Common Shares,
then, the Conversion Ratio shall be adjusted such that the number of Common
Shares into which each Series A Preferred Share is convertible immediately
after the occurrence of any such event shall be adjusted to equal the number
of Common Shares that a record holder of the same number of Common Shares into
which a Series A Preferred Share is convertible immediately prior to the
occurrence of such event would own or be entitled to receive after the
happening of such event.
(ii) CERTAIN OTHER DISTRIBUTIONS AND ADJUSTMENTS.
(A) If at any time the Corporation shall take a
record of the holders of its Common Shares for the purpose of
entitling them to receive any dividend or other distribution
of:
(1) cash,
(2) any evidences of its
indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever
(other than cash, Convertible Securities or
Additional Common Shares), or
(3) any warrants or other rights to
subscribe for or purchase any evidences of its
indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever
(other than cash, Convertible Securities or
Additional Common Shares),
then, the holders of Series A Preferred Shares shall be entitled
to receive such dividend or distribution as if such holder had
converted such Series A Preferred Shares into Common Shares.
(B) A reclassification of the Common Shares
(other than a change in par value, or from par value to no par
value or from no par value to par value) into
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Common Shares and shares of any other class of stock shall be
deemed a distribution by the Corporation to the holders of its
Common Shares of such shares of such other class of stock
within the meaning of Subsection (c)(ii)(A) above and, if the
outstanding Common Shares shall be changed into a larger or
smaller number of Common Shares as a part of such
reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding Common
Shares within the meaning of Subsection (c)(i) hereof.
(iii) ISSUANCE OF ADDITIONAL COMMON SHARES.
(A) If at any time the Corporation shall
(except as hereinafter provided) issue or sell any Additional
Common Shares (an "Additional Issuance"), other than Permitted
Issuances, in exchange for consideration in an amount per
Additional Common Share less than either the Purchase Price or
the Current Market Price on the date of such Additional
Issuance (before giving effect to such Additional Issuance)
then, effective at the time of such Additional Issuance, the
number of Common Shares which will be issued upon conversion of
the Series A Preferred Shares shall be increased to a number
determined by multiplying the number of Common Shares subject
to issuance upon conversion of the Series A Preferred Shares
immediately before such Additional Issuance by a fraction, the
numerator of which shall be the number of Common Shares
immediately after giving effect to such Additional Issuance
(calculated on a Fully Diluted Basis) and the denominator of
which shall be the sum of:
(1) the number of Common Shares outstanding
immediately before giving effect to such Additional Issuance
(calculated on a Fully Diluted Basis), plus
(2) the number of Common Shares that the
aggregate consideration received by the Corporation with
respect to such Additional Issuance would purchase at the
"Calculation Price" on the date of such Additional Issuance
(before giving effect to such Additional Issuance).
For purposes of the preceding calculation, the term "Calculation
Price" shall mean (a) the Purchase Price if the consideration
received per Additional Common Share is less than the Purchase
Price but greater than the Current Market Price, (b) the Current
Market Price if the consideration received per Additional Common
Share is less than the Current Market Price but greater than the
Purchase Price and (c) the greater of the Purchase Price and the
Current Market Price if the consideration received per Additional
Common Share is less than both the Purchase Price and the Current
Market Price.
In computing adjustments under this Subsection, fractional
interests in Common Shares shall be taken into account to the
nearest one-thousandth of a share.
(B) Subsection (c)(iii)(A) shall not apply to any
issuance of Additional Common Shares for which an adjustment is
provided under Subsections (c)(i) and (c)(ii). No adjustment of
the number of Common Shares
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into which the Series A Preferred Shares are convertible shall be
made under Subsection (c)(iii)(A) upon the issuance of any
Additional Common Shares that are issued pursuant to the exercise
of any warrants or other subscription or purchase rights or
pursuant to the exercise of any conversion or exchange rights in
any Convertible Securities, if any such adjustment shall
previously have been made upon the issuance of such warrants or
other rights or upon the issuance of such Convertible Securities
(or upon the issuance of any warrant or other rights therefor)
pursuant to Subsections (c)(iv) and (c)(v).
(iv) ISSUANCE OF WARRANTS OR OTHER RIGHTS. If at any time the
Corporation shall take a record of the holders of its Common Shares for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Corporation is the
surviving corporation) issue or sell, any warrants or other rights to subscribe
for or purchase any Additional Common Shares or any Convertible Securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which a Common Share is issuable upon
the exercise of such warrants or other rights or upon conversion or exchange of
such Convertible Securities shall be less than either the Purchase Price or the
Current Market Price on the date of such issue or sale, then the number of
Common Shares which will be issued upon conversion of the Series A Preferred
Shares shall be adjusted as provided in Subsection (c)(iii)(A) on the basis that
the maximum number of Additional Common Shares issuable pursuant to all such
warrants or other rights necessary to effect the conversion or exchange of all
such Convertible Securities shall be deemed to have been issued and outstanding
and the Corporation shall be deemed to have received all of the consideration
payable therefor, if any, as of the date of the issuance of such warrants or
other rights. No further adjustments to the number of Common Shares which will
be issued upon conversion of the Series A Preferred Shares shall be made upon
the actual issue of Common Shares or of Convertible Securities upon exercise of
warrants or other rights contemplated by this Subsection (c)(iv) or upon the
actual issue of Common Shares upon conversion or exchange of Convertible
Securities contemplated by this Subsection (c)(iv).
(v) ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the
Corporation shall take a record of the holders of its Common Shares for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Corporation is the
surviving corporation) issue or sell, any Convertible Securities, whether or not
the rights to exchange or convert thereunder are immediately exercisable, and
the price per share for which a Common Share is issuable upon such conversion or
exchange shall be less than either the Purchase Price or the Current Market
Price on the date of such issue or sale, then the number of Common Shares which
will be issued upon conversion of the Series A Preferred Shares shall be
adjusted as provided in Subsection (c)(iii)(A) on the basis that the maximum
number of Additional Common Shares necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
and outstanding and the Corporation shall have received all of the consideration
payable therefor, if any, as of the date of issuance of such Convertible
Securities. No adjustment to the number of Common Shares into which the Series A
Preferred Shares are convertible shall be made under this Subsection (c)(v) upon
the issuance of any Convertible Securities that are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Subsection (c)(iv). No
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further adjustments of the number of Common Shares into which the Series A
Preferred Shares are convertible shall be made upon the actual issue of such
Common Shares upon conversion or exchange of such Convertible Securities and,
if any issue or sale of such Convertible Securities is made upon exercise of
any warrant or other right to subscribe for or to purchase any such Convertible
Securities for which adjustments of the number of Common Shares into which the
Series A Preferred Shares are convertible have been or are to be made pursuant
to other provisions of this Subsection (c), no further adjustments of the
number of Common Shares into which the Preferred Shares are convertible shall
be made by reason of such issue or sale.
(vi) SUPERSEDING ADJUSTMENT. If, at any time after any
adjustment of the number of Common Shares into which the Series A Preferred
Shares are convertible shall have been made pursuant to Subsections (c)(iv) and
(c)(v) as the result of any issuance of warrants, rights or Convertible
Securities,
(A) such warrants or rights, or the right of
conversion or exchange in such other Convertible Securities, shall
expire, and all or a portion of such warrants or rights, or the right
of conversion or exchange with respect to all or a portion of such
other Convertible Securities, as the case may be, shall not have been
exercised, or
(B) the consideration per share for which Common
Shares are issuable pursuant to such warrants or rights, or the terms
of such other Convertible Securities, shall be increased solely by
virtue of provisions therein contained for an automatic increase in
such consideration per share upon the occurrence of a specified date or
event,
then the previous adjustment made to the number of Common Shares into which the
Preferred Shares are convertible shall be rescinded and annulled and the
Additional Common Shares that were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such rights or options
or other Convertible Securities on the basis of
(C) treating the number of Additional Common Shares
or other property, if any, theretofore actually issued or issuable
pursuant to the previous exercise of any such warrants or rights or any
such right of conversion or exchange, as having been issued on the date
or dates of any such exercise and for the consideration actually
received and receivable therefor, and
(D) treating any such warrants or rights or any such
other Convertible Securities that then remain outstanding as having
been granted or issued immediately after the time of such increase of
the consideration per share for which Common Shares or other property
are issuable under such warrants or rights or other Convertible
Securities; whereupon a new adjustment of the number of Common Shares
into which the Series A Preferred Shares are convertible shall
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be made, which new adjustment shall supersede the previous adjustment
so rescinded and annulled.
(vii) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments to the number of Common Shares into which the Series A Preferred
Shares are convertible provided for in this Subsection (c):
(A) COMPUTATION OF CONSIDERATION. To the extent that
any Additional Common Shares or any Convertible Securities or any
warrants or other rights to subscribe for or purchase any Additional
Common Shares or any Convertible Securities shall be issued for cash
consideration, the consideration received by the Corporation therefor
shall be the amount of the cash received by the Corporation therefor,
or, if such Additional Common Shares or Convertible Securities are
offered by the Corporation for subscription, the subscription price,
or, if such Additional Common Shares or Convertible Securities are sold
to underwriters or dealers for public offering without a subscription
offering, the initial public offering price (in any such case
subtracting any amounts paid or receivable for accrued interest or
accrued dividends and without taking into account any compensation,
discounts or expenses paid or incurred by the Corporation for and in
the underwriting of, or otherwise in connection with, the issuance
thereof). To the extent that such issuance shall be for a consideration
other than cash, then, except as herein otherwise expressly provided,
the amount of such consideration shall be deemed to be the fair value
of such consideration at the time of such issuance as determined in
good faith by the Board of Directors of the Corporation. In case any
Additional Common Shares or any Convertible Securities or any warrants
or other rights to subscribe for or purchase such Additional Common
Shares or Convertible Securities shall be issued in connection with any
merger in which the Corporation issues any securities, the amount of
consideration therefor shall be deemed to be the fair value, as
determined in good faith by the Board of Directors of the Corporation,
of such portion of the assets and business of the nonsurviving
corporation as such Board in good faith shall determine to be
attributable to such Additional Common Shares, Convertible Securities,
warrants or other rights, as the case may be. The consideration for any
Additional Common Shares issuable pursuant to any warrants or other
rights to subscribe for or purchase the same shall be the consideration
received by the Corporation for issuing such warrants or other rights
plus the additional consideration payable to the Corporation upon
exercise of such warrants or other rights. The consideration for any
Additional Common Shares issuable pursuant to the term of any
Convertible Securities shall be the consideration received by the
Corporation for issuing warrants or other rights to subscribe for or
purchase such Convertible Securities, plus the consideration paid or
payable to the Corporation in respect of the subscription for or
purchase of such Convertible Securities, plus the additional
consideration, if any, payable to the Corporation upon the exercise of
the right of conversion or exchange in such Convertible Securities. In
case of the issuance at any time of any Additional Common Shares or
Convertible Securities in payment or satisfaction of any dividends upon
any class of stock other than Common Shares, the Corporation shall be
deemed to have received for such Additional Common Shares or
Convertible Securities a consideration equal to the amount of such
dividend so paid or satisfied.
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(B) WHEN ADJUSTMENTS TO BE MADE. The adjustments
required by this Subsection (c) shall be made whenever and as often as
any specified event requiring an adjustment shall occur, except that
any adjustment to the number of Common Shares into which the Series A
Preferred Shares are convertible that would otherwise be required may
be postponed (except in the case of a subdivision or combination of
Common Shares, as provided for in Subsection (c)(i)) up to, but not
beyond the date of conversion if such adjustment either by itself or
with other adjustments not previously made adds or subtracts less than
1% of the Common Shares into which the Series A Preferred Shares are
convertible immediately prior to the making of such adjustment. Any
adjustment representing a change of less than such minimum amount
(except as aforesaid) that is postponed shall be carried forward and
made as soon as such adjustment, together with other adjustments
required by this Subsection (c) and not previously made, would result
in a minimum adjustment or on the date of conversion. For the purpose
of any adjustment, any specified event shall be deemed to have occurred
at the close of business on the date of its occurrence.
(C) FRACTIONAL INTERESTS. In computing adjustments
under this Subsection (c), fractional interests in Common Shares shall
be taken into account to the nearest 1/1000th of a share.
(D) WHEN ADJUSTMENT NOT REQUIRED. If the Corporation
shall take a record of the holders of its Common Shares for the purpose
of entitling them to receive a dividend or distribution or subscription
or purchase rights and shall, thereafter and before the distribution to
shareholders thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
(E) ESCROW OF SHARES. If after any property becomes
distributable pursuant to this Subsection (c) by reason of the taking
of any record of the holders of Common Shares, but prior to the
occurrence of the event for which such record is taken, and the holders
of Series A Preferred Shares convert such Series A Preferred Shares,
any Additional Common Shares issuable upon exercise by reason of such
adjustment shall be deemed the last Common Shares into which the Series
A Preferred Shares have been converted (notwithstanding any other
provision to the contrary herein) and such shares or other property
shall be held in escrow for such holder by the Corporation to be issued
to such holder upon and to the extent that the event actually takes
place. Notwithstanding any other provision to the contrary herein, if
the event for which such record was taken fails to occur or is
rescinded, then such escrowed shares shall be cancelled by the
Corporation and escrowed property returned to the Corporation.
(F) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever
the Board of Directors of the Corporation shall be required to make a
determination in good faith of the fair value of any item under this
Subsection (c), such determination may be challenged in good faith by
the Majority Holders, and any dispute shall be resolved by an
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investment banking or valuation firm of recognized national standing
selected by the Corporation and acceptable to the Majority Holders.
(G) PROHIBITION ON ADJUSTMENT. The provisions of
Subsections (c)(iii), (c)(iv) and (c)(v) shall not operate to reduce
the number of Common Shares which will be issued upon conversion of the
Series A Preferred Shares.
(viii) REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION
OR DISPOSITION OF ASSETS. In case the Corporation shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Corporation is not the surviving corporation or where
there is a change in or distribution with respect to the Common Shares), or
sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, Common Shares of the successor or acquiring corporation, or any cash,
shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Shares
of the Corporation, then each holder of Series A Preferred Shares shall have the
right thereafter to receive, upon conversion of such Series A Preferred Shares,
the number of Common Shares of the successor or acquiring corporation or of the
Corporation, if it is the surviving corporation, and Other Property receivable
upon or as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a holder of the number of Common
Shares into which the Series A Preferred Shares owned by such holder are
convertible immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Corporation) shall expressly assume
the due and punctual observance and performance of each and every covenant and
condition of the Series A Preferred Shares to be performed and observed by the
Corporation and all the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined by resolution of the
Board of Directors of the Corporation) in order to provide for adjustments of
Common Shares into which the Series A Preferred Shares are convertible which
shall be as nearly equivalent as practicable to the adjustments provided for in
this Subsection (c). For purposes of this Subsection (c)(viii), "common stock of
the successor or acquiring corporation" shall include stock of such corporation
of any class that is not preferred as to dividends or assets over any other
class of stock of such corporation and that is not subject to redemption and
shall also include any evidences of indebtedness, shares of stock or other
securities that are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Subsection (c)(viii) shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
(ix) OTHER ACTION AFFECTING COMMON SHARES. In case at any time
or from time to time the Corporation shall take any action in respect of its
Common Shares, other than any action described in this Subsection (c), then,
unless such action will not have a materially adverse effect upon the rights of
holders of Series A Preferred Shares, the number of Common
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Shares or other stock into which the Series A Preferred Shares are convertible
shall be adjusted in such manner as may be equitable in the circumstances.
(d) NOTICES TO HOLDERS OF SERIES A PREFERRED SHARES.
(i) NOTICE OF ADJUSTMENTS. Not less than 10 nor more than 30
days prior to the record date or effective date, as the case may be, of any
action that requires or might require an adjustment or readjustment pursuant to
Subsection (c), the Corporation shall forthwith prepare and deliver to each
holder of Series A Preferred Shares, a signed copy of a certificate executed by
the chief financial officer of the Corporation setting forth, in reasonable
detail, the event requiring the adjustment and the method by which such
adjustment was calculated (including a description of the basis on which the
Board of Directors of the Corporation determined the fair value of any evidences
of indebtedness, shares of stock, other securities or property or warrants or
other subscription or purchase rights referred to in Subsection (c)(vii)(A),
specifying the number of Common Shares into which the Series A Preferred Shares
are convertible and (if such adjustment was made pursuant to Subsections
(c)(viii) or (c)(ix)) describing the number and kind of any other shares of
stock or Other Property into which the Series A Preferred Shares are
convertible, after giving effect to such adjustment or change. The Corporation
shall keep at its office or agency copies of all such certificates and cause the
same to be available for inspection at said office during normal business hours
by any holder of Series A Preferred Shares or any prospective purchaser of
Series A Preferred Shares designated by a holder thereof.
(ii) NOTICE OF CORPORATE ACTION. If at any time:
(A) the Corporation shall take a record of the
holders of its Common Shares for the purpose of entitling them to
receive a dividend or other distribution, or any right to subscribe for
or purchase any evidences of its indebtedness, any shares of stock of
any class or any other securities or property, or to receive any other
right, or
(B) there shall be any capital reorganization of the
Corporation, any reclassification or recapitalization of the capital
stock of the Corporation or any consolidation or merger of the
Corporation with, or any sale, transfer or other disposition of all or
substantially all the property, assets or business of the Corporation
to, another corporation, person or entity, or
(C) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in any one or more of such cases, the Corporation shall give to each
holder of Series A Preferred Shares (A) at least 30 days prior written notice of
the date on which a record date shall be selected for such dividend,
distribution or right or for determining rights to vote in respect of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, and (B) in the case of any
such reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least 30 days prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause also shall specify (A) the date on which
any such
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record is to be taken for the purpose of such dividend, distribution or right,
the date on which the holders of Common Shares shall be entitled to any such
dividend, distribution or right, and the amount and character thereof, and (B)
the date on which any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up is to take place and the time, if any such time is to be fixed, as of which
the holders of Common Shares shall be entitled to exchange their Common Shares
for securities or other property deliverable upon such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to each holder of Series A Preferred Shares at
the last address of such holder appearing on the books of the Corporation.
VI. REDEMPTION OF SERIES A PREFERRED SHARES.
(a) MANDATORY REDEMPTION. The Corporation shall redeem all of the
issued and outstanding Series A Preferred Shares on September 30, 2010 (the
"Redemption Date"). The redemption price for the Series A Preferred Shares
redeemed shall be the Liquidation Preference Amount (the "Redemption Price"). If
on the Redemption Date the funds of the Corporation legally available are
insufficient to redeem all of the Series A Preferred Shares, the number of
Series A Preferred Shares legally permitted to be redeemed shall be redeemed and
Series A Preferred Shares which the Corporation is legally unable to redeem
shall be redeemed as soon thereafter as funds become legally available for such
redemption. In addition, with respect to any Series A Preferred Shares that the
Corporation is legally or otherwise unable to redeem within the one year period
commencing on the Redemption Date and, if the Conversion Ratio has not been
increased pursuant to Section VII, then, subject to NASDAQ Approval, the
Conversion Ratio applicable to such Series A Preferred Shares shall increase
from 4 Common Shares for each Series A Preferred Share to 8 Common Shares for
each Series A Preferred Share and the holders of the Series A Preferred Shares
shall have the right to convert such Series A Preferred Shares at any time prior
to redemption thereof by the Corporation.
(b) PRORATION. To the extent the Corporation is legally unable to
redeem all Series A Preferred Shares on the Redemption Date, the Series A
Preferred Shares to be redeemed shall be selected pro rata in accordance with
the ratio the number of Series A Preferred Shares held by each respective holder
bears to the total number of Series A Preferred Shares then issued and
outstanding. Not less than 30 or more than 60 days' previous notice shall be
given to the holders of record of the Series A Preferred Shares to be redeemed,
by registered or certified mail, postage prepaid.
(c) MECHANICS. At least 60 days prior to the Redemption Date, written
notice (hereinafter referred to as the "Redemption Notice") shall be mailed,
postage prepaid, to each holder of record of the Series A Preferred Shares, at
its address shown on the records of the Corporation; PROVIDED, HOWEVER, that the
Corporation's failure to give such Redemption Notice shall in no way affect its
obligation to redeem Series A Preferred Shares as provided in Section VI(a)
hereof. The Redemption Notice shall contain the following information:
(i) the number of Series A Preferred Shares held by the holder
and the total number of Series A Preferred Shares held by all holders.
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(ii) the Redemption Date and the applicable Redemption Price;
(iii) the number of Series A Preferred Shares to be redeemed;
and
(iv) a statement that the holder is to surrender to the
Corporation, at the place designated herein, its certificate or certificates
representing the Series A Preferred Shares to be redeemed.
(d) SURRENDER OF CERTIFICATES. Each holder of Series A Preferred Shares
to be redeemed shall surrender the certificate or certificates representing such
shares to the Corporation, and thereupon the applicable Redemption Price for
such shares as set forth in this Section 6 shall be paid to the order of the
person whose name appears on such certificate or certificates and each
surrendered certificate shall be cancelled and retired and new certificates
representing any Series A Preferred Shares not redeemed shall be issued to the
holder at no additional cost.
VII. PUT OPTIONS.
(a) GENERAL PUT OPTION. On September 30, 2004, the Majority Holders
shall have the right to require the Corporation to purchase all or part of the
Series A Preferred Shares that the Majority Holders then own at a purchase price
equal to the Put Option Purchase Price. If the Corporation fails to so purchase
any Put Shares under this Section VII(a) within any applicable Closing Period or
any applicable Subsequent Closing Period (each as defined in clause (f) below),
then, subject to NASDAQ Approval, the Conversion Ratio applicable to all
outstanding Series A Preferred Shares shall increase from 4 Common Shares for
each Series A Preferred Share to 8 Common Shares for each Series A Preferred
Share.
(b) OPT OUT/NASDAQ PUT. If either (i) the Control Share Acquisition
Resolution is not approved by the affirmative vote of the holders of shares
entitling them to exercise a majority of the voting power of the Corporation at
the Corporation's 1999 annual meeting of shareholders, or (ii) NASDAQ Approval
is not obtained at the Corporation's 1999 annual meeting of shareholders, then
the Majority Holders shall have the right to require the Corporation to purchase
all or part of the Series A Preferred Shares that the Majority Holders then own
at a purchase price equal to the Put Option Purchase Price.
(c) GOVERNMENTAL APPROVAL PUT. If within 365 days after the Original
Purchaser has filed its Notification and Report Form as required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in connection
with a Second Occurrence Failure by the Corporation under the Contingent Warrant
Agreement, the Corporation and the Original Purchaser are unable to obtain all
governmental and other approvals required under any applicable laws, statutes,
orders, rules, regulations or policies, or any guidelines promulgated
thereunder, including, without limitation, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("Government Approval"), then the Majority
Holders shall have the right to require the Corporation to purchase all or part
of the Series A Preferred Shares that the Majority Holders then own at a
purchase price equal to the Put Option Purchase Price.
(d) OCCURRENCE BASED PUT. If the Corporation or any of its Subsidiaries
shall (i) authorize or issue any shares of capital stock of any class or any
options, warrants, or rights to
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purchase capital stock of any class or any securities convertible into capital
stock of any class, other than (A) Conversion Shares issued upon conversion of
the Series A Preferred Shares, (B) Warrant Shares issued upon exercise of the
Warrant, (C) Common Shares issued to employees of the Corporation pursuant to
the Stock Plans, (D) Contingent Shares issued upon exercise of the Contingent
Warrants, (E) capital stock of any Subsidiary issued to the Corporation or any
Subsidiary or (F) Common Shares issued to satisfy obligations in respect of
acquisitions of securities or assets of any Person, provided that (I) such
contracts were entered into prior to September 30, 1999, and (II) the number of
Common Shares subject to this subparagraph (F) shall not exceed 110,000 in the
aggregate, or (ii) directly or indirectly sell, lease, or otherwise dispose of
more than 10% of the properties and assets of the Corporation and its
Subsidiaries on a consolidated basis, in the aggregate, to any Person (other
than the Corporation any Subsidiary), whether in one transaction or in a series
of transactions over any period of twelve consecutive months, or (iii) merge
into or with or consolidate with any other Person other than a Subsidiary, or
(iv) create, incur, assume, or otherwise become or remain liable, directly or
indirectly, for any Indebtedness for Borrowed Money that would cause the
Corporation to have Indebtedness for Borrowed Money in excess of $210,000,000
in the aggregate at any time, whether by loan, guaranty, mortgage, or
otherwise, excluding indebtedness incurred in connection with a redemption of
Series A Preferred Shares, then in any such case the Majority Holders shall
have the right to require the Corporation to purchase all or part of the Series
A Preferred Shares that the Majority Holders then own at a purchase price equal
to the Put Option Purchase Price. If the Corporation fails to so purchase any
Put Shares under this Section VII(d) within any applicable Closing Period or
any applicable Subsequent Closing Period, then, subject to NASDAQ Approval, the
Conversion Ratio applicable to all outstanding Series A Preferred Shares shall
increase from 4 Common Shares for each Series A Preferred Share to 8 Common
Shares for each Series A Preferred Share.
(e) MECHANICS. The Corporation shall deliver written notice to each
holder of Series A Preferred Shares at such holder's address on the books and
records of the Corporation of each event giving rise to a Put Option under
clauses (b), (c) and (d) of this Section VII (the "Corporation Put Right
Notice"). The Corporation Put Right Notice shall be mailed by first class
certified mail, return receipt requested, no later than two (2) business days
after the occurrence of the event giving rise to the Put Option. In order to
exercise a Put Option under clause (b), (c) or (d) of this Section VII, a holder
of the Series A Preferred Shares shall, no later than ninety (90) days after
receipt of the Corporation Put Right Notice, send written notice to the
Corporation specifying that the holder has elected to exercise its Put Option.
In order to exercise a Put Option under clause (a) of this Section VII, a holder
of the Series A Preferred Shares shall, no later than September 30, 2004, send
written notice to the Corporation specifying that it has elected to exercise the
Put Option.
(f) CLOSING PERIOD. If the purchase or redemption of Put Shares under
clauses (a), (b), (c) or (d), as the case may be, would not cause or constitute
a default under any agreement or indenture relating to indebtedness of the
Corporation then outstanding (collectively, the "Credit Agreements"), the
closing of the purchase of Put Shares under this Section VII shall occur as soon
as practicable after the delivery of a Put Option Notice with respect to such
Put Shares on a date mutually acceptable to the Majority Holders and the
Corporation, but in no event later than one year from the date of delivery of
the applicable Put Option Notice (the "Closing Period"). If the Corporation may
purchase part but not all of the Put Shares without causing a default under
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the Credit Agreements, the Corporation shall purchase, within the Closing
Period, that number of Put Shares (pro rata from each holder based on the
number of Put Shares held by each holder and the total number of Put Shares
held by all holders) that it may purchase without causing or constituting a
default under the Credit Agreements. Subject to any earlier conversion of any
Put Shares, the Corporation shall from time to time purchase Put Shares at any
time that any such purchase would not cause or constitute a default under the
Credit Agreements. The closing of the purchase of any Put Shares under the
preceding sentence shall occur as soon as practicable after the date that the
determination is made that such purchase will not cause or constitute a default
under the Credit Agreements on a date mutually acceptable to the Majority
Holders and the Corporation, but in no event later than sixty (60) days after
the date of such determination (each, a "Subsequent Closing Period"). Until
purchased by the Corporation in accordance with the terms of this Section VII,
the holders of the Put Shares shall have the right to convert Put Shares
notwithstanding delivery of a Put Option Notice.
(g) SURRENDER OF CERTIFICATES. Each holder of Put Shares to be
purchased pursuant to a Put Option shall surrender the certificate or
certificates representing all such Put Shares to the Corporation on or before
the closing of the purchase of the Put Shares, and thereupon the applicable Put
Option Purchase Price for such shares as set forth in this Section VII shall be
paid to the order of the person whose name appears on such certificate or
certificates for each Put Share purchased and each surrendered certificate shall
be cancelled and retired and new certificates representing any Series A
Preferred Shares not purchased shall be issued to the holder at no additional
cost. If any Put Shares are not purchased within the Closing Period or
Subsequent Closing Period, as the case may be, each certificate issued
representing such shares shall bear a legend indicating the increase, if any, in
the Conversion Ratio pursuant to this Section VII.
(h) CERTAIN DEFINITIONS. For purpose of this Section VII, the following
terms shall have the following meanings:
"Put Option" shall mean the option of the Majority Holders to
require the Corporation to purchase the Series A Preferred Shares owned by the
Majority Holders under clauses (a), (b), (c) and (d) of this Section VII.
"Put Option Date" shall mean the date on which the Original
Purchaser has actual notice that an event giving rise to a Put Option under this
Section VII has occurred.
"Put Option Notice" shall mean the written notice sent by the
Original Purchaser to the Corporation pursuant to which the Original Purchaser
notifies the Corporation that it is exercising its Put Option right under clause
(a), (b), (c) or (d) of this Section VII.
"Put Option Purchase Price" shall mean the Liquidation
Preference Amount.
"Put Shares" shall mean any Series A Preferred Shares with
respect to which the Majority Holders have elected to exercise their right to
require the Corporation to purchase under clauses (a), (b), (c) or (d) of this
Section VII.
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VIII. NO REISSUANCE OF PREFERRED STOCK. No Series A Preferred Share or Series
A Preferred Shares acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be cancelled, retired and eliminated from the shares which the Corporation
shall be authorized to issue. The President or any Vice President and the
Secretary or any Assistant Secretary of the Corporation are hereby authorized
and directed on behalf of the Corporation to file such documents from time to
time as may be necessary to reduce the authorized number of Series A Preferred
Shares accordingly.
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EXHIBIT 2.2
-----------
CONTINGENT WARRANT AGREEMENT
----------------------------
THIS CONTINGENT WARRANT AGREEMENT (this "Agreement"), dated as of
September 30, 1999, is among Advanced Lighting Technologies, Inc., an Ohio
corporation (the "Company"), General Electric Company, a New York corporation
("Purchaser"), Wayne R. Hellman ("Hellman"), Hellman, Ltd., an Ohio limited
liability company ("Hellman Ltd."), Wayne R. Hellman, as voting trustee under
Voting Trust Agreement dated October 10, 1995, Alan J. Ruud ("Ruud"), and Alan
J. Ruud, as voting trustee under Voting Trust Agreement dated January 2, 1998.
The parties hereto agree as follows:
SECTION 1
DEFINITIONS
The following terms when used in this Agreement shall, except where the
context otherwise requires, have the following meanings (such definitions to be
equally applicable to the singular and plural forms thereof):
"ACCOUNTANT'S CERTIFICATE" shall have the meaning provided in clause f.
of Section 2.2.
"AFFILIATE" shall mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGREEMENT" shall mean this Contingent Warrant Agreement as originally
executed and as amended, modified or supplemented from time to time.
"APPRAISED VALUE" shall mean, in respect of any Common Share on any
date herein specified, the fair saleable value of such Common Share (determined
without giving effect to the discount for (i) a minority interest, or (ii) any
lack of liquidity of the Common Share, or (iii) to the fact that the Company may
have no class of equity registered under the Exchange Act) based on the equity
value of Company, as determined by an investment banking or valuation firm
selected in accordance with the following sentences, divided by the number of
Common Shares outstanding on a Fully Diluted Basis as determined in accordance
with GAAP (assuming the payment of the exercise prices for such shares). The
determination of the Appraised Value per Common Share shall be made by an
investment banking or valuation firm of nationally recognized standing selected
by the Company and acceptable to Purchaser. If the investment banking or
valuation firm selected by Company is not acceptable to Purchaser and the
Company and Purchaser cannot agree on a mutually acceptable investment banking
or valuation firm, then
<PAGE> 75
Purchaser and the Company shall each choose one such investment banking or
valuation firm and the respective chosen firms shall agree on another investment
banking or valuation firm which shall make the determination. The Company shall
retain, at its sole cost, such investment banking or valuation firm as may be
necessary for the determination of Appraised Value required by the terms of this
Agreement.
"BUSINESS DAY" shall mean any day that is not a Saturday or Sunday or
a day on which banks are required to be closed in the State of New York.
"COMMON SHARES" shall mean the Common Shares, par value $.001, of the
Company.
"COMPANY" shall mean Advanced Lighting Technologies, Inc., an Ohio
corporation.
"COMPANY BENEFICIAL OWNER" shall have the meaning provided in Section
2.3.
"CONTINGENT SHARES" shall have the meaning provided in Section 2.1.
"CONVERSION SHARES" shall mean the Common Shares to be issued upon the
conversion of Series A Shares.
"CURRENT MARKET PRICE" shall mean, in respect of any Common Share on
any date herein specified, if there shall then be a public market for the Common
Shares, the average of the daily market prices for twenty (20) consecutive
Business Days immediately preceeding such date or, if there is no such public
market, the Appraised Value per Common Share. The daily market price for each
such Business Day shall be (i) the last sale price on such day on the principal
stock exchange or NASDAQ-NMS on which such Common Shares are then listed or
admitted to trading, or (ii) if no sale takes place on such day on any such
exchange or NASDAQ-NMS, the average of the last reported closing bid and asked
prices on such day as officially quoted on any such exchange or NASDAQ-NMS, or
(iii) if the Common Shares are not then listed or admitted to trading on any
stock exchange or NASDAQ-NMS, the average of the last reported closing bid and
asked prices on such day in the over-the-counter market, as furnished by the
NASDAQ or the National Quotation Bureau, Inc., or (iv) if neither such
corporation at the time is engaged in the business of reporting such prices, as
furnished by any similar firm then engaged in such business, or (v) if there is
no such firm, as furnished by any member of the NASD selected mutually by the
Company and Purchaser or, if they cannot agree upon such selection, as selected
by two such members of the NASD, one of which shall be selected by the Company
and one of which shall be selected by Purchaser.
"EBITDA" shall mean, for any period and without duplication, net
earnings (loss) of the Company and its Subsidiaries determined on a consolidated
basis for such period plus the sum of the following amounts (but only to the
extent included in determining net income (loss) for such period): (i)
depreciation and amortization expense for such period, plus (ii) Interest
Expense for such period, plus (iii) the amount of any reduction pursuant to the
proviso of the definition of Interest Expense in this Section 1, plus (iv)
income tax expense in respect of such period, minus (v) extraordinary gains and
gains from sales of assets for such period, plus (vi) extraordinary losses and
losses from sales of assets for such period. EBITDA shall be
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determined using generally accepted accounting principles and practices in
effect on the date of this Agreement.
"EBITDA RATIO" shall mean, for any period of determination, the ratio
of (i) EBITDA to (ii) Interest Expense.
"EXCESS HELLMAN SHARES PROXY" shall mean the irrevocable proxy granted
by Wayne R. Hellman, individually, Wayne R. Hellman, in his capacity as trustee
of the Hellman Voting Trust, and Hellman Ltd. to Purchaser, the form of which is
attached hereto as Exhibit A, to, among other things, vote the Excess Hellman
Shares.
"EXCESS HELLMAN SHARES" shall mean that number of Common Shares equal
to the sum of the number of Hellman Option Shares and the Ruud Option Shares.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FIRST CONTINGENT WARRANT" shall have the meaning provided in
subclause (vi) of clause c. of Section 2.2.
"FULLY DILUTED BASIS" means, with respect to any determination or
calculation, that such determination or calculation is performed on a fully
diluted basis (assuming the issuance of all Common Shares issuable under any
then outstanding options, warrants or convertible securities of any kind)
determined in accordance with GAAP for purposes of determining book value or net
income per share.
"GAAP" shall mean generally accepted accounting principles as in effect
on the date hereof and consistently applied and maintained throughout the period
indicated. Whenever any accounting term is used herein which is not otherwise
defined, it shall have the meaning ascribed thereto under GAAP.
"GOVERNMENTAL BODY" shall mean any nation or government, any state or
other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, in each case to the extent the same has jurisdiction over the
Person or property in question, including, but not limited to, any governmental
authority, agency, board, commission, court, department or instrumentality of
the United States, any State of the United States or any political subdivision
thereof, and any tribunal or arbitrator(s) of competent jurisdiction, and any
self-regulatory groups of which the Company, any Subsidiary or Purchaser is a
member or is subject.
"HELLMAN LTD." shall mean Hellman Ltd., an Ohio limited liability
company.
"HELLMAN OPTION SHARES" shall mean Common Shares owned by Wayne R.
Hellman, individually, in an amount equal to fifty percent (50%) of the Total
Option Shares.
"HELLMAN OPTION SHARES PROXY" shall mean the irrevocable proxy granted
by Wayne R. Hellman, individually, to Purchaser, the form of which is attached
hereto as Exhibit B, to, among other things, vote the Hellman Option Shares.
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<PAGE> 77
"HELLMAN SHARES" shall mean, collectively, all Common Shares held, of
record or beneficially, by Wayne R. Hellman, individually, Wayne R. Hellman, in
his capacity as trustee of the Hellman Voting Trust, and Hellman Ltd.
"HELLMAN SHARES PROXY" shall mean the irrevocable proxy granted by
Wayne R. Hellman, individually, Wayne R. Hellman, in his capacity as trustee of
the Hellman Voting Trust, and Hellman Ltd. to Purchaser, the form of which is
attached hereto as Exhibit C, to, among other things, vote the Net Hellman
Shares.
"HELLMAN VOTING TRUST" shall mean the Voting Trust Agreement, dated as
of October 10, 1995, as amended, between Wayne R. Hellman, as voting trustee,
and certain shareholders of the Company. As used herein, the term Hellman Voting
Trust shall include any irrevocable proxies granted to Wayne R. Hellman with
respect to shares withdrawn from the Hellman Voting Trust and deposited in
margin accounts by the beneficial holders thereof.
"INTEREST EXPENSE" shall mean, for any period (a) the total
consolidated interest expense of the Company and its Subsidiaries determined on
a consolidated basis and in any event shall include all interest expense with
respect to any indebtedness in respect of which the Company or any Subsidiary is
wholly or partially liable excluding interest on indebtedness to the Company
from any Subsidiary and interest on indebtedness to any Subsidiary from the
Company; provided, however, the amount of interest expense determined in
accordance with GAAP for any period shall be reduced by any amortization of
deferred financing costs in an amount up to but not exceeding $125,000 with
respect to any single fiscal quarter, minus (b) gross interest income of the
Company and its Subsidiaries determined on a consolidated basis.
"NASDAQ APPROVAL" shall mean approval of the transactions contemplated
by the Stock Purchase Agreement by the shareholders of the Corporation pursuant
to NASDAQ Rule 4460(i)(D).
"NET HELLMAN SHARES" shall mean the Hellman Shares less that number of
Common Shares that are represented by the Hellman Option Shares Proxy plus the
Ruud Option Shares Proxy.
"NET RUUD SHARES" shall mean the Ruud Shares less that number of Common
Shares that are represented by the Ruud Option Shares Proxy.
"OPTION AGREEMENT" shall mean the Option Agreement, of even date
herewith, among Purchaser, Hellman and Ruud, under which Purchaser is granted an
option to purchase the Hellman Option Shares and the Ruud Option Shares.
"PERMITTED ISSUANCES" shall mean (i) the issuance or conversion of
options issued pursuant to any stock option plan, employee incentive plan,
employee stock purchase plan or employee retirement and savings plan approved by
the Company's Board of Directors, (ii) the issuance of Conversion Shares,
Contingent Shares or Warrant Shares, and (iii) the issuance of Common Shares to
satisfy obligations in respect of acquisitions of securities or assets of any
Person, provided (A) such contracts were entered into prior to September 30,
1999, and (B) the number of Common Shares subject to this subclause (iii) shall
not exceed 110,000 in the aggregate.
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<PAGE> 78
"PERSON" shall mean any natural person, corporation, firm, partnership,
association, government, governmental agency or other entity, whether acting in
an individual, fiduciary or other capacity.
"PREFERRED SHARES" shall mean the Series A Shares.
"PROCEEDING" shall have the meaning provided in Section 2.3.
"PURCHASER" shall mean General Electric Company, a New York
corporation.
"REQUIRED RATIO" shall mean 2 to 1.
"RUUD OPTION SHARES" shall mean Common Shares owned by Alan J. Ruud,
individually, in an amount equal to fifty percent (50%) of the Total Option
Shares.
"RUUD OPTION SHARES PROXY" shall mean the irrevocable proxy granted by
Alan J. Ruud, individually, to Purchaser, the form of which is attached hereto
as Exhibit D, to, among other things, vote the Ruud Option Shares.
"RUUD SHARES" shall mean, collectively, all Common Shares held, of
record or beneficially, by Alan J. Ruud, individually, and Alan J. Ruud, in his
capacity as trustee of the Ruud Voting Trust.
"RUUD SHARES PROXY" shall mean the irrevocable proxy granted by Alan J.
Ruud, individually, and Alan J. Ruud, in his capacity as trustee of the Ruud
Voting Trust, to Purchaser, the form of which is attached hereto as Exhibit E,
to, among other things, vote the Net Ruud Shares.
"RUUD VOTING TRUST" shall mean the Voting Trust Agreement, dated as of
January 2, 1998, as amended, between Alan J. Ruud, as voting trustee, and
certain shareholders of the Company. As used herein, the term Ruud Voting Trust
shall include any irrevocable proxies granted to Alan J. Ruud with respect to
shares withdrawn from the Ruud Voting Trust and deposited in margin accounts by
the beneficial holders thereof.
"SECOND CONTINGENT WARRANT" shall have the meaning provided in
subclause (ii) of clause d. of Section 2.2.
"SECOND OCCURRENCE FAILURE" shall have the meaning provided in clause
c. of Section 2.2.
"SERIES A SHARES" shall mean shares of Series A Convertible Preferred
Stock, par value $.001, of the Company.
"STOCK PURCHASE AGREEMENT" shall mean the Stock Purchase Agreement,
dated September 28, 1999, between the Company and Purchaser.
"SUBSIDIARY" of the Company shall mean any other corporation of which
more than 50% of the outstanding shares of capital stock having ordinary voting
power for the election
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<PAGE> 79
of directors is owned directly or indirectly by the Company, by the Company and
one or more Subsidiaries, or by one or more other Subsidiaries.
"THIRD OCCURRENCE FAILURE" shall have the meaning provided in clause d.
of Section 2.2.
"TOTAL OPTION SHARES" shall mean the number of Common Shares that when
combined with all other Common Shares owned by Purchaser or its Affiliates at
the time of determination will result in Purchaser having twenty-five percent
(25%) of the voting power of the Company's capital stock. The time of
determination of the Total Option Shares shall be the first Business Day
immediately following Purchaser's receipt of the Accountant's Certificate
indicating a Second Occurrence Failure.
"WARRANT" shall mean the warrant in the form of Exhibit 1 attached to
the Stock Purchase Agreement.
"WARRANT SHARES" shall mean Common Shares to be issued upon exercise of
the Warrant.
SECTION 2
THE CONTINGENT WARRANTS AND THE CONTINGENT SHARES
2.1 AUTHORIZATION OF THE CONTINGENT SHARES; AGREEMENT TO ISSUE
SECURITIES AND PROVIDE FINANCIAL ACCOMMODATION. The Company has authorized the
issuance and sale on the terms and subject to the conditions of this Agreement
of such number of Common Shares as are necessary for the Company to fulfill its
obligations under the provisions of Sections 2.2.c(vi) and 2.2.d(iii) of this
Agreement (the "Contingent Shares"), in the event Purchaser exercises its rights
under either or both of such Sections. This Agreement is and is intended to be
an agreement for the issuance of securities by the Company and the providing of
financial accommodation to the Company within the meaning of Section 365(c)(2)
of Title 11 of the United States Code.
2.2 EBITDA COVERAGE RATIO; VESTING OF RIGHTS UNDER WARRANTS; ISSUANCE
OF CONTINGENT WARRANTS; PROXIES.
a. The Company shall not permit the average of the Company's
EBITDA Ratio for any two consecutive fiscal quarters, commencing with the
average for the fiscal quarters ending September 30, 1999 and December 31, 1999,
and continuing each fiscal quarter thereafter (each, a "Determination Period"),
to be less than the Required Ratio.
b. Intentionally Omitted.
c. Except as provided in clause e. below and subject to
with the terms of the Ohio Control Share Acquisition Act, if applicable, upon
the second occurrence of the EBITDA Ratio being ess than the Required Ratio for
any Determination Period (a "Second Occurrence Failure"):
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(i) The Hellman Shares Proxy shall become effective upon
expiration of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 applicable to the acquisition of an option and a proxy
in respect of the Hellman Option Shares and the Ruud Option Shares pursuant to
the Option Agreement, the Hellman Option Shares Proxy and the Ruud Option Shares
Proxy (the "Option Waiting Period") and from and after such date Purchaser may
exercise its rights under the Hellman Shares Proxy, including, without
limitation, its rights to vote the Net Hellman Shares; and
(ii) The Hellman Option Shares Proxy shall become effective
upon expiration of the Option Waiting Period and from and after such date
Purchaser may exercise its rights under the Hellman Option Shares Proxy,
including, without limitation, its rights to vote the Hellman Option Shares; and
(iii) The Ruud Option Shares Proxy shall become effective
upon expiration of the Option Waiting Period and from and after such date
Purchaser may exercise its rights under the Ruud Option Shares Proxy, including,
without limitation, its rights to vote the Ruud Option Shares; and
(iv) Purchaser shall exercise the Warrant; and
(v) Purchaser shall have the right and option to purchase
the Ruud Option Shares and the Hellman Option Shares pursuant to the terms of
the Option Agreement, the form of which is attached hereto as Exhibit F. The
parties acknowledge and agree that in determining the number of Total Option
Shares the Warrant Shares will be counted among the Common Shares owned by
Purchaser. The Option Agreement shall provide, among other things, that the
Options (as defined in the Option Agreement) may be exercised only after all
governmental and regulatory approvals (including, without limitation, any
approvals required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended) necessary in connection with Purchaser's ownership of a 25%
interest in the Company have been obtained and that the Option Period (as
defined in the Option Agreement) shall be extended so that it expires on the
later of: (A) the one-year anniversary of the date of Purchaser's receipt of the
Accountant's Certificate indicating a Second Occurrence Failure and (B) the
close of business on the 30th day following receipt of all necessary
governmental and regulatory approvals necessary in connection with Purchaser's
ownership of a 25% interest in the Company; and
(vi) Subject to NASDAQ Approval, the Company shall issue to
Purchaser a warrant in the form attached hereto as EXHIBIT 2.2(c) (the "First
Contingent Warrant") granting Purchaser the right to purchase, in accordance
with the terms set forth in such First Contingent Warrant and at the Current
Market Price (determined at the time the event giving rise to the issuance of
the First Contingent Warrant occurred), that number of additional Common Shares
necessary to give Purchaser a majority of the voting power of the Company's
capital stock (assuming for purposes of making such determination that (A)
Purchaser has fully exercised the Warrant, (B) Purchaser has not transferred, or
transferred the right to vote, any Warrant Shares, Preferred Shares or
Conversion Shares, and (C) Purchaser has the power and authority to vote the
Hellman Shares and the Ruud Shares). The First Contingent Warrant shall be
delivered to Purchaser no later than the third Business Day following the
Purchaser's receipt of the Accountant's Certificate indicating a Second
Occurrence Failure.
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<PAGE> 81
d. Except as provided in clause e. below and subject to
compliance with the terms of the Ohio Control Share Acquisition Act, if
applicable, upon the third occurrence of the EBITDA Ratio being less than the
Required Ratio for any Determination Period (a "Third Occurrence Failure"):
(i) The Ruud Shares Proxy shall become effective (provided
the Option Waiting Period has lapsed as of such date) and from and after such
date Purchaser may exercise its rights under the Ruud Shares Proxy, including,
without limitation, its rights to vote the Net Ruud Shares; and
(ii) The Excess Hellman Shares Proxy shall become effective
(provided the Option Waiting Period has lapsed as of such date) and from and
after such date Purchaser may exercise its rights under the Excess Hellman
Shares Proxy, including, without limitation, its rights to vote the Excess
Hellman Shares; and
(iii) Subject to NASDAQ Approval, the Company shall issue
to Purchaser a warrant (in addition to any First Contingent Warrant issued to
Purchaser in accordance with Section 2.2.c (vi) hereof) in the form attached
hereto as EXHIBIT 2.2(d) (the "Second Contingent Warrant") granting Purchaser
the right to purchase, in accordance with the terms set forth in such Second
Contingent Warrant and at the Current Market Price (determined at the time the
event giving rise to the issuance of the Second Contingent Warrant occurred)
that number of additional Common Shares necessary to give Purchaser a majority
of the voting power of the Company's capital stock (taking into account the
Hellman Shares and the Ruud Shares over which the Company has actual voting
control pursuant to the provisions of this Section 2.2 and assuming for the
purpose of making such determination that (A) Purchaser has fully exercised the
Warrant and (B) Purchaser has not transferred, or transferred the right to vote,
any Warrant Shares, Preferred Shares or Conversion Shares). The Second
Contingent Warrant shall be delivered to Purchaser no later than the third
Business Day following the Third Occurrence Failure.
e. If the EBITDA Ratio for any three consecutive fiscal
quarters immediately preceding a failure by the Company to meet the Required
Ratio for a Determination Period, other than the first Determination Period
ending December 31, 1999, is at least 2 to 1, then the failure to meet the
Required Ratio for such Determination Period (the "Most Recent Determination
Period") shall not be deemed to be a "Second Occurrence Failure" or a "Third
Occurrence Failure", as the case may be, for the purposes of this Section 2.2;
provided, however, that the EBITDA Ratio for the last full fiscal quarter
included in the Most Recent Determination Period will be the EBITDA Ratio for
the first full fiscal quarter included in the determination of the Required
Ratio for the Determination Period immediately succeeding the Most Recent
Determination Period.
f. The Company shall deliver to Purchaser (i) as soon as
practicable following, but in no event later than the 45th Business Day
following, the end of each fiscal quarter of the Company, commencing with the
fiscal quarter ending December 31, 1999, an "agreed upon procedures" letter of
the Company's independent certified public accountants in the form of Exhibit
2.2f(i) setting forth the calculation of the EBITDA Ratio (together with such
supporting information as Purchaser may reasonably request to verify the EBITDA
Ratio) for the most recently completed Determination Period, and (ii) as soon as
practicable following, but in
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no event later than the 90th Business Day following the end of each fiscal year
of the Company, commencing with the fiscal year ending June 30, 2000, a
certificate of the Company's independent certified public accountants in the
form of Exhibit 2.2f(ii) setting forth the calculation of the EBITDA Ratio
(together with such supporting information as Purchaser may reasonably request
to verify the EBITDA Ratio) for such fiscal year and for the most recently
completed Determination Period and certifying that such calculations are true
and correct (each such letter and certificate is referred to as an "Accountant's
Certificate").
2.3 PURCHASER'S RIGHTS IN THE EVENT OF GOVERNMENTAL PROCEEDING. If
any action or proceeding (a "Proceeding") before any Governmental Body or agency
is pending or threatened against the Company or any beneficial owner of 5% or
more of any class of equity securities of the Company (a "Company Beneficial
Owner"), including, without limitation, any Proceeding (i) seeking to adjudicate
the Company or any Company Beneficial Owner a bankrupt or insolvent or seeking
the appointment of a receiver, trustee, custodian or other similar official for
it, him or her or for any substantial part of its, his or her assets, or (ii) in
which the Company or any Company Beneficial Owner shall seek protection or
relief under any law relating to bankruptcy, insolvency, relief or protection of
debtors, and such Proceeding, directly or indirectly, prevents Purchaser from
exercising or realizing any of its rights under clauses c. or d. of Section 2.2
of this Agreement, then, automatically and without further action on the part of
the Company or Purchaser, Purchaser shall be entitled to simultaneously exercise
or realize its rights under clauses c. and d.of Section 2.2 of this Agreement to
the same extent as if there had occurred a Second Occurrence Failure and a Third
Occurrence Failure.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 INVESTMENT. At the time of any Second Occurrence Failure or a
Third Occurrence Failure, and at the time of any exercise by Purchaser of any of
its purchase rights under the First Contingent Warrant or the Second Contingent
Warrant, Purchaser will be acquiring, respectively, the First Contingent Warrant
and the Second Contingent Warrant, and the Contingent Shares, for investment for
Purchaser's own account, not as a nominee or agent and not with the view to, or
for resale in connection with, any distribution thereof. Purchaser understands
that none of the Contingent Shares have been, nor will they be (other than in
accordance with the terms of the Registration Rights Agreement referred to in
Section 4.1(g)(ii) of the Stock Purchase Agreement), registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act that depends upon, among other things, the bona
fide nature of the investment intent and the accuracy of Purchaser's
representations as expressed herein.
SECTION 4
CONDITIONS TO OBLIGATIONS OF THE COMPANY
4.1 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to issue the First Contingent Warrant and the Second Contingent Warrant
are subject to the satisfaction of each of the following conditions precedent,
to the extent applicable, on or
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before the applicable Second Occurrence Failure and Third Occurrence Failure,
respectively, unless waived by the Company in writing:
a. REPRESENTATIONS TRUE. All of the representations and
warranties made by Purchaser to the Company in this Agreement shall be true and
correct when made and, in all material respects, as of the applicable Second
Occurrence Failure and Third Occurrence Failure, respectively.
b. REGULATORY APPROVALS. Purchaser and the Company shall have
received all governmental and other approvals required under any applicable
laws, statutes, orders, rules, regulations or policies, or any guidelines
promulgated thereunder, including, without limitation, under the
Hart-Scott-Rodino Antitrust Improvements Act, as amended.
SECTION 5
MISCELLANEOUS
5.1 EXPENSES. The Company will pay, or reimburse Purchaser and hold
Purchaser harmless against liability for the payment of, all stamp and other
taxes which may be payable in respect of the execution and delivery of this
Agreement, the issuance of the First Contingent Warrant or the Second Contingent
Warrant and the issuance, purchase and delivery of Contingent Shares.
5.2 BINDING AGREEMENT; ASSIGNMENT. The provisions of this Agreement
shall be binding upon and inure to the benefit of the successors and permitted
assigns of the parties hereto. Purchaser shall not have the right to assign this
Agreement or any of its rights and obligations hereunder, except to any
Affiliate of Purchaser, without the consent of the Company.
5.3 NOTICES. All notices and other communications required or
permitted under this Agreement shall be deemed to have been duly given and made
if in writing and if served either by personal delivery to the party for whom
intended (which shall include delivery by Federal Express or similar service) or
three (3) business days after being deposited, postage prepaid, certified or
registered mail, return receipt requested, in the United States mail bearing the
address shown in this Agreement for, or such other address as may be designated
in writing hereafter by, such party:
a. If to Purchaser:
GE Lighting
1975 Noble Rd.
Cleveland, OH 44112
Attention: President and Chief Executive Officer
Facsimile: (216) 266-8699
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with a copy to:
GE Lighting
1975 Noble Rd.
Cleveland, OH 44112
Attention: General Counsel
Facsimile: (216) 266-3856
b. If to the Company:
Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
Attention: CEO
with a copy to:
Cowden, Humphrey & Sarlson Co., L.P.A.
1414 Terminal Tower
Cleveland, Ohio 44113
Attention: James S. Hogg, Esq.
Facsimile: (216) 241-2881
5.4 WAIVER. No delay on the part of any party hereto with respect to
the exercise of any right, power, privilege, or remedy under this Agreement
shall operate as a waiver thereof, nor shall any exercise or partial exercise of
any such right, power, privilege, or remedy preclude any further exercise
thereof or the exercise of any other right, power, privilege, or remedy. No
modification or waiver by either party hereto of any provision of this
Agreement, or consent to any departure by the other party therefrom, shall be
effective in any event unless in writing as set forth in Section 5.3, and then
only in the specific instance and for the purpose for which given.
Notwithstanding the foregoing, each party hereto shall have the right to waive
compliance by the other party with any of the provisions hereof, or to modify
such provisions to a less restrictive obligation of the other party on such
terms as such party shall determine, with or without prior notice to the other
party.
5.5 REMEDIES. The rights, powers, privileges, and remedies hereunder
are cumulative and not exclusive of any other right, power, privilege, or remedy
the parties hereto would otherwise have.
5.6 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and understanding between Purchaser and the Company with respect to the subject
matter hereof, and supersedes all prior agreements and understandings relating
to the subject matter hereof.
5.7 LAW GOVERNING. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to
principles of conflicts of law.
11
<PAGE> 85
5.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
5.9 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
5.10 CROSS-REFERENCES. References in this Agreement to any section are,
unless otherwise specified, to such section of this Agreement.
5.11 HEADINGS. The various headings of this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
5.12 AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement will be
effective unless such modification, amendment or waiver is approved in writing
by the Company and Purchaser. The failure of any party to enforce any of the
provisions of this Agreement will in no way be construed as a waiver of such
provisions and will not affect the right of such party thereafter to enforce
each and every provision of this Agreement.
5.13 TERM. This Agreement shall commence on the date hereof and end on
the eleventh anniversary of the date hereof.
5.14 RIGHT TO PURCHASE. Except for Permitted Issuances, if at any time
after a Third Occurrence Failure the Company authorizes the issuance or sale of
any equity securities or securities containing options or rights to acquire any
shares of equity securities of the Company (any such securities or debt, the
"Offered Securities"), then, subject to NASDAQ Approval, the Company shall first
offer to sell the Offered Securities to Purchaser by written notice to Purchaser
(the "Company Notice"). Purchaser may elect to purchase Purchaser's pro rata
share (determined by the ratio of Purchaser's then existing holdings of Common
Shares and Common Share equivalents (including, without limitation, Conversion
Shares) to the total holdings of all shareholders of the Company on a fully
diluted basis (assuming exercise of the Warrant immediately prior to the date of
the applicable purchase in accordance with the terms of the Warrant) of the
Offered Securities at the price and on the terms specified in the Company Notice
by delivering written notice of such election to the Company within 20 days
after delivery of the Company Notice. Upon the expiration of the offering period
described above, the Company shall be entitled to sell such of the Offered
Securities which the Purchaser has not elected to purchase during the 90 days
following such expiration on terms and conditions no more favorable to the
purchasers thereof than those offered to the Purchaser. Any Offered Securities
offered or sold by the Company after such 90-day period must be reoffered to the
Purchaser pursuant to the terms of this Section 5.14. The rights of Purchaser
under this Section 5.14 shall terminate upon expiration of the term of this
Agreement as set forth in Section 5.13 hereof.
12
<PAGE> 86
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement
to be executed in the name and on behalf of each of them by one of their
respective officers, thereunto duly authorized, as of the date first above
written.
THE COMPANY:
ADVANCED LIGHTING TECHNOLOGIES, INC.
By:
------------------------------------
Name:
--------------------------------
Title:
-------------------------------
---------------------------------------
Wayne R. Hellman
---------------------------------------
Wayne R. Hellman, as voting trustee
under Voting Trust Agreement dated
October 10, 1995, as amended
Hellman Ltd.
By:
------------------------------------
Its:
----------------------------------
---------------------------------------
Alan J. Ruud
---------------------------------------
Alan J. Ruud, as voting trustee under
Voting Trust Agreement dated
January 2, 1998, as amended
PURCHASER:
GENERAL ELECTRIC COMPANY
By:
------------------------------------
Name:
--------------------------------
Title:
------------------------------
13
<PAGE> 87
EXHIBIT A
EXCESS HELLMAN SHARES
---------------------
IRREVOCABLE PROXY
-----------------
The undersigned each hereby appoint GENERAL ELECTRIC COMPANY, a New York
corporation ("GE"), attorney and proxy of each of the undersigned, with full
power of substitution, with respect to the Excess Hellman Shares (as defined in
the Contingent Warrant Agreement of even date herewith between Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and GE (the "Contingent
Warrant Agreement")), to exercise and enjoy the right to vote the Excess Hellman
Shares and to participate in and consent or refuse to consent to any and all
corporate or shareholders' actions of any character, all in its sole and
absolute discretion. The undersigned shall retain the exclusive right to receive
and retain any distributions of property (except common or preferred shares of
the Company) made by the Company in the form of dividends with respect to the
Excess Hellman Shares or upon the liquidation, dissolution or winding up of the
Company. The matters regarding which GE shall be entitled to vote in its sole
and absolute discretion shall include, by way of example but not limitation, any
sale of substantially all of the assets of, or any liquidation of, the Company;
any increase or decrease in the authorized or outstanding number of shares of
any class of shares of the Company; any merger or consolidation involving the
Company; any acquisition by the Company of any other business or of
substantially all of the assets thereof; any election of directors of the
Company; any amendment to the articles of incorporation or code of regulations
of the Company; or any recapitalization or reorganization of the Company. The
proxy granted hereunder shall be effective from and after the later of (i) the
date of expiration of the Option Waiting Period (as defined in Section 2.2(c)(i)
of the Contingent Warrant Agreement), or (ii) the date of receipt by GE of the
Accountant's Certificate (as defined in the Contingent Warrant Agreement)
indicating a Third Occurrence Failure (as defined in the Contingent Warrant
Agreement), and shall terminate on the date of termination of the Hellman Shares
Proxy (as defined in the Contingent Warrant Agreement). The proxy granted
hereunder shall be irrevocable and shall be coupled with an interest and shall
be binding and enforceable on and against the respective heirs, personal
representatives, successors, and assigns of each of the undersigned, and the
proxy shall not be revoked or terminated by the death, disability, bankruptcy,
incompetency, dissolution or termination of any of the undersigned, or their
respective successors and assigns. In the event of any conflict between the
provisions of this document and the provisions of the Contingent Warrant
Agreement, the provisions of this document shall govern. This document shall be
governed by the laws of the State of Ohio.
The undersigned hereby execute and grant this proxy as of the _______ day of
__________, 1999.
---------------------------------------
Wayne R. Hellman
---------------------------------------
Wayne R. Hellman, as voting trustee
under Voting Trust Agreement dated
October 10, 1995, as amended
HELLMAN, LTD.
By:____________________________________
Its:___________________________________
<PAGE> 88
EXHIBIT B
---------
HELLMAN OPTION SHARES
---------------------
IRREVOCABLE PROXY
-----------------
The undersigned hereby appoints GENERAL ELECTRIC COMPANY, a New York corporation
("GE"), attorney and proxy of the undersigned, with full power of substitution,
with respect to the Hellman Option Shares (as defined in the Contingent Warrant
Agreement of even date herewith between Advanced Lighting Technologies, Inc., an
Ohio corporation (the "Company"), and GE (the "Contingent Warrant Agreement")),
to exercise and enjoy the right to vote the Hellman Option Shares and to
participate in and consent or refuse to consent to any and all corporate or
shareholders' actions of any character, all in its sole and absolute discretion.
The undersigned shall retain the exclusive right to receive and retain any
distributions of property (except common or preferred shares of the Company)
made by the Company in the form of dividends with respect to the Hellman Option
Shares or upon the liquidation, dissolution or winding up of the Company. The
matters regarding which GE shall be entitled to vote in its sole and absolute
discretion shall include, by way of example but not limitation, any sale of
substantially all of the assets of, or any liquidation of, the Company; any
increase or decrease in the authorized or outstanding number of shares of any
class of shares of the Company; any merger or consolidation involving the
Company; any acquisition by the Company of any other business or of
substantially all of the assets thereof; any election of directors of the
Company; any amendment to the articles of incorporation or code of regulations
of the Company; or any recapitalization or reorganization of the Company. The
proxy granted hereunder shall be effective upon expiration of the Option Waiting
Period (as defined in Section 2.2(c)(i) of the Contingent Warrant Agreement) and
shall end on the earlier of: (i) the Redemption Date (as defined in Second
Amended and Restated Articles of Incorporation of the Company, as amended), if
during the three (3) year period immediately preceding the Redemption Date GE
shall not have received an Accountant's Certificate (as defined in the
Contingent Warrant Agreement) indicating an occurrence of the EBITDA Ratio (as
defined in the Contingent Warrant Agreement) being less than the Required Ratio
(as defined in the Contingent Warrant Agreement) for any Determination Period
(as defined in the Contingent Warrant Agreement), or (ii) eleven (11) years
after the date GE has received the Accountant's Certificate indicating a Second
Occurrence Failure (as defined in the Contingent Warrant Agreement). The proxy
granted hereunder shall be irrevocable and shall be coupled with an interest and
shall be binding and enforceable on and against the heirs, personal
representatives, successors, and assigns of the undersigned, and the proxy shall
not be revoked or terminated by the death, disability, bankruptcy, or
incompetency of the undersigned, or his respective successors and assigns. In
the event of any conflict between the provisions of this document and the
provisions of the Contingent Warrant Agreement, the provisions of this document
shall govern. This document shall be governed by the laws of the State of Ohio.
The undersigned hereby executes and grants this proxy as of the _______ day of
__________, 1999.
---------------------------------------
Wayne R. Hellman
<PAGE> 89
EXHIBIT C
---------
NET HELLMAN SHARES
------------------
IRREVOCABLE PROXY
-----------------
The undersigned each hereby appoint GENERAL ELECTRIC COMPANY, a New York
corporation ("GE"), attorney and proxy of each of the undersigned, with full
power of substitution, with respect to the Net Hellman Shares (as defined in the
Contingent Warrant Agreement of even date herewith between Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and GE (the "Contingent
Warrant Agreement")), to exercise and enjoy the right to vote the Net Hellman
Shares and to participate in and consent or refuse to consent to any and all
corporate or shareholders' actions of any character, all in its sole and
absolute discretion. The undersigned shall retain the exclusive right to receive
and retain any distributions of property (except common or preferred shares of
the Company) made by the Company in the form of dividends with respect to the
Net Hellman Shares or upon the liquidation, dissolution or winding up of the
Company. The matters regarding which GE shall be entitled to vote in its sole
and absolute discretion shall include, by way of example but not limitation, any
sale of substantially all of the assets of, or any liquidation of, the Company;
any increase or decrease in the authorized or outstanding number of shares of
any class of shares of the Company; any merger or consolidation involving the
Company; any acquisition by the Company of any other business or of
substantially all of the assets thereof; any election of directors of the
Company; any amendment to the articles of incorporation or code of regulations
of the Company; or any recapitalization or reorganization of the Company. To the
extent either of the Hellman Option Shares Proxy (as defined in the Contingent
Warrant Agreement) or the Ruud Option Shares Proxy (as defined in the Contingent
Warrant Agreement) is deemed to be invalid or unenforceable, additional Hellman
Shares (as defined in the Contingent Warrant Agreement) in an amount equal to
the number of Common Shares (as defined in the Contingent Warrant Agreement)
subject to such invalid or unenforceable proxy shall be subject to the proxy
granted hereunder. The proxy granted hereunder shall be effective upon
expiration of the Option Waiting Period (as defined in Section 2.2(c)(i) of the
Contingent Warrant Agreement) and shall end on the earlier of: (i) the
Redemption Date (as defined in Second Amended and Restated Articles of
Incorporation of the Company, as amended), if during the three (3) year period
immediately preceding the Redemption Date GE shall not have received an
Accountant's Certificate (as defined in the Contingent Warrant Agreement)
indicating an occurrence of the EBITDA Ratio (as defined in the Contingent
Warrant Agreement) being less than the Required Ratio (as defined in the
Contingent Warrant Agreement) for any Determination Period (as defined in the
Contingent Warrant Agreement), or (ii) eleven (11) years after the date GE has
received the Accountant's Certificate indicating a Second Occurrence Failure (as
defined in the Contingent Warrant Agreement). The proxy granted hereunder shall
be irrevocable and shall be coupled with an interest and shall be binding and
enforceable on and against the respective heirs, personal representatives,
successors, and assigns of each of the undersigned, and the proxy shall not be
revoked or terminated by the death, disability, bankruptcy, incompetency,
dissolution or termination of any of the undersigned, or their respective
successors and assigns. In the event of any conflict between the provisions of
this document and the provisions of the Contingent Warrant Agreement, the
provisions of this document shall govern. This document shall be governed by the
laws of the State of Ohio.
The undersigned hereby execute and grant this proxy as of the _______ day of
__________, 1999.
----------------------------------------
Wayne R. Hellman
---------------------------------------
Wayne R. Hellman, as voting trustee
under Voting Trust Agreement dated
October 10, 1995, as amended
HELLMAN, LTD.
By:_____________________________________
Its:____________________________________
<PAGE> 90
EXHIBIT D
---------
RUUD OPTION SHARES
------------------
IRREVOCABLE PROXY
-----------------
The undersigned hereby appoints GENERAL ELECTRIC COMPANY, a New York corporation
("GE"), attorney and proxy of the undersigned, with full power of substitution,
with respect to the Ruud Option Shares (as defined in the Contingent Warrant
Agreement of even date herewith between Advanced Lighting Technologies, Inc., an
Ohio corporation (the "Company"), and GE (the "Contingent Warrant Agreement")),
to exercise and enjoy the right to vote the Ruud Option Shares and to
participate in and consent or refuse to consent to any and all corporate or
shareholders' actions of any character, all in its sole and absolute discretion.
The undersigned shall retain the exclusive right to receive and retain any
distributions of property (except common or preferred shares of the Company)
made by the Company in the form of dividends with respect to the Ruud Option
Shares or upon the liquidation, dissolution or winding up of the Company. The
matters regarding which GE shall be entitled to vote in its sole and absolute
discretion shall include, by way of example but not limitation, any sale of
substantially all of the assets of, or any liquidation of, the Company; any
increase or decrease in the authorized or outstanding number of shares of any
class of shares of the Company; any merger or consolidation involving the
Company; any acquisition by the Company of any other business or of
substantially all of the assets thereof; any election of directors of the
Company; any amendment to the articles of incorporation or code of regulations
of the Company; or any recapitalization or reorganization of the Company. The
proxy granted hereunder shall be effective upon expiration of the Option Waiting
Period (as defined in Section 2.2(c)(i) of the Contingent Warrant Agreement) and
shall end on the earlier of: (i) the Redemption Date (as defined in Second
Amended and Restated Articles of Incorporation of the Company, as amended), if
during the three (3) year period immediately preceding the Redemption Date GE
shall not have received an Accountant's Certificate (as defined in the
Contingent Warrant Agreement) indicating an occurrence of the EBITDA Ratio (as
defined in the Contingent Warrant Agreement) being less than the Required Ratio
(as defined in the Contingent Warrant Agreement) for any Determination Period
(as defined in the Contingent Warrant Agreement), or (ii) eleven (11) years
after the date GE has received the Accountant's Certificate indicating a Second
Occurrence Failure (as defined in the Contingent Warrant Agreement). The proxy
granted hereunder shall be irrevocable and shall be coupled with an interest and
shall be binding and enforceable on and against the heirs, personal
representatives, and assigns of the undersigned, and the proxy shall not be
revoked or terminated by the death, disability, bankruptcy, or incompetency of
the undersigned, or his respective successors and assigns. In the event of any
conflict between the provisions of this document and the provisions of the
Contingent Warrant Agreement, the provisions of this document shall govern. This
document shall be governed by the laws of the State of Ohio.
The undersigned hereby executes and grants this proxy as of the _______ day of
__________, 1999.
---------------------------------------
Alan J. Ruud
<PAGE> 91
EXHIBIT E
---------
RUUD SHARES
-----------
IRREVOCABLE PROXY
-----------------
The undersigned each hereby appoint GENERAL ELECTRIC COMPANY, a New York
corporation ("GE"), attorney and proxy of each of the undersigned, with full
power of substitution, with respect to the Net Ruud Shares (as defined in the
Contingent Warrant Agreement dated _________, 1999, between Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and GE (the "Contingent
Warrant Agreement")), to exercise and enjoy the right to vote the Net Ruud
Shares and to participate in and consent or refuse to consent to any and all
corporate or shareholders' actions of any character, all in its sole and
absolute discretion. The undersigned shall retain the exclusive right to receive
and retain any distributions of property (except common or preferred shares of
the Company) made by the Company in the form of dividends with respect to the
Net Ruud Shares or upon the liquidation, dissolution or winding up of the
Company. The matters regarding which GE shall be entitled to vote in its sole
and absolute discretion shall include, by way of example but not limitation, any
sale of substantially all of the assets of, or any liquidation of, the Company;
any increase or decrease in the authorized or outstanding number of shares of
any class of shares of the Company; any merger or consolidation involving the
Company; any acquisition by the Company of any other business or of
substantially all of the assets thereof; any election of directors of the
Company; any amendment to the articles of incorporation or code of regulations
of the Company; or any recapitalization or reorganization of the Company. The
proxy granted hereunder shall be effective from and after the later of (i) the
date of expiration of the Option Waiting Period (as defined in Section 2.2(c)(i)
of the Contingent Warrant Agreement), or (ii) the date of receipt by GE of the
Accountant's Certificate (as defined in the Contingent Warrant Agreement)
indicating a Third Occurrence Failure (as defined in the Contingent Warrant
Agreement), and shall terminate on the date of termination of the Hellman Shares
Proxy (as defined in the Contingent Warrant Agreement). The proxy granted
hereunder shall be irrevocable and shall be coupled with an interest and shall
be binding and enforceable on and against the respective heirs, personal
representatives, successors, and assigns of each of the undersigned, and the
proxy shall not be revoked or terminated by the death, disability, bankruptcy,
incompetency, dissolution or termination of any of the undersigned, or their
respective successors and assigns. In the event of any conflict between the
provisions of this document and the provisions of the Contingent Warrant
Agreement, the provisions of this document shall govern. This document shall be
governed by the laws of the State of Ohio.
The undersigned hereby execute and grant this proxy as of the _______ day of
__________, 1999.
---------------------------------------
Alan J. Ruud
---------------------------------------
Alan J. Ruud, as voting trustee
under the Voting Trust Agreement dated
January 2, 1998, as amended
<PAGE> 92
EXHIBIT F
---------
OPTION AGREEMENT
----------------
THIS OPTION AGREEMENT (this "Agreement"), dated as of
September 30, 1999, is among General Electric Company, a New York corporation
("Purchaser"), Wayne R. Hellman ("Hellman"), and Alan J. Ruud ("Ruud"). Hellman
and Ruud are hereinafter sometimes collectively referred to the "Shareholders".
RECITALS:
---------
A. The Shareholders are shareholders of Advanced Lighting Technologies,
Inc., an Ohio corporation (the "Company").
B. The Company and Purchaser are parties to a Stock Purchase Agreement,
dated September 28, 1999, under which the Company has agreed, among other
things, to sell and Purchaser has agreed to purchase 761,250 shares of preferred
stock of the Company (the "Stock Purchase Agreement").
C. The Company, Purchaser, the Shareholders and certain trusts
controlled by the Shareholders are parties to a Contingent Warrant Agreement of
even date herewith (the "Contingent Warrant Agreement"), under which the Company
has agreed to issue to Purchaser warrants to purchase Common Shares of the
Company upon the happening of certain events and the Shareholders have agreed to
grant Purchaser proxies to vote and options to purchase certain shares of common
stock of the Company held by the Shareholders.
D. It is a condition to Purchaser's consummating the transactions
contemplated by the Stock Purchase Agreement that the Shareholders enter into
this Agreement and grant the options contemplated hereby on the terms and
subject to the conditions contained herein.
NOW, THEREFORE, based upon the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS.
--------- ------------
The following terms when used in this Agreement shall, except where the
context otherwise requires, have the following meanings (such definitions to be
equally applicable to the singular and plural forms thereof):
"Accountant's Certificate" shall have the meaning ascribed thereto in
clause f. of Section 2.2 of the Contingent Warrant Agreement.
"Affiliate" shall mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Option Agreement as originally executed and
as amended, modified or supplemented from time to time.
1
<PAGE> 93
"Appraised Value" shall mean, in respect of any Common Share on any
date herein specified, the fair saleable value of such Common Share (determined
without giving effect to the discount for (i) a minority interest, or (ii) any
lack of liquidity of the Common Share, or (iii) to the fact that the Company may
have no class of equity registered under the Exchange Act) based on the equity
value of Company, as determined by an investment banking or valuation firm
selected in accordance with the following sentences, divided by the number of
Common Shares outstanding on a Fully Diluted Basis as determined in accordance
with GAAP (assuming the payment of the exercise prices for such shares). The
determination of the Appraised Value per Common Share shall be made by an
investment banking or valuation firm of nationally recognized standing selected
by Purchaser and acceptable to the Shareholders. If the investment banking or
valuation firm selected by Purchaser is not acceptable to the Shareholders and
the Purchaser and the Shareholders cannot agree on a mutually acceptable
investment banking or valuation firm, then Purchaser and the Shareholders,
collectively, shall each choose one such investment banking or valuation firm
and the respective chosen firms shall agree on another investment banking or
valuation firm which shall make the determination. The Shareholders shall
retain, at their sole cost, such investment banking or valuation firm as may be
necessary for the determination of Appraised Value required by the terms of this
Agreement.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required to be closed in the State of New York.
"Common Shares" shall mean the Common Shares, par value $.001, of the
Company.
"Company" shall mean Advanced Lighting Technologies, Inc., an Ohio
corporation.
"Contingent Warrant Agreement" shall mean the Contingent Warrant
Agreement, of event date herewith, among the Company, Purchaser, the
Shareholders and certain trusts controlled by the Shareholders.
"Current Market Price" shall mean, in respect of any Common Share on
any date herein specified, if there shall then be a public market for the Common
Shares, the average of the daily market prices for twenty (20) consecutive
Business Days immediately preceding such date or, if there is no such public
market, the Appraised Value per Common Share. The daily market price for each
such Business Day shall be (i) the last sale price on such day on the principal
stock exchange or NASDAQ-NMS on which such Common Shares are then listed or
admitted to trading, or (ii) if no sale takes place on such day on any such
exchange or NASDAQ-NMS, the average of the last reported closing bid and asked
prices on such day as officially quoted on any such exchange or NASDAQ-NMS, or
(iii) if the Common Shares are not then listed or admitted to trading on any
stock exchange or NASDAQ-NMS, the average of the last reported closing bid and
asked prices on such day in the over-the-counter market, as furnished by the
NASDAQ or the National Quotation Bureau, Inc., or (iv) if neither such
corporation at the time is engaged in the business of reporting such prices, as
furnished by any similar firm then engaged in such business, or (v) if there is
no such firm, as furnished by any member of the NASD selected mutually by
Purchaser and the Shareholders or, if they cannot agree upon such selection, as
selected by two such members of the NASD, one of which shall be selected by
Purchaser and one of which shall be selected by the Shareholders.
"Determination Period" shall mean any two consecutive fiscal quarters,
commencing with the fiscal quarters ending September 30, 1999 and December 31,
1999, and continuing each fiscal quarter thereafter.
"EBITDA" shall mean, for any period and without duplication, net
earnings (loss) of the Company and its Subsidiaries determined on a consolidated
basis for such period plus the sum of the
2
<PAGE> 94
following amounts (but only to the extent included in determining net income
(loss) for such period): (i) depreciation and amortization expense for such
period, plus (ii) Interest Expense for such period, plus (iii) the amount of any
reduction pursuant to the proviso of the definition of Interest Expense in this
Section 1, plus (iv) income tax expense in respect of such period, minus (v)
extraordinary gains and gains from sales of assets for such period, plus (vi)
extraordinary losses and losses from sales of assets for such period. EBITDA
shall be determined using generally accepted accounting principles and practices
in effect on the date of this Agreement.
"EBITDA Ratio" shall mean, for any period of determination, the ratio
of (i) EBITDA to (ii) Interest Expense.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fully Diluted Basis" means, with respect to any determination or
calculation, that such determination or calculation is performed on a fully
diluted basis (assuming the issuance of all Common Shares issuable under any
then outstanding options, warrants or convertible securities of any kind)
determined in accordance with GAAP for purposes of determining book value or net
income per share.
"GAAP" shall mean generally accepted accounting principles as in effect
on the date hereof and consistently applied and maintained throughout the period
indicated. Whenever any accounting term is used herein which is not otherwise
defined, it shall have the meaning ascribed thereto under GAAP.
"Hellman" shall mean Wayne R. Hellman.
"Hellman Option" shall have the meaning provided in Section 2.1.
"Hellman Option Shares" shall mean Common Shares owned by Hellman,
individually, in an amount equal to fifty percent (50%) of the Total Option
Shares.
"Interest Expense" shall mean, for any period (a) the total
consolidated interest expense of the Company and its Subsidiaries determined on
a consolidated basis and in any event shall include all interest expense with
respect to any indebtedness in respect of which the Company or any Subsidiary is
wholly or partially liable excluding interest on indebtedness to the Company
from any Subsidiary and interest on indebtedness to any Subsidiary from the
Company; provided, however, the amount of interest expense determined in
accordance with GAAP for any period shall be reduced by any amortization of
deferred financing costs in an amount up to but not exceeding $125,000 with
respect to any single fiscal quarter, minus (b) gross interest income of the
Company and its Subsidiaries determined on a consolidated basis.
"Option Closing" shall have the meaning provided in Section 2.5.
"Option Notice" shall have the meaning provided in Section 2.5.
"Option Period" shall have the meaning provided in Section 2.3.
"Option Purchase Price" shall have the meaning provided in Section 2.4.
"Options" shall have the meaning provided in Section 2.2.
3
<PAGE> 95
"Person" shall mean any natural person, corporation, firm, partnership,
association, government, governmental agency or other entity, whether acting in
an individual, fiduciary or other capacity.
"Purchaser" shall mean General Electric Company, a New York
corporation.
"Required Ratio" shall mean 2 to 1.
"Ruud" shall mean Alan J. Ruud.
"Ruud Option" shall have the meaning provided in Section 2.2.
"Ruud Option Shares" shall mean Common Shares owned by Ruud,
individually, in an amount equal to fifty percent (50%) of the Total Option
Shares.
"Second Occurrence Failure" shall mean the second occurrence of the
Company's EBITDA Ratio being less than the Required Ratio for any Determination
Period.
"Shareholders" shall mean Hellman and Ruud, collectively.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement,
dated September 28, 1999, between the Company and Purchaser.
"Subsidiary" of the Company shall mean any other corporation of which
more than 50% of the outstanding shares of capital stock having ordinary voting
power for the election of directors is owned directly or indirectly by the
Company, by the Company and one or more Subsidiaries, or by one or more other
Subsidiaries.
"Total Option Shares" shall mean the number of Common Shares that when
combined with all other Common Shares owned by Purchaser or its Affiliates at
the time of determination will result in Purchaser having twenty-five percent
(25%) of the voting power of the Company's capital stock. The time of
determination of the Total Option Shares shall be the first Business Day
immediately following Purchaser's receipt of the Accountant's Certificate
indicating a Second Occurrence Failure.
ARTICLE II. OPTION AGREEMENT
----------- ----------------
SECTION 2.1. GRANT OF HELLMAN OPTION. Hellman does hereby
grant to Purchaser, or Purchaser's nominee, the exclusive and irrevocable right,
privilege and option (the "Hellman Option") to purchase at any time or from time
to time during the Option Period, upon the terms and conditions set forth
herein, all but not less than all of the Hellman Option Shares (such Hellman
Option Shares being subject to adjustment from time to time to take into account
any action taken by the Company in respect of its Common Shares, including,
without limitation, stock splits, dividends, combinations and
reclassifications), or any securities into which the Hellman Option Shares
hereafter may be converted.
SECTION 2.2. GRANT OF RUUD OPTION. Ruud does hereby grant to
Purchaser, or Purchaser's nominee, the exclusive and irrevocable right,
privilege and option (the "Ruud Option") to purchase at any time or from time to
time during the Option Period, upon the terms and conditions set forth herein,
all but not less than all of the Ruud Option Shares (such Ruud Option Shares
being subject to adjustment from time to time to take into account any action
taken by the Company in respect of its Common Shares, including, without
limitation, stock splits, dividends, combinations and reclassifications), or any
securities
4
<PAGE> 96
into which the Ruud Option Shares hereafter may be converted. The Hellman Option
and the Ruud Option are hereinafter sometimes collectively referred to as the
"Options".
SECTION 2.3. OPTION PERIOD. The Options are granted on the date hereof
and may be exercised by Purchaser from and after the date Purchaser has received
the Accountant's Certificate indicating a Second Occurrence Failure and ending
on the date that is the later of (i) the one (1) year anniversary of the date of
Purchaser's receipt of the Accountant's Certificate indicating a Second
Occurrence Failure, and (ii) the close of business on the 30th day following
receipt of all governmental and regulatory approvals (including, without
limitation, any approvals required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended) necessary in connection with Purchaser's
ownership of a twenty-five percent (25%) interest in the Company (the "Option
Period").
SECTION 2.4. PURCHASE PRICE. The purchase price of the Hellman Option
Shares and the Ruud Option Shares shall be the Current Market Price of such
shares at the time of the Second Occurrence Failure.
SECTION 2.5. EXERCISE OF THE OPTIONS. Purchaser may exercise the
Options at any time during the Option Period by delivery to Hellman, with
respect to the exercise of the Hellman Option, and to Ruud, with respect to the
exercise of the Ruud Option, of written notice thereof at the notice address for
Hellman and Ruud, respectively, set forth in Section 4.4 hereof (an "Option
Notice"). The Hellman Option and the Ruud Option must both be exercised if
either is exercised. The closing (an "Option Closing") of the purchase and sale
of the Hellman Option Shares or the Ruud Option Shares, as the case may be,
shall occur as soon as practicable after the delivery of the Option Notice
pertaining to such shares but in no event later than ten (10) days from the date
of delivery of that Option Notice. The obligation of Purchaser to consummate the
purchase of any of the Hellman Option Shares or the Ruud Option Shares at any
Option Closing is conditioned upon the receipt by the Company and the
Shareholders of all governmental and regulatory approvals required for the
ownership of the Hellman Option Shares or the Ruud Option Shares, as the case
may be. At an Option Closing, certificates representing the Hellman Option
Shares or the Ruud Option Shares, as the case may be, shall be delivered,
together with stock powers duly executed in blank, to the Purchaser free and
clear of any and all claims, liens, charges, pledges or encumbrances and the
Purchaser shall deliver to Hellman and Ruud, as the case may be, their
respective allocable portion of the Option Purchase Price. Hellman and Ruud
shall pay any and all transfer and similar taxes imposed in connection with the
sale of the Hellman Option Shares and the Ruud Option Shares to Purchaser.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
----------- ------------------------------
The Shareholders jointly and severally represent and warrant to
Purchaser as follows:
SECTION 3.1. CAPACITY; BINDING OBLIGATION. Each Shareholder has the
capacity to enter into this Agreement, to perform its obligations hereunder, and
to consummate the transactions contemplated hereby. This Agreement constitutes
(or will constitute when executed and delivered) a legal, valid, and binding
obligation of each Shareholder, enforceable against each Shareholder in
accordance with its terms. Neither the execution, delivery, and performance of
this Agreement, nor the sale of the Hellman Option Shares or the Ruud Option
Shares will violate any provision of any law, any order of any court or other
agency of government, the Second Amended and Restated Articles of Incorporation
of the Company, as amended, the Code of Regulations of the Company or any
agreement or instrument to which either Shareholder is a party or by which
either Shareholder is bound, or be in conflict with, result in a breach of, or
constitute (with notice or lapse of time, or both) a default under any such
agreement or instrument.
5
<PAGE> 97
SECTION 3.2. SECURITIES. As of the date hereof, the Hellman Option
Shares and the Ruud Option Shares are duly authorized, validly issued, fully
paid and nonassessable. As of the date hereof, except as disclosed in writing to
the Purchaser, the Hellman Option Shares and the Ruud Option Shares are owned by
Hellman and Ruud, respectively, free and clear of all liens, encumbrances and
restrictions on transfer, other than restrictions contained in this Agreement,
the Contingent Warrant Agreement and under applicable state and federal
securities laws. Following the sale of the Hellman Option Shares or the Ruud
Option Shares or both to Purchaser in accordance with this Agreement, such
shares will be duly authorized, validly issued, fully paid and nonassessable and
will be owned by Purchaser free and clear of all liens, encumbrances and
restrictions on transfer, other than restrictions under applicable state and
federal securities laws.
ARTICLE IV. MISCELLANEOUS
---------- -------------
SECTION 4.1. BINDING EFFECT. The Options granted herein shall be
binding upon and inure to the benefit of the parties hereto and their respective
executors, heirs, administrators, successors and assigns.
SECTION 4.2. NO OUTSIDE REPRESENTATIONS. This Agreement shall be deemed
to contain all of the terms and conditions agreed upon by the parties, it being
understood that there are no outside representations or oral agreements of the
parties other than those contained in the Contingent Warrant Agreement.
SECTION 4.3. ASSIGNMENT. Purchaser shall not have the right to assign
this Agreement or any of its rights and obligations hereunder, except to any
Affiliate of Purchaser, without the consent of the Company.
SECTION 4.4. NOTICES. All notices given hereunder shall be in writing
and deemed given when mailed by registered or certified mail, return receipt
requested, postage prepaid, or sent by Federal Express or other similar
overnight service, addressed to the party to whom directed at the address set
forth below, or to such other address as may from time to time be designated by
notice given in the manner provided in this Section 4.4 or when delivered
personally.
Purchaser: GE Lighting
1975 Noble Rd.
Cleveland, OH 44112
Attention: President and Chief Executive Officer
With a copy to: GE Lighting
1975 Noble Rd.
Cleveland, OH 44112
Attention: General Counsel
The Shareholders: Wayne R. Hellman
c/o Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
6
<PAGE> 98
With a copy to: Cowden, Humphrey & Sarlson Co., L.P.A.
1414 Terminal Tower
Cleveland, Ohio 44113
Attention: James S. Hogg, Esq.
Facsimile: (216) 241-2881
and: Alan J. Ruud
c/o Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
With a copy to: Cowden, Humphrey & Sarlson Co., L.P.A.
1414 Terminal Tower
Cleveland, Ohio 44113
Attention: James S. Hogg, Esq.
Facsimile: (216) 241-2881
SECTION 4.5. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 4.6. PRUDENTIAL LETTER. At the time of execution of this
Agreement, the Shareholders shall deliver to Purchaser a letter executed by a
duly authorized officer of Prudential Securities substantially in the form of
Exhibit A attached hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
PURCHASER:
GENERAL ELECTRIC COMPANY
By:_______________________________________
Name:______________________________
Title:_____________________________
THE SHAREHOLDERS:
------------------------------------------
Wayne R. Hellman
------------------------------------------
Alan J. Ruud
7
<PAGE> 99
EXHIBIT 2.2(c)
[First Contingent Warrant]
WARRANT
to Purchase Common Shares of
ADVANCED LIGHTING TECHNOLOGIES, INC.
<PAGE> 100
TABLE OF CONTENTS
SECTION PAGE
1. DEFINITIONS..........................................................1
2. EXERCISE OF WARRANT..................................................5
2.1. Manner of Exercise..........................................5
2.2. Payment of Taxes............................................6
2.3. Fractional Shares.......................................... 6
2.4. Continued Validity......................................... 6
3. TRANSFER, DIVISION AND COMBINATION.................................. 6
3.1. Transfer................................................... 6
3.2. Division and Combination................................... 7
3.3. Expenses................................................... 7
3.4. Maintenance of Books....................................... 7
4. ADJUSTMENTS......................................................... 7
4.1. Share Dividends, Subdivisions and Combinations............. 7
4.2 Certain Other Distributions and Adjustments................ 8
4.4. Other Provisions Applicable to Adjustments
Under This Section ........................................ 8
4.5. Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets .................... 9
4.6. Other Action Affecting Common Shares.......................10
5. NOTICES TO WARRANT HOLDERS..........................................10
5.1. Notice of Adjustments......................................10
5.2. Notice of Corporate Action.................................10
6. NO IMPAIRMENT.......................................................11
7. RESERVATION AND AUTHORIZATION OF COMMON SHARES;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY ........11
8. TAXING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS..................12
9. RESTRICTIONS ON TRANSFERABILITY; REGISTRATIONS......................12
9.1. Restrictive Legend.........................................12
9.2. Notice of Proposed Transfers; Requests for Registration ...13
9.3. Registration...............................................13
10. SUPPLYING INFORMATION...............................................13
11. LOSS OR MUTILATION..................................................13
12. OFFICE OF THE COMPANY...............................................13
13. FINANCIAL AND BUSINESS INFORMATION..................................13
13.1. Quarterly Information......................................13
13.2. Annual Information.........................................14
13.3. Filings....................................................14
14. LIMITATION OF LIABILITY.............................................14
15. MISCELLANEOUS.......................................................15
15.1. Nonwaiver and Expenses.....................................15
15.2. Notice Generally...........................................15
15.3. Remedies...................................................15
15.4. Successors and Assigns.....................................16
15.5. Amendment..................................................16
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15.6. Severability............................................16
15.7. Headings................................................16
15.8. Governing Law...........................................16
SIGNATURES
EXHIBITS
Exhibit A - Subscription Form
Exhibit B - Assignment Form
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<PAGE> 102
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF
THIS WARRANT.
INITIAL WARRANT PRICE
$____________ PER SHARE
WARRANT
To Purchase Common Shares of
ADVANCED LIGHTING TECHNOLOGIES, INC.
THIS IS TO CERTIFY THAT GENERAL ELECTRIC COMPANY, or registered assigns, is
entitled, at any time during the Exercise Period (as hereinafter defined), to
purchase from ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio corporation (the
"Company"), up to __________________ Common Shares (as hereinafter defined)
(such Common Shares, subject to adjustment as provided herein, are referred to
herein as the "Warrant Shares") as described herein, in whole or in part,
including fractional parts, at the Current Warrant Price (as defined herein) per
share (subject to adjustment as provided herein) all on the terms and conditions
and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
Terms used in this Warrant have the respective meanings set
forth below:
"Additional Issuance" shall have the meaning set forth in
Section 4.3(a).
"Additional Common Shares" shall mean all Common Shares issued
by the Company after the date hereof, other than Conversion Shares, Contingent
Shares or Warrant Shares.
"Appraised Value" shall mean, in respect of any Common Share
on any date herein specified, the fair saleable value of such Common Share
(determined without giving affect to the discount for (i) a minority interest or
(ii) any lack of liquidity of the Common Share or (iii) to the fact that the
Company may have no class of equity registered under the Exchange Act) based on
the equity value of the Company, as determined by an investment banking or
valuation firm selected in accordance with the following sentences, divided by
the number of Common Shares outstanding on a Fully Diluted Basis as determined
in accordance with GAAP (assuming the payment of the exercise prices for such
shares). The determination of the Appraised Value per Common Share shall be made
by an investment banking or valuation firm of nationally recognized standing
selected by the Company and acceptable to the Majority Holders. If the
investment banking or valuation firm selected by Company is not acceptable to
the Majority
<PAGE> 103
Holders and the Company and the Majority Holders cannot agree on a mutually
acceptable investment banking or valuation firm, then the Majority Holders and
the Company shall each choose one such investment banking or valuation firm and
the respective chosen firms shall agree on another investment banking or
valuation firm which shall make the determination. The Company shall retain, at
its sole cost, such investment banking or valuation firm as may be necessary for
the determination of Appraised Value required by the terms of this Warrant.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required to be closed in the State of New
York.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act, the Exchange
Act and other federal securities laws.
"Common Share" shall mean (except where the context otherwise
indicates) a Common Share, $0.001 par value, of the Company as constituted on
the date hereof, and any capital stock into which such Common Share may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
Common Shares upon any reclassification thereof which is also not preferred as
to dividends or assets over any other class of capital stock of the Company and
which is not subject to redemption and (ii) capital stock of any successor or
acquiring corporation received by or distributed to the holders of Common Shares
of the Company in the circumstances contemplated by Section 4.5.
"Contingent Shares" shall mean Common Shares to be issued upon
the exercise of any right to purchase Common Shares pursuant to the Contingent
Warrant Agreement.
"Contingent Warrant Agreement" shall mean the Contingent
Warrant Agreement, dated as of September 30, 1999, between the Company and
General Electric Company.
"Conversion Shares" shall mean the Common Shares issued or
issuable upon the conversion of the Series A Shares.
"Convertible Securities" shall mean warrants, evidences of
indebtedness, shares of capital stock or other securities that are exercisable
for, convertible into or exchangeable, with or without payment of additional
consideration in cash or property, for Additional Common Shares, either
immediately or upon the occurrence of a specified date or a specified event.
"Current Market Price" shall mean, in respect of any Common
Share on any date herein specified, if there shall then be a public market for
the Common Shares, the average of the daily market prices for 20 consecutive
Business Days immediately preceding such date or, if there is no such public
market, the Appraised Value per Common Share. The daily market price for each
such Business Day shall be (i) the last sale price on such day on the principal
stock exchange or NASDAQ-NMS on which such Common Shares are then listed or
admitted to trading, or (ii) if no sale takes place on such day on any such
exchange or NASDAQ-NMS, the average of the last reported closing bid and asked
prices on such day as officially quoted on any
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such exchange or NASDAQ-NMS, or (iii) if the Common Shares are not then listed
or admitted to trading on any stock exchange or NASDAQ-NMS, the average of the
last reported closing bid and asked prices on such day in the over-the-counter
market, as furnished by the NASDAQ or the National Quotation Bureau, Inc., or
(iv) if neither such corporation at the time is engaged in the business of
reporting such prices, as furnished by any similar firm then engaged in such
business, or (v) if there is no such firm, as furnished by any member of the
NASD selected mutually by the Majority Holders and the Company or, if they
cannot agree upon such selection, as selected by two such members of the NASD,
one of which shall be selected by the Majority Holders and one of which shall be
selected by the Company.
"Current Warrant Price" shall mean the Initial Warrant Price,
as adjusted from time to time in the case of share dividends, subdivisions and
combinations as set forth in Section 4.1 hereof.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
"Exercise Period" shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1.
"Expiration Date" shall mean ______________, 200__.
"Fully Diluted Basis" means, with respect to any determination
or calculation, that such determination or calculation is performed on a fully
diluted basis (assuming the issuance of all Common Shares issuable under any
then outstanding options, warrants or convertible securities of any kind)
determined in accordance with GAAP for purposes of determining book value or net
income per share.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
"GE" shall mean General Electric Company, a New York
corporation.
"Holder" shall mean the Person in whose name the Warrant set
forth herein is registered on the books of the Company maintained for such
purpose.
"Initial Warrant Price" shall mean the Initial Warrant Price
per Common Share set forth on the first page hereof.
"Majority Holders" shall mean the holders of Warrants
exercisable for in excess of 50% of the aggregate number of Common Shares then
purchasable upon exercise of all Warrants, whether or not then exercisable.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
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<PAGE> 105
"NASDAQ" shall mean the National Association of Securities
Dealers Automated Quotation System.
"NASDAQ-NMS" shall mean the NASDAQ National Market System.
"New Securities" shall have the meaning set forth in Section
4.3(a).
"New Securities Warrant" shall have the meaning set forth in
Section 4.3(a).
"Other Property" shall have the meaning set forth in Section
4.5.
"Permitted Issuances" shall mean (a) the issuance or
conversion of options issued to employees pursuant to any stock option plan or
employee incentive plan approved by the Company's board of directors, (b) the
issuance of Warrant Shares, Contingent Shares or Conversion Shares and (c) the
issuance of Common Shares to satisfy obligations in respect of acquisitions of
securities or assets of any Person, provided that (i) such contracts were
entered into prior to September 30, 1999, and (ii) the number of Common Shares
subject to this Subparagraph (c) shall not exceed 110,000 in the aggregate.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, incorporated
organization, association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
"Registration Statement" shall have the meaning set forth in
Section 9.4.
"Restricted Common Shares" shall mean Common Shares that are,
or upon their issuance on the exercise of this Warrant would be, evidenced by a
certificate bearing the restrictive legend set forth in Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Series A Shares" shall mean shares of Series A Convertible
Preferred Stock, par value $.001, of the Company.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, association or other business entity
in respect of which that Person owns securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors,
partnership committee, board of managers or trustees or other managerial body
thereof, whether directly or indirectly through one or more of the other
Subsidiaries of such Person or a combination thereof. Unless otherwise
specified, "Subsidiary" means a Subsidiary of the Company and "Subsidiaries"
means all Subsidiaries of the Company.
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<PAGE> 106
"Transfer" shall mean any disposition of any Warrant or
Warrant Share or of any interest in either thereof that would constitute a sale
thereof within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section
9.2.
"Warrants" shall mean this Warrant and all warrants issued
upon transfer, division or combination of, or in substitution for, this Warrant.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of Common Shares for which they may be exercised.
"Warrant Price" shall mean an amount equal to (i) the number
of Common Shares being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Shares" shall have the meaning set forth in the
introductory paragraph on the first page hereof.
2. EXERCISE OF WARRANT
2.1. MANNER OF EXERCISE. From and after the date hereof and
until 5:00 P.M., New York time, on the Expiration Date (the "Exercise Period"),
Holder may exercise this Warrant, on any Business Day, for all or any part of
the Warrant Shares. In order to exercise this Warrant, in whole or in part,
Holder shall deliver to the Company at its principal office at 32000 Aurora
Road, Solon, Ohio 44139, or at the office or agency designated by the Company
pursuant to Section 12: (i) a written notice of Holder's election to exercise
this Warrant, which notice shall specify the number of Common Shares to be
purchased, (ii) payment of the Warrant Price and (iii) this Warrant. Such notice
shall be substantially in the form of the subscription form appearing at the end
of this Warrant as Exhibit A, duly executed by Holder or its agent or attorney.
Upon receipt thereof, the Company shall, as promptly as practicable, and in any
event within five Business Days thereafter, execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full Common Shares issuable upon such
exercise, together with cash in lieu of any fraction of a share, as hereinafter
provided. The share certificate or certificates so delivered shall be, to the
extent possible, in such denomination or denominations as such Holder shall
request in the notice and shall be registered in the name of Holder or, subject
to Section 9, such other name as shall be designated in the notice. This Warrant
shall be deemed to have been exercised and such certificate or certificates
shall be deemed to have been issued, and Holder or any other Person so
designated to be named therein shall be deemed to have become a holder of record
of such shares for all purposes, as of the date the notice, together with the
cash or check or other payment as provided below and this Warrant, is received
by the Company as described above and all taxes required to be paid by Holder,
if any, pursuant to Section 2.2 prior to the issuance of such shares have been
paid. If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing Warrant
Shares, deliver to Holder a new Warrant evidencing the rights of Holder to
purchase the unpurchased Common Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant, or,
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<PAGE> 107
at the request of Holder, appropriate notation may be made on this Warrant and
the same returned to Holder. Payment of the Warrant Price shall be made at the
option of Holder by (i) certified or official bank check, and/or (ii) Holder's
surrender to the Company of that number of Warrant Shares (or the right to
receive such number of shares) or Common Shares having an aggregate Current
Market Price equal to or greater than the Current Warrant Price for all shares
then being purchased (including those being surrendered), or (iii) any
combination thereof, duly endorsed by or accompanied by appropriate instruments
of transfer duly executed by Holder or by Holder's attorney duly authorized in
writing.
2.2. PAYMENT OF TAXES. All Common Shares issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon Holder, in which case such
taxes or charges shall be paid by Holder. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for Common Shares issuable upon
exercise of this Warrant in any name other than that of Holder, and in such case
the Company shall not be required to issue or deliver any share certificate
until such tax or other charge has been paid or it has been established to the
reasonable satisfaction of the Company that no such tax or other charge is due.
2.3. FRACTIONAL SHARES. The Company shall not be required to
issue a fractional Common Share upon exercise of any Warrant. If any fraction of
a share would, but for this Section, be issuable upon exercise of this Warrant,
in lieu of such fractional share, the Company may, at its option, pay a cash
adjustment in respect of such final fraction in an amount equal to the same
fraction of the Current Market Price per Common Share on the date of exercise
or, if there is no Current Market Price on such date, the Current Warrant Price
per Common Share, adjusted to reflect equitably share dividends, subdivisions
and combinations after the date hereof.
2.4. CONTINUED VALIDITY. A holder of Common Shares issued upon
the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the Securities Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 9, 10 and
15 of this Warrant. The Company will, at the time of each exercise of this
Warrant, in whole or in part, upon the request of the holder of the Common
Shares issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation to afford to
such holder all such rights; PROVIDED, HOWEVER, that if such holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to compliance with Section 9 hereof,
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal
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<PAGE> 108
office of the Company referred to in Section 2.1 or the office or agency
designated by the Company pursuant to Section 12, together with a written
assignment of this Warrant substantially in the form of Exhibit B hereto duly
executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to Section 9, execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned in compliance with Section 9, may be exercised by a new Holder
for the purchase of Common Shares without having a new Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
3.1 and with Section 9, as to any transfer that may be involved in such division
or combination, the Company shall execute and deliver a new Warrant or Warrants
in exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver at
its own expense (other than transfer taxes) the new Warrant or Warrants under
this Section 3.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at
its aforesaid office or agency, books for the registration and the registration
of transfer of the Warrants.
4. ADJUSTMENTS
The number of Common Shares for which this Warrant is
exercisable, and the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event
described below in accordance with Section 5.1.
4.1. SHARE DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any
time the Company shall:
(a) take a record of the holders of its Common Shares for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Common Shares,
(b) subdivide its outstanding Common Shares into a larger
number of Common Shares, or
(c) combine its outstanding Common Shares into a smaller
number of Common Shares,
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then (i) the number of Common Shares for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of Common Shares that a record holder of the same number of Common
Shares for which this Warrant is exercisable immediately prior to the occurrence
of such event would own or be entitled to receive after the happening of such
event, and (ii) the Current Warrant Price shall be adjusted to equal (A) the
Current Warrant Price multiplied by the number of Common Shares for which this
Warrant is exercisable immediately prior to the adjustment divided by (B) the
number of shares for which this Warrant is exercisable immediately after the
adjustment.
4.2 CERTAIN OTHER DISTRIBUTIONS AND ADJUSTMENTS. (a) If at any
time the Company shall take a record of the holders of its Common Shares for the
purpose of entitling them to receive any dividend or other distribution of:
(i) cash,
(ii) any evidences of its indebtedness, any shares of its
stock or any other securities or property of any nature whatsoever
(other than cash, Convertible Securities or Additional Common Shares),
or
(iii) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Common Shares),
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised this Warrant.
(b) A reclassification of the Common Shares (other than a
change in par value, or from par value to no par value or from no par value to
par value) into Common Shares and shares of any other class of stock shall be
deemed a distribution by the Company to the holders of its Common Shares of such
shares of such other class of stock within the meaning of paragraph (a) above
and, if the outstanding Common Shares shall be changed into a larger or smaller
number of Common Shares as a part of such reclassification, such change shall be
deemed a subdivision or combination, as the case may be, of the outstanding
Common Shares within the meaning of Section 4.1.
4.3.[INTENTIONALLY OMITTED]
4.4. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments of the number of Common Shares for which this Warrant is exercisable
and to the Current Warrant Price provided for in Section 4:
(a) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Shares shall be taken into account to
the nearest 1/1000th of a share.
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(b) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Shares for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to shareholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(c) ESCROW OF WARRANT SHARES. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Shares, but prior to the occurrence of the event for
which such record is taken, and Holder exercises this Warrant, any Additional
Common Shares issuable upon exercise by reason of such adjustment shall be
deemed the last Common Shares for which this Warrant is exercised
(notwithstanding any other provision to the contrary herein) and such shares or
other property shall be held in escrow for Holder by the Company to be issued to
Holder upon and to the extent that the event actually takes place, upon payment
of the then Current Warrant Price. Notwithstanding any other provision to the
contrary herein, if the event for which such record was taken fails to occur or
is rescinded, then such escrowed shares shall be cancelled by the Company and
escrowed property returned to the Company.
4.5. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION
OR DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Shares), or sell,
transfer or otherwise dispose of all or substantially all its property, assets
or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, Common Shares of the successor or acquiring corporation, or any cash,
shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Shares
of the Company, then each Holder shall have the right thereafter to receive,
upon exercise of such Warrant, the number of Common Shares of the successor or
acquiring corporation or of the Company, if it is the surviving corporation, and
Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of Common Shares for which this Warrant is exercisable immediately
prior to such event. In case of any such reorganization, reclassification,
merger, consolidation or disposition of assets, the successor or acquiring
corporation (if other than the Company) shall expressly assume the due and
punctual observance and performance of each and every covenant and condition of
this Warrant to be performed and observed by the Company and all the obligations
and liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of Common Shares for which this
Warrant is exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 4. For purposes of this Section 4.5,
"common stock of the successor or acquiring corporation" shall include stock of
such corporation of any class that is not preferred as to dividends or assets
over any other class of stock of such corporation and that is not subject to
redemption and shall
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also include any evidences of indebtedness, shares of stock or other securities
that are convertible into or exchangeable for any such stock, either immediately
or upon the arrival of a specified date or the happening of a specified event
and any warrants or other rights to subscribe for or purchase any such stock.
The foregoing provisions of this Section 4.5 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
4.6. OTHER ACTION AFFECTING COMMON SHARES. In case at any time
or from time to time the Company shall take any action in respect of its Common
Shares, other than any action described in this Section 4, then, unless such
action will not have a materially adverse effect upon the rights of Holders, the
number of Common Shares or other stock for which this Warrant is exercisable
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances.
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. Not less than 10 nor more than 30
days prior to the record date or effective date, as the case may be, of any
action that requires or might require an adjustment or readjustment pursuant to
Section 4, the Company shall forthwith prepare and deliver to each Holder a
signed copy of a certificate executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment
and the method by which such adjustment was calculated, specifying the number of
Common Shares for which this Warrant is exercisable and (if such adjustment was
made pursuant to Section 4.5 or 4.6) describing the number and kind of any other
shares of stock or Other Property for which this Warrant is exercisable, and any
change in the purchase price or prices thereof, after giving effect to such
adjustment or change. The Company shall keep at its office or agency designated
pursuant to Section 12 copies of all such certificates and cause the same to be
available for inspection at said office during normal business hours by any
Holder or any prospective purchaser of a Warrant designated by a Holder thereof.
5.2. NOTICE OF CORPORATE ACTION. If at any time
(a) the Company shall take a record of the holders of its
Common Shares for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation, person or entity, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days prior written notice of the date on which a record date shall be
selected for such dividend,
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distribution or right or for determining rights to vote in respect of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, and (ii) in the case of any
such reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least 30 days prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause also shall specify (i) the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, the date on which the holders of Common Shares shall be entitled to any
such dividend, distribution or right, and the amount and character thereof, and
(ii) the date on which any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up is to take place and the time, if any such time is to be fixed, as of which
the holders of Common Shares shall be entitled to exchange their Common Shares
for securities or other property deliverable upon such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of Holder
appearing on the books of the Company and delivered in accordance with Section
15.2.
6. NO IMPAIRMENT
The Company shall not by any action, including, without
limitation, amending its articles of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Common Shares upon the exercise of this Warrant, including
taking such action as is necessary for the Current Warrant Price to be not less
than the par value of the Common Shares issuable upon exercise of this Warrant,
and (b) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON SHARES; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the date hereof, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued Common Shares as will be sufficient to permit the
exercise in full of all outstanding Warrants. All Common Shares that shall be so
issuable, when issued upon exercise of any Warrant and payment therefor in
accordance with the terms of such Warrant, shall be duly and validly issued and
fully paid and nonassessable, and not subject to preemptive rights.
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Before taking any action that would result in an adjustment in
the number of Common Shares for which this Warrant is exercisable, the Company
shall obtain all such authorizations or exemptions thereof, or consents thereto,
as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
If any Common Shares required to be reserved for issuance upon
exercise of Warrants require registration or qualification with any governmental
authority or other governmental approval or filing under any federal or state
law (otherwise than as provided in Section 9) before such shares may be so
issued, the Company will in good faith and as expeditiously as possible and at
its expense endeavor to cause such shares to be duly registered or such approval
to be obtained or filing made.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Shares with respect to which any provision
of Section 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY; REGISTRATIONS
The Warrants and the Warrant Shares shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Share. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. (a) Except as otherwise provided in
this Section 9, each certificate for Warrant Shares initially issued upon the
exercise of this Warrant, and each certificate for Warrant Shares issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended,
and may not be transferred in violation of such Act
or the rules and regulations thereunder."
(b) Except as otherwise provided in this Section 9, each
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"This warrant and the securities represented hereby have not been
registered under the Securities Act of 1933, as amended,
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<PAGE> 114
and may not be transferred in violation of such Act, the rules and
regulations thereunder or the provisions of this Warrant."
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION.
Prior to any Transfer of any Warrant or any Restricted Common Share, the holder
of such Warrant or Restricted Common Share shall give written notice (a
"Transfer Notice") to the Company of such Transfer. Each certificate, if any,
evidencing such Restricted Common Share issued upon such Transfer shall bear the
restrictive legend set forth in Section 9.1(a), and each Warrant issued upon
such Transfer shall bear the restrictive legend set forth in Section 9.1(b),
unless in the opinion of counsel to such holder that is reasonably acceptable to
the Company such legend is not required in order to ensure compliance with the
Securities Act.
9.3. REGISTRATION. Each holder of Warrant Shares has certain
registration rights under the Registration Rights Agreement dated September 30,
1999, between the Company and General Electric Company, as amended from time to
time. Any Holder may obtain a copy of such agreement by notice to the Company.
10. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and
each holder of Restricted Common Shares in supplying such information as may be
reasonably necessary for such holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Shares.
11. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably satisfactory
to it (it being understood that the written agreement of GE shall be sufficient
indemnity), and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like tenor
to such Holder; PROVIDED, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company for
cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive offices
of the Company) where the Warrants may be presented for exercise, registration
of transfer, division or combination as provided in this Warrant.
13. FINANCIAL AND BUSINESS INFORMATION
13.1. QUARTERLY INFORMATION. The Company will deliver to each
Holder, as soon as practicable after the end of each of the first three quarters
of the Company, and in any event
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within 45 days thereafter, one copy of an unaudited consolidated balance sheet
of the Company and its subsidiaries as at the close of such quarter, and the
related unaudited consolidated statements of income and cash flows of the
Company for such quarter and, in the case of the second and third quarters, for
the portion of the fiscal year ending with such quarter, setting forth in each
case in comparative form the figures for the corresponding periods in the
previous fiscal year. Such financial statements shall be prepared by the Company
in accordance with GAAP (without period-end adjustments or footnotes) and
accompanied by the certification of the Company's chief executive officer or
chief financial officer that such financial statements are complete and correct
and present fairly the consolidated financial position, results of operations
and cash flows of the Company and its subsidiaries as at the end of such quarter
and for such year-to-date period, as the case may be.
13.2. ANNUAL INFORMATION. The Company will deliver to each
Holder as soon as practicable after the end of each fiscal year of the Company,
and in any event within 90 days thereafter, one copy of:
(a) an audited consolidated balance sheet of the Company and
its subsidiaries as at the end of such year, and
(b) audited consolidated statements of income and cash flows
of the Company and its subsidiaries for such year;
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all prepared in accordance with GAAP, and
which audited financial statements shall be accompanied by (i) an opinion
thereon of the independent certified public accountants regularly retained by
the Company, or any other firm of independent certified public accountants of
recognized national standing selected by the Company and (ii) a report of such
independent certified public accountants confirming any adjustment made pursuant
to Section 4 during such year.
13.3. FILINGS. The Company will file with the Commission all
regular or periodic reports required pursuant to the Exchange Act and will
deliver to Holder promptly upon their becoming available one copy of each
report, notice or proxy statement sent by the Company to its shareholders
generally, and of each regular or periodic report (pursuant to the Exchange
Act), filed by the Company with (i) the Commission or (ii) any securities
exchange on which Common Shares are listed.
14. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by
Holder to purchase Common Shares, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of such Holder for
the purchase price of any Common Share or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
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<PAGE> 116
15. MISCELLANEOUS
15.1. NONWAIVER AND EXPENSES. No course of dealing or any
delay or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Holder's rights, powers
or remedies. If the Company fails to comply with any provision of this Warrant,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in enforcing any of
its rights, powers or remedies hereunder.
15.2. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid, or
by telecopy and confirmed by telecopy answerback, addressed as follows:
(a) If to any Holder or holder of Warrant Shares, at its last
known address appearing on the books of the Company maintained for such purpose.
(b) If to the Company at
Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
Attention: President
Telecopy Number: (440)519-0503
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback, one Business Day after the same shall have been delivered to a
nationally recognized courier service, or three Business Days after the same
shall have been deposited, postage prepaid, in the United States mail. Failure
or delay in receipt of copies of any notice, demand, request, approval,
declaration, delivery or other communication to the Person designated above
shall in no way adversely affect the effectiveness of such notice, demand,
request, approval, declaration, delivery or other communication.
15.3. REMEDIES. Each holder of a Warrant or a Warrant Share,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under Section 9 of this Warrant. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of Section 9 of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
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15.4. SUCCESSORS AND ASSIGNS. Subject to the provisions of
Sections 3.1 and 9, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
successors and assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and, with
respect to Section 9 hereof, holders of Warrant Shares, and shall be enforceable
by any such Holder or holder of Warrant Shares.
15.5. AMENDMENT. This Warrant may be modified or amended or
the provisions hereof waived only with the written consent of the Company and
the Majority Holders; PROVIDED that no such Warrant may be modified or amended
to reduce the number of Common Shares for which such Warrant is exercisable or
to increase the price at which such Common Shares may be purchased upon exercise
of such Warrant (before giving effect to any adjustment as provided therein)
without the prior written consent of each Holder.
15.6. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
15.7. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
15.8. GOVERNING LAW. This Warrant shall be governed by the
laws of the State of New York, without regard to the provisions thereof relating
to conflict of laws.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and attested by its Secretary or an Assistant Secretary.
Dated: ______________, 200___
ADVANCED LIGHTING TECHNOLOGIES, INC.
By:_________________________________
Name:
Title:
Attest:
By:__________________________________
Name:
Title:
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<PAGE> 119
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of ______ Common Shares of ADVANCED
LIGHTING TECHNOLOGIES, INC. and herewith makes payment therefor, all at the
price and on the terms and conditions specified in this Warrant and requests
that certificates for the Common Shares hereby purchased (and any securities or
other property issuable upon such exercise) be issued in the name of and
delivered to ______________________________ whose address is
____________________________ and, if such Common Shares shall not include all of
the Common Shares issuable as provided in this Warrant, that a new Warrant of
like tenor and date for the balance of the Common Shares issuable hereunder be
delivered to the undersigned.
-----------------------------------------
(Name of Registered Owner)
-----------------------------------------
(Signature of Registered Owner)
-----------------------------------------
(Street Address)
-----------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within warrant in every
particular, without alteration or enlargement or any change
whatsoever.
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EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
Common Shares set forth below:
Name and Address of Assignee No. of Common Shares
---------------------------- --------------------
and does hereby irrevocably constitute and appoint _____________________________
attorney-in-fact to register such transfer on the books of ADVANCED LIGHTING
TECHNOLOGIES, INC. maintained for the purpose, with full power of substitution
in the premises.
Dated:____________________ Print Name:______________________
Signature:________________________
Witness:__________________________
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
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<PAGE> 121
EXHIBIT 2.2(d)
--------------
[Second Contingent Warrant]
WARRANT
to Purchase Common Shares of
ADVANCED LIGHTING TECHNOLOGIES, INC.
<PAGE> 122
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
1. DEFINITIONS..........................................................1
2. EXERCISE OF WARRANT..................................................5
2.1. Manner of Exercise..........................................5
2.2. Payment of Taxes............................................6
2.3. Fractional Shares...........................................6
2.4. Continued Validity..........................................6
3. TRANSFER, DIVISION AND COMBINATION...................................6
3.1. Transfer....................................................6
3.2. Division and Combination....................................7
3.3. Expenses....................................................7
3.4. Maintenance of Books........................................7
4. ADJUSTMENTS..........................................................7
4.1. Share Dividends, Subdivisions and Combinations..............7
4.2 Certain Other Distributions and Adjustments.................8
4.4. Other Provisions Applicable to Adjustments under
this Section ...............................................8
4.5. Reorganization, Reclassification, Merger, Consolidation
or Disposition of Assets ...................................9
4.6. Other Action Affecting Common Shares.......................10
5. NOTICES TO WARRANT HOLDERS..........................................10
5.1. Notice of Adjustments.....................................10
5.2. Notice of Corporate Action................................10
6. NO IMPAIRMENT.......................................................11
7. RESERVATION AND AUTHORIZATION OF COMMON SHARES;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY .......11
8. TAXING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS.................12
9. RESTRICTIONS ON TRANSFERABILITY....................................12
9.1. Restrictive Legend................................. 12
9.2. Notice of Proposed Transfers; Requests for
Registration .............................................13
9.3. Registration..............................................13
10. SUPPLYING INFORMATION..............................................13
11. LOSS OR MUTILATION.................................................13
12. OFFICE OF THE COMPANY..............................................13
13. FINANCIAL AND BUSINESS INFORMATION.................................13
13.1. Quarterly Information.....................................13
13.2. Annual Information........................................14
13.3. Filings...................................................14
14. LIMITATION OF LIABILITY............................................14
15. MISCELLANEOUS......................................................15
15.1. Nonwaiver and Expenses....................................15
15.2. Notice Generally..........................................15
15.3. Remedies..................................................15
15.4. Successors and Assigns....................................16
15.5. Amendment.................................................16
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15.6. Severability..............................................16
15.7. Headings..................................................16
15.8. Governing Law.............................................16
SIGNATURES
EXHIBITS
Exhibit A - Subscription Form
Exhibit B - Assignment Form
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THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF
THIS WARRANT.
INITIAL WARRANT PRICE
$___________ PER SHARE
WARRANT
To Purchase Common Shares of
ADVANCED LIGHTING TECHNOLOGIES, INC.
THIS IS TO CERTIFY THAT GENERAL ELECTRIC COMPANY, or
registered assigns, is entitled, at any time during the Exercise Period (as
hereinafter defined), to purchase from ADVANCED LIGHTING TECHNOLOGIES, INC., an
Ohio corporation (the "Company"), up to __________________ Common Shares (as
hereinafter defined) (such Common Shares, subject to adjustment as provided
herein, are referred to herein as the "Warrant Shares") as described herein, in
whole or in part, including fractional parts, at the Current Warrant Price (as
defined herein) per share (subject to adjustment as provided herein) all on the
terms and conditions and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
Terms used in this Warrant have the respective meanings set
forth below:
"Additional Issuance" shall have the meaning set forth in
Section 4.3(a).
"Additional Common Shares" shall mean all Common Shares issued
by the Company after the date hereof, other than Conversion Shares, Contingent
Shares or Warrant Shares.
"Appraised Value" shall mean, in respect of any Common Share
on any date herein specified, the fair saleable value of such Common Share
(determined without giving affect to the discount for (i) a minority interest or
(ii) any lack of liquidity of the Common Share or (iii) to the fact that the
Company may have no class of equity registered under the Exchange Act) based on
the equity value of the Company, as determined by an investment banking or
valuation firm selected in accordance with the following sentences, divided by
the number of Common Shares outstanding on a Fully Diluted Basis as determined
in accordance with GAAP (assuming the payment of the exercise prices for such
shares). The determination of the Appraised Value per Common Share shall be made
by an investment banking or valuation firm of nationally recognized standing
selected by the Company and acceptable to the Majority Holders. If the
investment banking or valuation firm selected by Company is not acceptable to
the Majority
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Holders and the Company and the Majority Holders cannot agree on a mutually
acceptable investment banking or valuation firm, then the Majority Holders and
the Company shall each choose one such investment banking or valuation firm and
the respective chosen firms shall agree on another investment banking or
valuation firm which shall make the determination. The Company shall retain, at
its sole cost, such investment banking or valuation firm as may be necessary for
the determination of Appraised Value required by the terms of this Warrant.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required to be closed in the State of New
York.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act, the Exchange
Act and other federal securities laws.
"Common Share" shall mean (except where the context otherwise
indicates) a Common Share, $0.001 par value, of the Company as constituted on
the date hereof, and any capital stock into which such Common Share may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
Common Shares upon any reclassification thereof which is also not preferred as
to dividends or assets over any other class of capital stock of the Company and
which is not subject to redemption and (ii) capital stock of any successor or
acquiring corporation received by or distributed to the holders of Common Shares
of the Company in the circumstances contemplated by Section 4.5.
"Contingent Shares" shall mean Common Shares to be issued upon
the exercise of any right to purchase Common Shares pursuant to the Contingent
Warrant Agreement.
"Contingent Warrant Agreement" shall mean the Contingent
Warrant Agreement, dated as of September 30, 1999, between the Company and
General Electric Company.
"Conversion Shares" shall mean the Common Shares issued or
issuable upon the conversion of the Series A Shares.
"Convertible Securities" shall mean warrants, evidences of
indebtedness, shares of capital stock or other securities that are exercisable
for, convertible into or exchangeable, with or without payment of additional
consideration in cash or property, for Additional Common Shares, either
immediately or upon the occurrence of a specified date or a specified event.
"Current Market Price" shall mean, in respect of any Common
Share on any date herein specified, if there shall then be a public market for
the Common Shares, the average of the daily market prices for 20 consecutive
Business Days immediately preceding such date or, if there is no such public
market, the Appraised Value per Common Share. The daily market price for each
such Business Day shall be (i) the last sale price on such day on the principal
stock exchange or NASDAQ-NMS on which such Common Shares are then listed or
admitted to trading, or (ii) if no sale takes place on such day on any such
exchange or NASDAQ-NMS, the average of the last reported closing bid and asked
prices on such day as officially quoted on any
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such exchange or NASDAQ-NMS, or (iii) if the Common Shares are not then listed
or admitted to trading on any stock exchange or NASDAQ-NMS, the average of the
last reported closing bid and asked prices on such day in the over-the-counter
market, as furnished by the NASDAQ or the National Quotation Bureau, Inc., or
(iv) if neither such corporation at the time is engaged in the business of
reporting such prices, as furnished by any similar firm then engaged in such
business, or (v) if there is no such firm, as furnished by any member of the
NASD selected mutually by the Majority Holders and the Company or, if they
cannot agree upon such selection, as selected by two such members of the NASD,
one of which shall be selected by the Majority Holders and one of which shall be
selected by the Company.
"Current Warrant Price" shall mean the Initial Warrant Price,
as adjusted from time to time in the case of share dividends, subdivisions and
combinations as set forth in Section 4.1 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1.
"Expiration Date" shall mean ______________, 200__.
"Fully Diluted Basis" means, with respect to any determination
or calculation, that such determination or calculation is performed on a fully
diluted basis (assuming the issuance of all Common Shares issuable under any
then outstanding options, warrants or convertible securities of any kind)
determined in accordance with GAAP for purposes of determining book value or net
income per share.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
"GE" shall mean General Electric Company, a New York
corporation.
"Holder" shall mean the Person in whose name the Warrant set
forth herein is registered on the books of the Company maintained for such
purpose.
"Initial Warrant Price" shall mean the Initial Warrant Price
per Common Share set forth on the first page hereof.
"Majority Holders" shall mean the holders of Warrants
exercisable for in excess of 50% of the aggregate number of Common Shares then
purchasable upon exercise of all Warrants, whether or not then exercisable.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
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"NASDAQ" shall mean the National Association of Securities
Dealers Automated Quotation System.
"NASDAQ-NMS" shall mean the NASDAQ National Market System.
"New Securities" shall have the meaning set forth in Section
4.3(a).
"New Securities Warrant" shall have the meaning set forth in
Section 4.3(a).
"Other Property" shall have the meaning set forth in Section
4.5.
"Permitted Issuances" shall mean (a) the issuance or
conversion of options issued to employees pursuant to any stock option plan or
employee incentive plan approved by the Company's board of directors, (b) the
issuance of Warrant Shares, Contingent Shares or Conversion Shares and (c) the
issuance of Common Shares to satisfy obligations in respect of acquisitions of
securities or assets of any Person, provided that (i) such contracts were
entered into prior to September 30, 1999, and (ii) the number of Common Shares
subject to this Subparagraph (c) shall not exceed 110,000 in the aggregate.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, incorporated
organization, association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
"Registration Statement" shall have the meaning set forth in
Section 9.4.
"Restricted Common Shares" shall mean Common Shares that are,
or upon their issuance on the exercise of this Warrant would be, evidenced by a
certificate bearing the restrictive legend set forth in Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Series A Shares" shall mean shares of Series A Convertible
Preferred Stock, par value $.001, of the Company.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, association or other business entity
in respect of which that Person owns securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors,
partnership committee, board of managers or trustees or other managerial body
thereof, whether directly or indirectly through one or more of the other
Subsidiaries of such Person or a combination thereof. Unless otherwise
specified, "Subsidiary" means a Subsidiary of the Company and "Subsidiaries"
means all Subsidiaries of the Company.
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"Transfer" shall mean any disposition of any Warrant or
Warrant Share or of any interest in either thereof that would constitute a sale
thereof within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in
Section 9.2.
"Warrants" shall mean this Warrant and all warrants issued
upon transfer, division or combination of, or in substitution for, this Warrant.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of Common Shares for which they may be exercised.
"Warrant Price" shall mean an amount equal to (i) the number
of Common Shares being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Shares" shall have the meaning set forth in the
introductory paragraph on the first page hereof.
2. EXERCISE OF WARRANT
2.1. MANNER OF EXERCISE. From and after the date hereof and
until 5:00 P.M., New York time, on the Expiration Date (the "Exercise Period"),
Holder may exercise this Warrant, on any Business Day, for all or any part of
the Warrant Shares. In order to exercise this Warrant, in whole or in part,
Holder shall deliver to the Company at its principal office at 32000 Aurora
Road, Solon, Ohio 44139, or at the office or agency designated by the Company
pursuant to Section 12: (i) a written notice of Holder's election to exercise
this Warrant, which notice shall specify the number of Common Shares to be
purchased, (ii) payment of the Warrant Price and (iii) this Warrant. Such notice
shall be substantially in the form of the subscription form appearing at the end
of this Warrant as Exhibit A, duly executed by Holder or its agent or attorney.
Upon receipt thereof, the Company shall, as promptly as practicable, and in any
event within five Business Days thereafter, execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full Common Shares issuable upon such
exercise, together with cash in lieu of any fraction of a share, as hereinafter
provided. The share certificate or certificates so delivered shall be, to the
extent possible, in such denomination or denominations as such Holder shall
request in the notice and shall be registered in the name of Holder or, subject
to Section 9, such other name as shall be designated in the notice. This Warrant
shall be deemed to have been exercised and such certificate or certificates
shall be deemed to have been issued, and Holder or any other Person so
designated to be named therein shall be deemed to have become a holder of record
of such shares for all purposes, as of the date the notice, together with the
cash or check or other payment as provided below and this Warrant, is received
by the Company as described above and all taxes required to be paid by Holder,
if any, pursuant to Section 2.2 prior to the issuance of such shares have been
paid. If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing Warrant
Shares, deliver to Holder a new Warrant evidencing the rights of Holder to
purchase the unpurchased Common Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant, or,
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at the request of Holder, appropriate notation may be made on this Warrant and
the same returned to Holder. Payment of the Warrant Price shall be made at the
option of Holder by (i) certified or official bank check, and/or (ii) Holder's
surrender to the Company of that number of Warrant Shares (or the right to
receive such number of shares) or Common Shares having an aggregate Current
Market Price equal to or greater than the Current Warrant Price for all shares
then being purchased (including those being surrendered), or (iii) any
combination thereof, duly endorsed by or accompanied by appropriate instruments
of transfer duly executed by Holder or by Holder's attorney duly authorized in
writing.
2.2. PAYMENT OF TAXES. All Common Shares issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon Holder, in which case such
taxes or charges shall be paid by Holder. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for Common Shares issuable upon
exercise of this Warrant in any name other than that of Holder, and in such case
the Company shall not be required to issue or deliver any share certificate
until such tax or other charge has been paid or it has been established to the
reasonable satisfaction of the Company that no such tax or other charge is due.
2.3. FRACTIONAL SHARES. The Company shall not be required to
issue a fractional Common Share upon exercise of any Warrant. If any fraction of
a share would, but for this Section, be issuable upon exercise of this Warrant,
in lieu of such fractional share, the Company may, at its option, pay a cash
adjustment in respect of such final fraction in an amount equal to the same
fraction of the Current Market Price per Common Share on the date of exercise
or, if there is no Current Market Price on such date, the Current Warrant Price
per Common Share, adjusted to reflect equitably share dividends, subdivisions
and combinations after the date hereof.
2.4. CONTINUED VALIDITY. A holder of Common Shares issued upon
the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the Securities Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 9, 10 and
15 of this Warrant. The Company will, at the time of each exercise of this
Warrant, in whole or in part, upon the request of the holder of the Common
Shares issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation to afford to
such holder all such rights; PROVIDED, HOWEVER, that if such holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to compliance with Section 9 hereof,
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal
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office of the Company referred to in Section 2.1 or the office or agency
designated by the Company pursuant to Section 12, together with a written
assignment of this Warrant substantially in the form of Exhibit B hereto duly
executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to Section 9, execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned in compliance with Section 9, may be exercised by a new Holder
for the purchase of Common Shares without having a new Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
3.1 and with Section 9, as to any transfer that may be involved in such division
or combination, the Company shall execute and deliver a new Warrant or Warrants
in exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver at
its own expense (other than transfer taxes) the new Warrant or Warrants under
this Section 3.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at
its aforesaid office or agency, books for the registration and the registration
of transfer of the Warrants.
4. ADJUSTMENTS
The number of Common Shares for which this Warrant is
exercisable, and the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event
described below in accordance with Section 5.1.
4.1. SHARE DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any
time the Company shall:
(a) take a record of the holders of its Common Shares for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Common Shares,
(b) subdivide its outstanding Common Shares into a larger
number of Common Shares, or
(c) combine its outstanding Common Shares into a smaller
number of Common Shares,
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then (i) the number of Common Shares for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of Common Shares that a record holder of the same number of Common
Shares for which this Warrant is exercisable immediately prior to the occurrence
of such event would own or be entitled to receive after the happening of such
event, and (ii) the Current Warrant Price shall be adjusted to equal (A) the
Current Warrant Price multiplied by the number of Common Shares for which this
Warrant is exercisable immediately prior to the adjustment divided by (B) the
number of shares for which this Warrant is exercisable immediately after the
adjustment.
4.2 CERTAIN OTHER DISTRIBUTIONS AND ADJUSTMENTS. (a) If at any
time the Company shall take a record of the holders of its Common Shares for the
purpose of entitling them to receive any dividend or other distribution of:
(i) cash,
(ii) any evidences of its indebtedness, any shares of its
stock or any other securities or property of any nature whatsoever
(other than cash, Convertible Securities or Additional Common Shares),
or
(iii) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Common Shares),
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised this Warrant.
(b) A reclassification of the Common Shares (other than a
change in par value, or from par value to no par value or from no par value to
par value) into Common Shares and shares of any other class of stock shall be
deemed a distribution by the Company to the holders of its Common Shares of such
shares of such other class of stock within the meaning of paragraph (a) above
and, if the outstanding Common Shares shall be changed into a larger or smaller
number of Common Shares as a part of such reclassification, such change shall be
deemed a subdivision or combination, as the case may be, of the outstanding
Common Shares within the meaning of Section 4.1.
4.3.[INTENTIONALLY OMITTED]
4.4. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments of the number of Common Shares for which this Warrant is exercisable
and to the Current Warrant Price provided for in Section 4:
(a) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Shares shall be taken into account to
the nearest 1/1000th of a share.
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(b) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Shares for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to shareholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(c) ESCROW OF WARRANT SHARES. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Shares, but prior to the occurrence of the event for
which such record is taken, and Holder exercises this Warrant, any Additional
Common Shares issuable upon exercise by reason of such adjustment shall be
deemed the last Common Shares for which this Warrant is exercised
(notwithstanding any other provision to the contrary herein) and such shares or
other property shall be held in escrow for Holder by the Company to be issued to
Holder upon and to the extent that the event actually takes place, upon payment
of the then Current Warrant Price. Notwithstanding any other provision to the
contrary herein, if the event for which such record was taken fails to occur or
is rescinded, then such escrowed shares shall be cancelled by the Company and
escrowed property returned to the Company.
4.5. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION
OR DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Shares), or sell,
transfer or otherwise dispose of all or substantially all its property, assets
or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, Common Shares of the successor or acquiring corporation, or any cash,
shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Shares
of the Company, then each Holder shall have the right thereafter to receive,
upon exercise of such Warrant, the number of Common Shares of the successor or
acquiring corporation or of the Company, if it is the surviving corporation, and
Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of Common Shares for which this Warrant is exercisable immediately
prior to such event. In case of any such reorganization, reclassification,
merger, consolidation or disposition of assets, the successor or acquiring
corporation (if other than the Company) shall expressly assume the due and
punctual observance and performance of each and every covenant and condition of
this Warrant to be performed and observed by the Company and all the obligations
and liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of Common Shares for which this
Warrant is exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 4. For purposes of this Section 4.5,
"common stock of the successor or acquiring corporation" shall include stock of
such corporation of any class that is not preferred as to dividends or assets
over any other class of stock of such corporation and that is not subject to
redemption and shall
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also include any evidences of indebtedness, shares of stock or other securities
that are convertible into or exchangeable for any such stock, either immediately
or upon the arrival of a specified date or the happening of a specified event
and any warrants or other rights to subscribe for or purchase any such stock.
The foregoing provisions of this Section 4.5 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
4.6. OTHER ACTION AFFECTING COMMON SHARES. In case at any time
or from time to time the Company shall take any action in respect of its Common
Shares, other than any action described in this Section 4, then, unless such
action will not have a materially adverse effect upon the rights of Holders, the
number of Common Shares or other stock for which this Warrant is exercisable
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances.
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. Not less than 10 nor more than 30
days prior to the record date or effective date, as the case may be, of any
action that requires or might require an adjustment or readjustment pursuant to
Section 4, the Company shall forthwith prepare and deliver to each Holder a
signed copy of a certificate executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment
and the method by which such adjustment was calculated, specifying the number of
Common Shares for which this Warrant is exercisable and (if such adjustment was
made pursuant to Section 4.5 or 4.6) describing the number and kind of any other
shares of stock or Other Property for which this Warrant is exercisable, and any
change in the purchase price or prices thereof, after giving effect to such
adjustment or change. The Company shall keep at its office or agency designated
pursuant to Section 12 copies of all such certificates and cause the same to be
available for inspection at said office during normal business hours by any
Holder or any prospective purchaser of a Warrant designated by a Holder thereof.
5.2. NOTICE OF CORPORATE ACTION. If at any time
(a) the Company shall take a record of the holders of its
Common Shares for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation, person or entity, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days prior written notice of the date on which a record date shall be
selected for such dividend,
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distribution or right or for determining rights to vote in respect of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, and (ii) in the case of any
such reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least 30 days prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause also shall specify (i) the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, the date on which the holders of Common Shares shall be entitled to any
such dividend, distribution or right, and the amount and character thereof, and
(ii) the date on which any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up is to take place and the time, if any such time is to be fixed, as of which
the holders of Common Shares shall be entitled to exchange their Common Shares
for securities or other property deliverable upon such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of Holder
appearing on the books of the Company and delivered in accordance with Section
15.2.
6. NO IMPAIRMENT
The Company shall not by any action, including, without
limitation, amending its articles of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Common Shares upon the exercise of this Warrant, including
taking such action as is necessary for the Current Warrant Price to be not less
than the par value of the Common Shares issuable upon exercise of this Warrant,
and (b) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON SHARES;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the date hereof, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued Common Shares as will be sufficient to permit the
exercise in full of all outstanding Warrants. All Common Shares that shall be so
issuable, when issued upon exercise of any Warrant and payment therefor in
accordance with the terms of such Warrant, shall be duly and validly issued and
fully paid and nonassessable, and not subject to preemptive rights.
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<PAGE> 135
Before taking any action that would result in an adjustment in
the number of Common Shares for which this Warrant is exercisable, the Company
shall obtain all such authorizations or exemptions thereof, or consents thereto,
as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
If any Common Shares required to be reserved for issuance upon
exercise of Warrants require registration or qualification with any governmental
authority or other governmental approval or filing under any federal or state
law (otherwise than as provided in Section 9) before such shares may be so
issued, the Company will in good faith and as expeditiously as possible and at
its expense endeavor to cause such shares to be duly registered or such approval
to be obtained or filing made.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Shares with respect to which any provision
of Section 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY; REGISTRATIONS
The Warrants and the Warrant Shares shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Share. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. (a) Except as otherwise provided in
this Section 9, each certificate for Warrant Shares initially issued upon the
exercise of this Warrant, and each certificate for Warrant Shares issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended,
and may not be transferred in violation of such Act
or the rules and regulations thereunder."
(b) Except as otherwise provided in this Section 9, each
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"This warrant and the securities represented hereby have not been
registered under the Securities Act of 1933, as amended,
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<PAGE> 136
and may not be transferred in violation of such Act, the rules and
regulations thereunder or the provisions of this Warrant."
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION.
Prior to any Transfer of any Warrant or any Restricted Common Share, the holder
of such Warrant or Restricted Common Share shall give written notice (a
"Transfer Notice") to the Company of such Transfer. Each certificate, if any,
evidencing such Restricted Common Share issued upon such Transfer shall bear the
restrictive legend set forth in Section 9.1(a), and each Warrant issued upon
such Transfer shall bear the restrictive legend set forth in Section 9.1(b),
unless in the opinion of counsel to such holder that is reasonably acceptable to
the Company such legend is not required in order to ensure compliance with the
Securities Act.
9.3. REGISTRATION. Each holder of Warrant Shares has certain
registration rights under the Registration Rights Agreement dated September 30,
1999, between the Company and General Electric Company, as amended from time to
time. Any Holder may obtain a copy of such agreement by notice to the Company.
10. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and
each holder of Restricted Common Shares in supplying such information as may be
reasonably necessary for such holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Shares.
11. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably satisfactory
to it (it being understood that the written agreement of GE shall be sufficient
indemnity), and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like tenor
to such Holder; PROVIDED, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company for
cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive offices
of the Company) where the Warrants may be presented for exercise, registration
of transfer, division or combination as provided in this Warrant.
13. FINANCIAL AND BUSINESS INFORMATION
13.1. QUARTERLY INFORMATION. The Company will deliver to each
Holder, as soon as practicable after the end of each of the first three quarters
of the Company, and in any event
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<PAGE> 137
within 45 days thereafter, one copy of an unaudited consolidated balance sheet
of the Company and its subsidiaries as at the close of such quarter, and the
related unaudited consolidated statements of income and cash flows of the
Company for such quarter and, in the case of the second and third quarters, for
the portion of the fiscal year ending with such quarter, setting forth in each
case in comparative form the figures for the corresponding periods in the
previous fiscal year. Such financial statements shall be prepared by the Company
in accordance with GAAP (without period-end adjustments or footnotes) and
accompanied by the certification of the Company's chief executive officer or
chief financial officer that such financial statements are complete and correct
and present fairly the consolidated financial position, results of operations
and cash flows of the Company and its subsidiaries as at the end of such quarter
and for such year-to-date period, as the case may be.
13.2. ANNUAL INFORMATION. The Company will deliver to each
Holder as soon as practicable after the end of each fiscal year of the Company,
and in any event within 90 days thereafter, one copy of:
(a) an audited consolidated balance sheet of the Company and
its subsidiaries as at the end of such year, and
(b) audited consolidated statements of income and cash flows
of the Company and its subsidiaries for such year;
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all prepared in accordance with GAAP, and
which audited financial statements shall be accompanied by (i) an opinion
thereon of the independent certified public accountants regularly retained by
the Company, or any other firm of independent certified public accountants of
recognized national standing selected by the Company and (ii) a report of such
independent certified public accountants confirming any adjustment made pursuant
to Section 4 during such year.
13.3. FILINGS. The Company will file with the Commission all
regular or periodic reports required pursuant to the Exchange Act and will
deliver to Holder promptly upon their becoming available one copy of each
report, notice or proxy statement sent by the Company to its shareholders
generally, and of each regular or periodic report (pursuant to the Exchange
Act), filed by the Company with (i) the Commission or (ii) any securities
exchange on which Common Shares are listed.
14. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by
Holder to purchase Common Shares, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of such Holder for
the purchase price of any Common Share or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
-14-
<PAGE> 138
15. MISCELLANEOUS
15.1. NONWAIVER AND EXPENSES. No course of dealing or any
delay or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Holder's rights, powers
or remedies. If the Company fails to comply with any provision of this Warrant,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in enforcing any of
its rights, powers or remedies hereunder.
15.2. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid, or
by telecopy and confirmed by telecopy answerback, addressed as follows:
(a) If to any Holder or holder of Warrant Shares, at its last
known address appearing on the books of the Company maintained for such purpose.
(b) If to the Company at
Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
Attention: President
Telecopy Number: (440)519-0503
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback, one Business Day after the same shall have been delivered to a
nationally recognized courier service, or three Business Days after the same
shall have been deposited, postage prepaid, in the United States mail. Failure
or delay in receipt of copies of any notice, demand, request, approval,
declaration, delivery or other communication to the Person designated above
shall in no way adversely affect the effectiveness of such notice, demand,
request, approval, declaration, delivery or other communication.
15.3. REMEDIES. Each holder of a Warrant or a Warrant Share,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under Section 9 of this Warrant. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of Section 9 of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
-15-
<PAGE> 139
15.4. SUCCESSORS AND ASSIGN. Subject to the provisions of
Sections 3.1 and 9, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
successors and assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and, with
respect to Section 9 hereof, holders of Warrant Shares, and shall be enforceable
by any such Holder or holder of Warrant Shares.
15.5. AMENDMENT. This Warrant may be modified or amended or
the provisions hereof waived only with the written consent of the Company and
the Majority Holders; provided that no such Warrant may be modified or amended
to reduce the number of Common Shares for which such Warrant is exercisable or
to increase the price at which such Common Shares may be purchased upon exercise
of such Warrant (before giving effect to any adjustment as provided therein)
without the prior written consent of each Holder.
15.6. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
15.7. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
15.8. GOVERNING LAW. This Warrant shall be governed by the
laws of the State of New York, without regard to the provisions thereof relating
to conflict of laws.
-16-
<PAGE> 140
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and attested by its Secretary or an Assistant Secretary.
Dated: ______________, 200___
ADVANCED LIGHTING TECHNOLOGIES, INC.
By:_________________________________
Name:
Title:
Attest:
By:__________________________________
Name:
Title:
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<PAGE> 141
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of ______ Common Shares of ADVANCED
LIGHTING TECHNOLOGIES, INC. and herewith makes payment therefor, all at the
price and on the terms and conditions specified in this Warrant and requests
that certificates for the Common Shares hereby purchased (and any securities or
other property issuable upon such exercise) be issued in the name of and
delivered to ______________________________ whose address is
____________________________ and, if such Common Shares shall not include all of
the Common Shares issuable as provided in this Warrant, that a new Warrant of
like tenor and date for the balance of the Common Shares issuable hereunder be
delivered to the undersigned.
________________________________________
(Name of Registered Owner)
________________________________________
(Signature of Registered Owner)
________________________________________
(Street Address)
________________________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within warrant in every
particular, without alteration or enlargement or any change
whatsoever.
-18-
<PAGE> 142
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
Common Shares set forth below:
Name and Address of Assignee No. of Common Shares
- ---------------------------- --------------------
and does hereby irrevocably constitute and appoint _____________________________
attorney-in-fact to register such transfer on the books of ADVANCED LIGHTING
TECHNOLOGIES, INC. maintained for the purpose, with full power of substitution
in the premises.
Dated:______________________ Print Name:______________________
Signature:_______________________
Witness:_________________________
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
-19-
<PAGE> 143
EXHIBIT 2.2(f)(i)
-----------------
INDEPENDENT ACCOUNTANTS' REPORT
ON APPLYING AGREED-UPON PROCEDURES
To the Management of
Advanced Lighting Technologies, Inc.
We have performed the procedures enumerated below, which were agreed to by the
Management of Advanced Lighting Technologies, Inc., solely to assist you in
evaluating the accompanying EBITDA Coverage Ratio Calculation Schedule defined
in accordance with Section 2.2 of the Contingent Warrant Agreement dated
_________________ (prepared in accordance with the criteria specified therein)
for the quarter ended ______________________. This agreed-upon procedures
engagement was performed in accordance with standards established by the
American Institute of Certified Public Accountants. The sufficiency of these
procedures is solely the responsibility of the specified users of the report.
Consequently, we make no representation regarding the sufficiency of the
procedures described below either for the purpose for which this report has been
requested or for any other purpose.
(This paragraph will enumerate yet to be defined procedures followed and the
associated findings.)
We were not engaged to, and did not, perform an examination, the objective of
which would be the expression of an opinion on the accompanying Schedule.
Accordingly, we do not express any such opinion. Had we performed additional
procedures, other matters might have come to our attention that would have been
reported to you.
This report is intended solely for the use of Management of Advanced Lighting
Technologies, Inc., and should not be used by those who have not agreed to the
procedures and taken responsibility for the sufficiency of the procedures for
their purposes.
(Date)
<PAGE> 144
ADVANCED LIGHTING TECHNOLOGIES, INC.
AGREED-UPON PROCEDURES RELATED TO FINANCIAL COVENANT IN GENERAL ELECTRIC
CONTINGENT WARRANT AGREEMENT
1. We compared the consolidated net income (loss), depreciation,
amortization, provision for income taxes, interest expense and
extraordinary gains and losses in the EBITDA Coverage Ratio schedule
with the corresponding dollar amount included in the Company's
unaudited condensed consolidated financial statements included in the
Company's Quarterly Report on Form 10-Q and found the amounts to be in
agreement.
2. We compared the dollar amounts in the EBITDA Coverage Ratio schedule
not directly derived from the unaudited financial statements to the
corresponding dollar amounts derived from the Company's accounting
records and found them to be in agreement.
3. We proved the arithmetical accuracy of EBITDA, as defined, and Interest
Expense, as defined, and found the amounts to be in agreement with the
amounts in the EBITDA Coverage Ratio schedule.
4. We recalculated the EBITDA Coverage Ratio and Average EBITDA Coverage
Ratio for the respective Determination Period and found the amounts
calculated to be in agreement with the amounts in the EBITDA Coverage
Ratio schedule.
<PAGE> 145
ADVANCED LIGHTING TECHNOLOGIES, INC.
EBITDA Coverage Ratio Schedule
Section 2.2 of Contingent Warrant Agreement dated September 30, 1999
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Most Recent
Two Consecutive
Quarter Ended Fiscal Quarters
Sept. 30, 1999 Dec. 31, 1999 Combined
-------------- ------------- ------------------
<S> <C> <C> <C>
EBITDA COVERAGE RATIO
EBITDA, as defined
Consolidated Net Income (Loss)
Plus:
Depreciation
Amortization
Interest Expense
Provision for Income Taxes ___________ ____________ ____________
Less:
Extraordinary Gains
Gains from Sale of Assets ___________ ____________ ____________
Plus:
Extraordinary Losses
Losses from Sale of Assets ___________ ____________ ____________
EBITDA, as defined
=========== ============ ============
Interest Expense, as defined
Interest Expense
Less:
Interest Income
Deferred Financing Cost (a) ___________ ____________ ____________
Interest Expense, as defined
=========== ============ ============
EBITDA Coverage Ratio
EBITDA Coverage Ratio for Determination Period
Average EBITDA Coverage Ratio for Determination Period
Required EBITDA Coverage Ratio 2:1
EBITDA Coverage Ratio Met?
(a) Not to exceed $125 per quarter
Confidential - For Internal Use Only
</TABLE>
<PAGE> 146
EXHIBIT 2.2(f)(ii)
SPECIAL LETTER TO GENERAL ELECTRIC COMPANY
Board of Directors
Advanced Lighting Technologies, Inc.
We have audited, in accordance with generally accepted auditing standards, the
consolidated balance sheet of Advanced Lighting Technologies, Inc. and
Subsidiaries (the "Company") as of June 30, 2000, and the related consolidated
statement of earnings, retained earnings, and cash flows for the year then
ended, and have issued our report thereon dated __________________.
In connection with our audit, nothing came to our attention that caused us to
believe that the Company had failed to comply with the terms of Section 2.2
(EBITDA Coverage Ratio) of the Contingent Warrant Agreement dated _____________.
However, it should be noted that our audit was not directed primarily toward
obtaining knowledge of such noncompliance.
This report is intended solely for the information and use by the Company and
The General Electric Company and should not be used for any other purpose.
(DATE)
<PAGE> 1
Exhibit 10.6
------------
[CONFORMED COPY]
CONTINGENT WARRANT AGREEMENT
----------------------------
THIS CONTINGENT WARRANT AGREEMENT (this "Agreement"), dated as of
September 30, 1999, is among Advanced Lighting Technologies, Inc., an Ohio
corporation (the "Company"), General Electric Company, a New York corporation
("Purchaser"), Wayne R. Hellman ("Hellman"), Hellman, Ltd., an Ohio limited
liability company ("Hellman Ltd."), Wayne R. Hellman, as voting trustee under
Voting Trust Agreement dated October 10, 1995, Alan J. Ruud ("Ruud"), and Alan
J. Ruud, as voting trustee under Voting Trust Agreement dated January 2, 1998.
The parties hereto agree as follows:
SECTION 1
DEFINITIONS
The following terms when used in this Agreement shall, except where the
context otherwise requires, have the following meanings (such definitions to be
equally applicable to the singular and plural forms thereof):
"ACCOUNTANT'S CERTIFICATE" shall have the meaning provided in clause f.
of Section 2.2.
"AFFILIATE" shall mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGREEMENT" shall mean this Contingent Warrant Agreement as originally
executed and as amended, modified or supplemented from time to time.
"APPRAISED VALUE" shall mean, in respect of any Common Share on any
date herein specified, the fair saleable value of such Common Share (determined
without giving effect to the discount for (i) a minority interest, or (ii) any
lack of liquidity of the Common Share, or (iii) to the fact that the Company may
have no class of equity registered under the Exchange Act) based on the equity
value of Company, as determined by an investment banking or valuation firm
selected in accordance with the following sentences, divided by the number of
Common Shares outstanding on a Fully Diluted Basis as determined in accordance
with GAAP (assuming the payment of the exercise prices for such shares). The
determination of the Appraised Value per Common Share shall be made by an
investment banking or valuation firm of nationally recognized standing selected
by the Company and acceptable to Purchaser. If the investment banking or
valuation firm selected by Company is not acceptable to Purchaser and the
Company and Purchaser cannot agree on a mutually acceptable investment banking
or valuation firm, then
<PAGE> 2
Purchaser and the Company shall each choose one such investment banking or
valuation firm and the respective chosen firms shall agree on another investment
banking or valuation firm which shall make the determination. The Company shall
retain, at its sole cost, such investment banking or valuation firm as may be
necessary for the determination of Appraised Value required by the terms of this
Agreement.
"BUSINESS DAY" shall mean any day that is not a Saturday or Sunday or
a day on which banks are required to be closed in the State of New York.
"COMMON SHARES" shall mean the Common Shares, par value $.001, of the
Company.
"COMPANY" shall mean Advanced Lighting Technologies, Inc., an Ohio
corporation.
"COMPANY BENEFICIAL OWNER" shall have the meaning provided in Section
2.3.
"CONTINGENT SHARES" shall have the meaning provided in Section 2.1.
"CONVERSION SHARES" shall mean the Common Shares to be issued upon the
conversion of Series A Shares.
"CURRENT MARKET PRICE" shall mean, in respect of any Common Share on
any date herein specified, if there shall then be a public market for the Common
Shares, the average of the daily market prices for twenty (20) consecutive
Business Days immediately preceeding such date or, if there is no such public
market, the Appraised Value per Common Share. The daily market price for each
such Business Day shall be (i) the last sale price on such day on the principal
stock exchange or NASDAQ-NMS on which such Common Shares are then listed or
admitted to trading, or (ii) if no sale takes place on such day on any such
exchange or NASDAQ-NMS, the average of the last reported closing bid and asked
prices on such day as officially quoted on any such exchange or NASDAQ-NMS, or
(iii) if the Common Shares are not then listed or admitted to trading on any
stock exchange or NASDAQ-NMS, the average of the last reported closing bid and
asked prices on such day in the over-the-counter market, as furnished by the
NASDAQ or the National Quotation Bureau, Inc., or (iv) if neither such
corporation at the time is engaged in the business of reporting such prices, as
furnished by any similar firm then engaged in such business, or (v) if there is
no such firm, as furnished by any member of the NASD selected mutually by the
Company and Purchaser or, if they cannot agree upon such selection, as selected
by two such members of the NASD, one of which shall be selected by the Company
and one of which shall be selected by Purchaser.
"EBITDA" shall mean, for any period and without duplication, net
earnings (loss) of the Company and its Subsidiaries determined on a consolidated
basis for such period plus the sum of the following amounts (but only to the
extent included in determining net income (loss) for such period): (i)
depreciation and amortization expense for such period, plus (ii) Interest
Expense for such period, plus (iii) the amount of any reduction pursuant to the
proviso of the definition of Interest Expense in this Section 1, plus (iv)
income tax expense in respect of such period, minus (v) extraordinary gains and
gains from sales of assets for such period, plus (vi) extraordinary losses and
losses from sales of assets for such period. EBITDA shall be
2
<PAGE> 3
determined using generally accepted accounting principles and practices in
effect on the date of this Agreement.
"EBITDA RATIO" shall mean, for any period of determination, the ratio
of (i) EBITDA to (ii) Interest Expense.
"EXCESS HELLMAN SHARES PROXY" shall mean the irrevocable proxy granted
by Wayne R. Hellman, individually, Wayne R. Hellman, in his capacity as trustee
of the Hellman Voting Trust, and Hellman Ltd. to Purchaser, the form of which is
attached hereto as Exhibit A, to, among other things, vote the Excess Hellman
Shares.
"EXCESS HELLMAN SHARES" shall mean that number of Common Shares equal
to the sum of the number of Hellman Option Shares and the Ruud Option Shares.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FIRST CONTINGENT WARRANT" shall have the meaning provided in
subclause (vi) of clause c. of Section 2.2.
"FULLY DILUTED BASIS" means, with respect to any determination or
calculation, that such determination or calculation is performed on a fully
diluted basis (assuming the issuance of all Common Shares issuable under any
then outstanding options, warrants or convertible securities of any kind)
determined in accordance with GAAP for purposes of determining book value or net
income per share.
"GAAP" shall mean generally accepted accounting principles as in effect
on the date hereof and consistently applied and maintained throughout the period
indicated. Whenever any accounting term is used herein which is not otherwise
defined, it shall have the meaning ascribed thereto under GAAP.
"GOVERNMENTAL BODY" shall mean any nation or government, any state or
other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, in each case to the extent the same has jurisdiction over the
Person or property in question, including, but not limited to, any governmental
authority, agency, board, commission, court, department or instrumentality of
the United States, any State of the United States or any political subdivision
thereof, and any tribunal or arbitrator(s) of competent jurisdiction, and any
self-regulatory groups of which the Company, any Subsidiary or Purchaser is a
member or is subject.
"HELLMAN LTD." shall mean Hellman Ltd., an Ohio limited liability
company.
"HELLMAN OPTION SHARES" shall mean Common Shares owned by Wayne R.
Hellman, individually, in an amount equal to fifty percent (50%) of the Total
Option Shares.
"HELLMAN OPTION SHARES PROXY" shall mean the irrevocable proxy granted
by Wayne R. Hellman, individually, to Purchaser, the form of which is attached
hereto as Exhibit B, to, among other things, vote the Hellman Option Shares.
3
<PAGE> 4
"HELLMAN SHARES" shall mean, collectively, all Common Shares held, of
record or beneficially, by Wayne R. Hellman, individually, Wayne R. Hellman, in
his capacity as trustee of the Hellman Voting Trust, and Hellman Ltd.
"HELLMAN SHARES PROXY" shall mean the irrevocable proxy granted by
Wayne R. Hellman, individually, Wayne R. Hellman, in his capacity as trustee of
the Hellman Voting Trust, and Hellman Ltd. to Purchaser, the form of which is
attached hereto as Exhibit C, to, among other things, vote the Net Hellman
Shares.
"HELLMAN VOTING TRUST" shall mean the Voting Trust Agreement, dated as
of October 10, 1995, as amended, between Wayne R. Hellman, as voting trustee,
and certain shareholders of the Company. As used herein, the term Hellman Voting
Trust shall include any irrevocable proxies granted to Wayne R. Hellman with
respect to shares withdrawn from the Hellman Voting Trust and deposited in
margin accounts by the beneficial holders thereof.
"INTEREST EXPENSE" shall mean, for any period (a) the total
consolidated interest expense of the Company and its Subsidiaries determined on
a consolidated basis and in any event shall include all interest expense with
respect to any indebtedness in respect of which the Company or any Subsidiary is
wholly or partially liable excluding interest on indebtedness to the Company
from any Subsidiary and interest on indebtedness to any Subsidiary from the
Company; provided, however, the amount of interest expense determined in
accordance with GAAP for any period shall be reduced by any amortization of
deferred financing costs in an amount up to but not exceeding $125,000 with
respect to any single fiscal quarter, minus (b) gross interest income of the
Company and its Subsidiaries determined on a consolidated basis.
"NASDAQ APPROVAL" shall mean approval of the transactions contemplated
by the Stock Purchase Agreement by the shareholders of the Corporation pursuant
to NASDAQ Rule 4460(i)(D).
"NET HELLMAN SHARES" shall mean the Hellman Shares less that number of
Common Shares that are represented by the Hellman Option Shares Proxy plus the
Ruud Option Shares Proxy.
"NET RUUD SHARES" shall mean the Ruud Shares less that number of Common
Shares that are represented by the Ruud Option Shares Proxy.
"OPTION AGREEMENT" shall mean the Option Agreement, of even date
herewith, among Purchaser, Hellman and Ruud, under which Purchaser is granted an
option to purchase the Hellman Option Shares and the Ruud Option Shares.
"PERMITTED ISSUANCES" shall mean (i) the issuance or conversion of
options issued pursuant to any stock option plan, employee incentive plan,
employee stock purchase plan or employee retirement and savings plan approved by
the Company's Board of Directors, (ii) the issuance of Conversion Shares,
Contingent Shares or Warrant Shares, and (iii) the issuance of Common Shares to
satisfy obligations in respect of acquisitions of securities or assets of any
Person, provided (A) such contracts were entered into prior to September 30,
1999, and (B) the number of Common Shares subject to this subclause (iii) shall
not exceed 110,000 in the aggregate.
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<PAGE> 5
"PERSON" shall mean any natural person, corporation, firm, partnership,
association, government, governmental agency or other entity, whether acting in
an individual, fiduciary or other capacity.
"PREFERRED SHARES" shall mean the Series A Shares.
"PROCEEDING" shall have the meaning provided in Section 2.3.
"PURCHASER" shall mean General Electric Company, a New York
corporation.
"REQUIRED RATIO" shall mean 2 to 1.
"RUUD OPTION SHARES" shall mean Common Shares owned by Alan J. Ruud,
individually, in an amount equal to fifty percent (50%) of the Total Option
Shares.
"RUUD OPTION SHARES PROXY" shall mean the irrevocable proxy granted by
Alan J. Ruud, individually, to Purchaser, the form of which is attached hereto
as Exhibit D, to, among other things, vote the Ruud Option Shares.
"RUUD SHARES" shall mean, collectively, all Common Shares held, of
record or beneficially, by Alan J. Ruud, individually, and Alan J. Ruud, in his
capacity as trustee of the Ruud Voting Trust.
"RUUD SHARES PROXY" shall mean the irrevocable proxy granted by Alan J.
Ruud, individually, and Alan J. Ruud, in his capacity as trustee of the Ruud
Voting Trust, to Purchaser, the form of which is attached hereto as Exhibit E,
to, among other things, vote the Net Ruud Shares.
"RUUD VOTING TRUST" shall mean the Voting Trust Agreement, dated as of
January 2, 1998, as amended, between Alan J. Ruud, as voting trustee, and
certain shareholders of the Company. As used herein, the term Ruud Voting Trust
shall include any irrevocable proxies granted to Alan J. Ruud with respect to
shares withdrawn from the Ruud Voting Trust and deposited in margin accounts by
the beneficial holders thereof.
"SECOND CONTINGENT WARRANT" shall have the meaning provided in
subclause (ii) of clause d. of Section 2.2.
"SECOND OCCURRENCE FAILURE" shall have the meaning provided in clause
c. of Section 2.2.
"SERIES A SHARES" shall mean shares of Series A Convertible Preferred
Stock, par value $.001, of the Company.
"STOCK PURCHASE AGREEMENT" shall mean the Stock Purchase Agreement,
dated September 28, 1999, between the Company and Purchaser.
"SUBSIDIARY" of the Company shall mean any other corporation of which
more than 50% of the outstanding shares of capital stock having ordinary voting
power for the election
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<PAGE> 6
of directors is owned directly or indirectly by the Company, by the Company and
one or more Subsidiaries, or by one or more other Subsidiaries.
"THIRD OCCURRENCE FAILURE" shall have the meaning provided in clause d.
of Section 2.2.
"TOTAL OPTION SHARES" shall mean the number of Common Shares that when
combined with all other Common Shares owned by Purchaser or its Affiliates at
the time of determination will result in Purchaser having twenty-five percent
(25%) of the voting power of the Company's capital stock. The time of
determination of the Total Option Shares shall be the first Business Day
immediately following Purchaser's receipt of the Accountant's Certificate
indicating a Second Occurrence Failure.
"WARRANT" shall mean the warrant in the form of Exhibit 1 attached to
the Stock Purchase Agreement.
"WARRANT SHARES" shall mean Common Shares to be issued upon exercise of
the Warrant.
SECTION 2
THE CONTINGENT WARRANTS AND THE CONTINGENT SHARES
2.1 AUTHORIZATION OF THE CONTINGENT SHARES; AGREEMENT TO ISSUE
SECURITIES AND PROVIDE FINANCIAL ACCOMMODATION. The Company has authorized the
issuance and sale on the terms and subject to the conditions of this Agreement
of such number of Common Shares as are necessary for the Company to fulfill its
obligations under the provisions of Sections 2.2.c(vi) and 2.2.d(iii) of this
Agreement (the "Contingent Shares"), in the event Purchaser exercises its rights
under either or both of such Sections. This Agreement is and is intended to be
an agreement for the issuance of securities by the Company and the providing of
financial accommodation to the Company within the meaning of Section 365(c)(2)
of Title 11 of the United States Code.
2.2 EBITDA COVERAGE RATIO; VESTING OF RIGHTS UNDER WARRANTS; ISSUANCE
OF CONTINGENT WARRANTS; PROXIES.
a. The Company shall not permit the average of the Company's
EBITDA Ratio for any two consecutive fiscal quarters, commencing with the
average for the fiscal quarters ending September 30, 1999 and December 31, 1999,
and continuing each fiscal quarter thereafter (each, a "Determination Period"),
to be less than the Required Ratio.
b. Intentionally Omitted.
c. Except as provided in clause e. below and subject to
with the terms of the Ohio Control Share Acquisition Act, if applicable, upon
the second occurrence of the EBITDA Ratio being ess than the Required Ratio for
any Determination Period (a "Second Occurrence Failure"):
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<PAGE> 7
(i) The Hellman Shares Proxy shall become effective upon
expiration of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 applicable to the acquisition of an option and a proxy
in respect of the Hellman Option Shares and the Ruud Option Shares pursuant to
the Option Agreement, the Hellman Option Shares Proxy and the Ruud Option Shares
Proxy (the "Option Waiting Period") and from and after such date Purchaser may
exercise its rights under the Hellman Shares Proxy, including, without
limitation, its rights to vote the Net Hellman Shares; and
(ii) The Hellman Option Shares Proxy shall become effective
upon expiration of the Option Waiting Period and from and after such date
Purchaser may exercise its rights under the Hellman Option Shares Proxy,
including, without limitation, its rights to vote the Hellman Option Shares; and
(iii) The Ruud Option Shares Proxy shall become effective
upon expiration of the Option Waiting Period and from and after such date
Purchaser may exercise its rights under the Ruud Option Shares Proxy, including,
without limitation, its rights to vote the Ruud Option Shares; and
(iv) Purchaser shall exercise the Warrant; and
(v) Purchaser shall have the right and option to purchase
the Ruud Option Shares and the Hellman Option Shares pursuant to the terms of
the Option Agreement, the form of which is attached hereto as Exhibit F. The
parties acknowledge and agree that in determining the number of Total Option
Shares the Warrant Shares will be counted among the Common Shares owned by
Purchaser. The Option Agreement shall provide, among other things, that the
Options (as defined in the Option Agreement) may be exercised only after all
governmental and regulatory approvals (including, without limitation, any
approvals required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended) necessary in connection with Purchaser's ownership of a 25%
interest in the Company have been obtained and that the Option Period (as
defined in the Option Agreement) shall be extended so that it expires on the
later of: (A) the one-year anniversary of the date of Purchaser's receipt of the
Accountant's Certificate indicating a Second Occurrence Failure and (B) the
close of business on the 30th day following receipt of all necessary
governmental and regulatory approvals necessary in connection with Purchaser's
ownership of a 25% interest in the Company; and
(vi) Subject to NASDAQ Approval, the Company shall issue to
Purchaser a warrant in the form attached hereto as EXHIBIT 2.2(c) (the "First
Contingent Warrant") granting Purchaser the right to purchase, in accordance
with the terms set forth in such First Contingent Warrant and at the Current
Market Price (determined at the time the event giving rise to the issuance of
the First Contingent Warrant occurred), that number of additional Common Shares
necessary to give Purchaser a majority of the voting power of the Company's
capital stock (assuming for purposes of making such determination that (A)
Purchaser has fully exercised the Warrant, (B) Purchaser has not transferred, or
transferred the right to vote, any Warrant Shares, Preferred Shares or
Conversion Shares, and (C) Purchaser has the power and authority to vote the
Hellman Shares and the Ruud Shares). The First Contingent Warrant shall be
delivered to Purchaser no later than the third Business Day following the
Purchaser's receipt of the Accountant's Certificate indicating a Second
Occurrence Failure.
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<PAGE> 8
d. Except as provided in clause e. below and subject to
compliance with the terms of the Ohio Control Share Acquisition Act, if
applicable, upon the third occurrence of the EBITDA Ratio being less than the
Required Ratio for any Determination Period (a "Third Occurrence Failure"):
(i) The Ruud Shares Proxy shall become effective (provided
the Option Waiting Period has lapsed as of such date) and from and after such
date Purchaser may exercise its rights under the Ruud Shares Proxy, including,
without limitation, its rights to vote the Net Ruud Shares; and
(ii) The Excess Hellman Shares Proxy shall become effective
(provided the Option Waiting Period has lapsed as of such date) and from and
after such date Purchaser may exercise its rights under the Excess Hellman
Shares Proxy, including, without limitation, its rights to vote the Excess
Hellman Shares; and
(iii) Subject to NASDAQ Approval, the Company shall issue
to Purchaser a warrant (in addition to any First Contingent Warrant issued to
Purchaser in accordance with Section 2.2.c (vi) hereof) in the form attached
hereto as EXHIBIT 2.2(d) (the "Second Contingent Warrant") granting Purchaser
the right to purchase, in accordance with the terms set forth in such Second
Contingent Warrant and at the Current Market Price (determined at the time the
event giving rise to the issuance of the Second Contingent Warrant occurred)
that number of additional Common Shares necessary to give Purchaser a majority
of the voting power of the Company's capital stock (taking into account the
Hellman Shares and the Ruud Shares over which the Company has actual voting
control pursuant to the provisions of this Section 2.2 and assuming for the
purpose of making such determination that (A) Purchaser has fully exercised the
Warrant and (B) Purchaser has not transferred, or transferred the right to vote,
any Warrant Shares, Preferred Shares or Conversion Shares). The Second
Contingent Warrant shall be delivered to Purchaser no later than the third
Business Day following the Third Occurrence Failure.
e. If the EBITDA Ratio for any three consecutive fiscal
quarters immediately preceding a failure by the Company to meet the Required
Ratio for a Determination Period, other than the first Determination Period
ending December 31, 1999, is at least 2 to 1, then the failure to meet the
Required Ratio for such Determination Period (the "Most Recent Determination
Period") shall not be deemed to be a "Second Occurrence Failure" or a "Third
Occurrence Failure", as the case may be, for the purposes of this Section 2.2;
provided, however, that the EBITDA Ratio for the last full fiscal quarter
included in the Most Recent Determination Period will be the EBITDA Ratio for
the first full fiscal quarter included in the determination of the Required
Ratio for the Determination Period immediately succeeding the Most Recent
Determination Period.
f. The Company shall deliver to Purchaser (i) as soon as
practicable following, but in no event later than the 45th Business Day
following, the end of each fiscal quarter of the Company, commencing with the
fiscal quarter ending December 31, 1999, an "agreed upon procedures" letter of
the Company's independent certified public accountants in the form of Exhibit
2.2f(i) setting forth the calculation of the EBITDA Ratio (together with such
supporting information as Purchaser may reasonably request to verify the EBITDA
Ratio) for the most recently completed Determination Period, and (ii) as soon as
practicable following, but in
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<PAGE> 9
no event later than the 90th Business Day following the end of each fiscal year
of the Company, commencing with the fiscal year ending June 30, 2000, a
certificate of the Company's independent certified public accountants in the
form of Exhibit 2.2f(ii) setting forth the calculation of the EBITDA Ratio
(together with such supporting information as Purchaser may reasonably request
to verify the EBITDA Ratio) for such fiscal year and for the most recently
completed Determination Period and certifying that such calculations are true
and correct (each such letter and certificate is referred to as an "Accountant's
Certificate").
2.3 PURCHASER'S RIGHTS IN THE EVENT OF GOVERNMENTAL PROCEEDING. If
any action or proceeding (a "Proceeding") before any Governmental Body or agency
is pending or threatened against the Company or any beneficial owner of 5% or
more of any class of equity securities of the Company (a "Company Beneficial
Owner"), including, without limitation, any Proceeding (i) seeking to adjudicate
the Company or any Company Beneficial Owner a bankrupt or insolvent or seeking
the appointment of a receiver, trustee, custodian or other similar official for
it, him or her or for any substantial part of its, his or her assets, or (ii) in
which the Company or any Company Beneficial Owner shall seek protection or
relief under any law relating to bankruptcy, insolvency, relief or protection of
debtors, and such Proceeding, directly or indirectly, prevents Purchaser from
exercising or realizing any of its rights under clauses c. or d. of Section 2.2
of this Agreement, then, automatically and without further action on the part of
the Company or Purchaser, Purchaser shall be entitled to simultaneously exercise
or realize its rights under clauses c. and d.of Section 2.2 of this Agreement to
the same extent as if there had occurred a Second Occurrence Failure and a Third
Occurrence Failure.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 INVESTMENT. At the time of any Second Occurrence Failure or a
Third Occurrence Failure, and at the time of any exercise by Purchaser of any of
its purchase rights under the First Contingent Warrant or the Second Contingent
Warrant, Purchaser will be acquiring, respectively, the First Contingent Warrant
and the Second Contingent Warrant, and the Contingent Shares, for investment for
Purchaser's own account, not as a nominee or agent and not with the view to, or
for resale in connection with, any distribution thereof. Purchaser understands
that none of the Contingent Shares have been, nor will they be (other than in
accordance with the terms of the Registration Rights Agreement referred to in
Section 4.1(g)(ii) of the Stock Purchase Agreement), registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act that depends upon, among other things, the bona
fide nature of the investment intent and the accuracy of Purchaser's
representations as expressed herein.
SECTION 4
CONDITIONS TO OBLIGATIONS OF THE COMPANY
4.1 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to issue the First Contingent Warrant and the Second Contingent Warrant
are subject to the satisfaction of each of the following conditions precedent,
to the extent applicable, on or
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<PAGE> 10
before the applicable Second Occurrence Failure and Third Occurrence Failure,
respectively, unless waived by the Company in writing:
a. REPRESENTATIONS TRUE. All of the representations and
warranties made by Purchaser to the Company in this Agreement shall be true and
correct when made and, in all material respects, as of the applicable Second
Occurrence Failure and Third Occurrence Failure, respectively.
b. REGULATORY APPROVALS. Purchaser and the Company shall have
received all governmental and other approvals required under any applicable
laws, statutes, orders, rules, regulations or policies, or any guidelines
promulgated thereunder, including, without limitation, under the
Hart-Scott-Rodino Antitrust Improvements Act, as amended.
SECTION 5
MISCELLANEOUS
5.1 EXPENSES. The Company will pay, or reimburse Purchaser and hold
Purchaser harmless against liability for the payment of, all stamp and other
taxes which may be payable in respect of the execution and delivery of this
Agreement, the issuance of the First Contingent Warrant or the Second Contingent
Warrant and the issuance, purchase and delivery of Contingent Shares.
5.2 BINDING AGREEMENT; ASSIGNMENT. The provisions of this Agreement
shall be binding upon and inure to the benefit of the successors and permitted
assigns of the parties hereto. Purchaser shall not have the right to assign this
Agreement or any of its rights and obligations hereunder, except to any
Affiliate of Purchaser, without the consent of the Company.
5.3 NOTICES. All notices and other communications required or
permitted under this Agreement shall be deemed to have been duly given and made
if in writing and if served either by personal delivery to the party for whom
intended (which shall include delivery by Federal Express or similar service) or
three (3) business days after being deposited, postage prepaid, certified or
registered mail, return receipt requested, in the United States mail bearing the
address shown in this Agreement for, or such other address as may be designated
in writing hereafter by, such party:
a. If to Purchaser:
GE Lighting
1975 Noble Rd.
Cleveland, OH 44112
Attention: President and Chief Executive Officer
Facsimile: (216) 266-8699
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<PAGE> 11
with a copy to:
GE Lighting
1975 Noble Rd.
Cleveland, OH 44112
Attention: General Counsel
Facsimile: (216) 266-3856
b. If to the Company:
Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
Attention: CEO
with a copy to:
Cowden, Humphrey & Sarlson Co., L.P.A.
1414 Terminal Tower
Cleveland, Ohio 44113
Attention: James S. Hogg, Esq.
Facsimile: (216) 241-2881
5.4 WAIVER. No delay on the part of any party hereto with respect to
the exercise of any right, power, privilege, or remedy under this Agreement
shall operate as a waiver thereof, nor shall any exercise or partial exercise of
any such right, power, privilege, or remedy preclude any further exercise
thereof or the exercise of any other right, power, privilege, or remedy. No
modification or waiver by either party hereto of any provision of this
Agreement, or consent to any departure by the other party therefrom, shall be
effective in any event unless in writing as set forth in Section 5.3, and then
only in the specific instance and for the purpose for which given.
Notwithstanding the foregoing, each party hereto shall have the right to waive
compliance by the other party with any of the provisions hereof, or to modify
such provisions to a less restrictive obligation of the other party on such
terms as such party shall determine, with or without prior notice to the other
party.
5.5 REMEDIES. The rights, powers, privileges, and remedies hereunder
are cumulative and not exclusive of any other right, power, privilege, or remedy
the parties hereto would otherwise have.
5.6 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and understanding between Purchaser and the Company with respect to the subject
matter hereof, and supersedes all prior agreements and understandings relating
to the subject matter hereof.
5.7 LAW GOVERNING. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to
principles of conflicts of law.
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<PAGE> 12
5.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
5.9 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
5.10 CROSS-REFERENCES. References in this Agreement to any section are,
unless otherwise specified, to such section of this Agreement.
5.11 HEADINGS. The various headings of this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
5.12 AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement will be
effective unless such modification, amendment or waiver is approved in writing
by the Company and Purchaser. The failure of any party to enforce any of the
provisions of this Agreement will in no way be construed as a waiver of such
provisions and will not affect the right of such party thereafter to enforce
each and every provision of this Agreement.
5.13 TERM. This Agreement shall commence on the date hereof and end on
the eleventh anniversary of the date hereof.
5.14 RIGHT TO PURCHASE. Except for Permitted Issuances, if at any time
after a Third Occurrence Failure the Company authorizes the issuance or sale of
any equity securities or securities containing options or rights to acquire any
shares of equity securities of the Company (any such securities or debt, the
"Offered Securities"), then, subject to NASDAQ Approval, the Company shall first
offer to sell the Offered Securities to Purchaser by written notice to Purchaser
(the "Company Notice"). Purchaser may elect to purchase Purchaser's pro rata
share (determined by the ratio of Purchaser's then existing holdings of Common
Shares and Common Share equivalents (including, without limitation, Conversion
Shares) to the total holdings of all shareholders of the Company on a fully
diluted basis (assuming exercise of the Warrant immediately prior to the date of
the applicable purchase in accordance with the terms of the Warrant) of the
Offered Securities at the price and on the terms specified in the Company Notice
by delivering written notice of such election to the Company within 20 days
after delivery of the Company Notice. Upon the expiration of the offering period
described above, the Company shall be entitled to sell such of the Offered
Securities which the Purchaser has not elected to purchase during the 90 days
following such expiration on terms and conditions no more favorable to the
purchasers thereof than those offered to the Purchaser. Any Offered Securities
offered or sold by the Company after such 90-day period must be reoffered to the
Purchaser pursuant to the terms of this Section 5.14. The rights of Purchaser
under this Section 5.14 shall terminate upon expiration of the term of this
Agreement as set forth in Section 5.13 hereof.
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement
to be executed in the name and on behalf of each of them by one of their
respective officers, thereunto duly authorized, as of the date first above
written.
THE COMPANY:
ADVANCED LIGHTING TECHNOLOGIES, INC.
By: /s/ Wayne Hellman
------------------------------------
Name: Wayne R. Hellman
--------------------------------
Title: Chairman & CEO
-------------------------------
/s/ Wayne R. Hellman
---------------------------------------
Wayne R. Hellman
/s/ Wayne Hellman
---------------------------------------
Wayne R. Hellman, as voting trustee
under Voting Trust Agreement dated
October 10, 1995, as amended
Hellman Ltd.
By: /s/ Wayne Hellman
------------------------------------
Its: Managing Member
----------------------------------
/s/ Alan J. Ruud
---------------------------------------
Alan J. Ruud
/s/ Alan J. Ruud
---------------------------------------
Alan J. Ruud, as voting trustee under
Voting Trust Agreement dated
January 2, 1998, as amended
PURCHASER:
GENERAL ELECTRIC COMPANY
By: /s/ MS Zafirovski
------------------------------------
Name: Mike S. Zafirovski
--------------------------------
Title: President and CEO, GE Lighting
------------------------------
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<PAGE> 14
EXHIBIT A
EXCESS HELLMAN SHARES
---------------------
IRREVOCABLE PROXY
-----------------
The undersigned each hereby appoint GENERAL ELECTRIC COMPANY, a New York
corporation ("GE"), attorney and proxy of each of the undersigned, with full
power of substitution, with respect to the Excess Hellman Shares (as defined in
the Contingent Warrant Agreement of even date herewith between Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and GE (the "Contingent
Warrant Agreement")), to exercise and enjoy the right to vote the Excess Hellman
Shares and to participate in and consent or refuse to consent to any and all
corporate or shareholders' actions of any character, all in its sole and
absolute discretion. The undersigned shall retain the exclusive right to receive
and retain any distributions of property (except common or preferred shares of
the Company) made by the Company in the form of dividends with respect to the
Excess Hellman Shares or upon the liquidation, dissolution or winding up of the
Company. The matters regarding which GE shall be entitled to vote in its sole
and absolute discretion shall include, by way of example but not limitation, any
sale of substantially all of the assets of, or any liquidation of, the Company;
any increase or decrease in the authorized or outstanding number of shares of
any class of shares of the Company; any merger or consolidation involving the
Company; any acquisition by the Company of any other business or of
substantially all of the assets thereof; any election of directors of the
Company; any amendment to the articles of incorporation or code of regulations
of the Company; or any recapitalization or reorganization of the Company. The
proxy granted hereunder shall be effective from and after the later of (i) the
date of expiration of the Option Waiting Period (as defined in Section 2.2(c)(i)
of the Contingent Warrant Agreement), or (ii) the date of receipt by GE of the
Accountant's Certificate (as defined in the Contingent Warrant Agreement)
indicating a Third Occurrence Failure (as defined in the Contingent Warrant
Agreement), and shall terminate on the date of termination of the Hellman Shares
Proxy (as defined in the Contingent Warrant Agreement). The proxy granted
hereunder shall be irrevocable and shall be coupled with an interest and shall
be binding and enforceable on and against the respective heirs, personal
representatives, successors, and assigns of each of the undersigned, and the
proxy shall not be revoked or terminated by the death, disability, bankruptcy,
incompetency, dissolution or termination of any of the undersigned, or their
respective successors and assigns. In the event of any conflict between the
provisions of this document and the provisions of the Contingent Warrant
Agreement, the provisions of this document shall govern. This document shall be
governed by the laws of the State of Ohio.
The undersigned hereby execute and grant this proxy as of the _______ day of
__________, 1999.
---------------------------------------
Wayne R. Hellman
---------------------------------------
Wayne R. Hellman, as voting trustee
under Voting Trust Agreement dated
October 10, 1995, as amended
HELLMAN, LTD.
By:____________________________________
Its:___________________________________
<PAGE> 15
EXHIBIT B
---------
HELLMAN OPTION SHARES
---------------------
IRREVOCABLE PROXY
-----------------
The undersigned hereby appoints GENERAL ELECTRIC COMPANY, a New York corporation
("GE"), attorney and proxy of the undersigned, with full power of substitution,
with respect to the Hellman Option Shares (as defined in the Contingent Warrant
Agreement of even date herewith between Advanced Lighting Technologies, Inc., an
Ohio corporation (the "Company"), and GE (the "Contingent Warrant Agreement")),
to exercise and enjoy the right to vote the Hellman Option Shares and to
participate in and consent or refuse to consent to any and all corporate or
shareholders' actions of any character, all in its sole and absolute discretion.
The undersigned shall retain the exclusive right to receive and retain any
distributions of property (except common or preferred shares of the Company)
made by the Company in the form of dividends with respect to the Hellman Option
Shares or upon the liquidation, dissolution or winding up of the Company. The
matters regarding which GE shall be entitled to vote in its sole and absolute
discretion shall include, by way of example but not limitation, any sale of
substantially all of the assets of, or any liquidation of, the Company; any
increase or decrease in the authorized or outstanding number of shares of any
class of shares of the Company; any merger or consolidation involving the
Company; any acquisition by the Company of any other business or of
substantially all of the assets thereof; any election of directors of the
Company; any amendment to the articles of incorporation or code of regulations
of the Company; or any recapitalization or reorganization of the Company. The
proxy granted hereunder shall be effective upon expiration of the Option Waiting
Period (as defined in Section 2.2(c)(i) of the Contingent Warrant Agreement) and
shall end on the earlier of: (i) the Redemption Date (as defined in Second
Amended and Restated Articles of Incorporation of the Company, as amended), if
during the three (3) year period immediately preceding the Redemption Date GE
shall not have received an Accountant's Certificate (as defined in the
Contingent Warrant Agreement) indicating an occurrence of the EBITDA Ratio (as
defined in the Contingent Warrant Agreement) being less than the Required Ratio
(as defined in the Contingent Warrant Agreement) for any Determination Period
(as defined in the Contingent Warrant Agreement), or (ii) eleven (11) years
after the date GE has received the Accountant's Certificate indicating a Second
Occurrence Failure (as defined in the Contingent Warrant Agreement). The proxy
granted hereunder shall be irrevocable and shall be coupled with an interest and
shall be binding and enforceable on and against the heirs, personal
representatives, successors, and assigns of the undersigned, and the proxy shall
not be revoked or terminated by the death, disability, bankruptcy, or
incompetency of the undersigned, or his respective successors and assigns. In
the event of any conflict between the provisions of this document and the
provisions of the Contingent Warrant Agreement, the provisions of this document
shall govern. This document shall be governed by the laws of the State of Ohio.
The undersigned hereby executes and grants this proxy as of the _______ day of
__________, 1999.
---------------------------------------
Wayne R. Hellman
<PAGE> 16
EXHIBIT C
---------
NET HELLMAN SHARES
------------------
IRREVOCABLE PROXY
-----------------
The undersigned each hereby appoint GENERAL ELECTRIC COMPANY, a New York
corporation ("GE"), attorney and proxy of each of the undersigned, with full
power of substitution, with respect to the Net Hellman Shares (as defined in the
Contingent Warrant Agreement of even date herewith between Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and GE (the "Contingent
Warrant Agreement")), to exercise and enjoy the right to vote the Net Hellman
Shares and to participate in and consent or refuse to consent to any and all
corporate or shareholders' actions of any character, all in its sole and
absolute discretion. The undersigned shall retain the exclusive right to receive
and retain any distributions of property (except common or preferred shares of
the Company) made by the Company in the form of dividends with respect to the
Net Hellman Shares or upon the liquidation, dissolution or winding up of the
Company. The matters regarding which GE shall be entitled to vote in its sole
and absolute discretion shall include, by way of example but not limitation, any
sale of substantially all of the assets of, or any liquidation of, the Company;
any increase or decrease in the authorized or outstanding number of shares of
any class of shares of the Company; any merger or consolidation involving the
Company; any acquisition by the Company of any other business or of
substantially all of the assets thereof; any election of directors of the
Company; any amendment to the articles of incorporation or code of regulations
of the Company; or any recapitalization or reorganization of the Company. To the
extent either of the Hellman Option Shares Proxy (as defined in the Contingent
Warrant Agreement) or the Ruud Option Shares Proxy (as defined in the Contingent
Warrant Agreement) is deemed to be invalid or unenforceable, additional Hellman
Shares (as defined in the Contingent Warrant Agreement) in an amount equal to
the number of Common Shares (as defined in the Contingent Warrant Agreement)
subject to such invalid or unenforceable proxy shall be subject to the proxy
granted hereunder. The proxy granted hereunder shall be effective upon
expiration of the Option Waiting Period (as defined in Section 2.2(c)(i) of the
Contingent Warrant Agreement) and shall end on the earlier of: (i) the
Redemption Date (as defined in Second Amended and Restated Articles of
Incorporation of the Company, as amended), if during the three (3) year period
immediately preceding the Redemption Date GE shall not have received an
Accountant's Certificate (as defined in the Contingent Warrant Agreement)
indicating an occurrence of the EBITDA Ratio (as defined in the Contingent
Warrant Agreement) being less than the Required Ratio (as defined in the
Contingent Warrant Agreement) for any Determination Period (as defined in the
Contingent Warrant Agreement), or (ii) eleven (11) years after the date GE has
received the Accountant's Certificate indicating a Second Occurrence Failure (as
defined in the Contingent Warrant Agreement). The proxy granted hereunder shall
be irrevocable and shall be coupled with an interest and shall be binding and
enforceable on and against the respective heirs, personal representatives,
successors, and assigns of each of the undersigned, and the proxy shall not be
revoked or terminated by the death, disability, bankruptcy, incompetency,
dissolution or termination of any of the undersigned, or their respective
successors and assigns. In the event of any conflict between the provisions of
this document and the provisions of the Contingent Warrant Agreement, the
provisions of this document shall govern. This document shall be governed by the
laws of the State of Ohio.
The undersigned hereby execute and grant this proxy as of the _______ day of
__________, 1999.
----------------------------------------
Wayne R. Hellman
---------------------------------------
Wayne R. Hellman, as voting trustee
under Voting Trust Agreement dated
October 10, 1995, as amended
HELLMAN, LTD.
By:_____________________________________
Its:____________________________________
<PAGE> 17
EXHIBIT D
---------
RUUD OPTION SHARES
------------------
IRREVOCABLE PROXY
-----------------
The undersigned hereby appoints GENERAL ELECTRIC COMPANY, a New York corporation
("GE"), attorney and proxy of the undersigned, with full power of substitution,
with respect to the Ruud Option Shares (as defined in the Contingent Warrant
Agreement of even date herewith between Advanced Lighting Technologies, Inc., an
Ohio corporation (the "Company"), and GE (the "Contingent Warrant Agreement")),
to exercise and enjoy the right to vote the Ruud Option Shares and to
participate in and consent or refuse to consent to any and all corporate or
shareholders' actions of any character, all in its sole and absolute discretion.
The undersigned shall retain the exclusive right to receive and retain any
distributions of property (except common or preferred shares of the Company)
made by the Company in the form of dividends with respect to the Ruud Option
Shares or upon the liquidation, dissolution or winding up of the Company. The
matters regarding which GE shall be entitled to vote in its sole and absolute
discretion shall include, by way of example but not limitation, any sale of
substantially all of the assets of, or any liquidation of, the Company; any
increase or decrease in the authorized or outstanding number of shares of any
class of shares of the Company; any merger or consolidation involving the
Company; any acquisition by the Company of any other business or of
substantially all of the assets thereof; any election of directors of the
Company; any amendment to the articles of incorporation or code of regulations
of the Company; or any recapitalization or reorganization of the Company. The
proxy granted hereunder shall be effective upon expiration of the Option Waiting
Period (as defined in Section 2.2(c)(i) of the Contingent Warrant Agreement) and
shall end on the earlier of: (i) the Redemption Date (as defined in Second
Amended and Restated Articles of Incorporation of the Company, as amended), if
during the three (3) year period immediately preceding the Redemption Date GE
shall not have received an Accountant's Certificate (as defined in the
Contingent Warrant Agreement) indicating an occurrence of the EBITDA Ratio (as
defined in the Contingent Warrant Agreement) being less than the Required Ratio
(as defined in the Contingent Warrant Agreement) for any Determination Period
(as defined in the Contingent Warrant Agreement), or (ii) eleven (11) years
after the date GE has received the Accountant's Certificate indicating a Second
Occurrence Failure (as defined in the Contingent Warrant Agreement). The proxy
granted hereunder shall be irrevocable and shall be coupled with an interest and
shall be binding and enforceable on and against the heirs, personal
representatives, and assigns of the undersigned, and the proxy shall not be
revoked or terminated by the death, disability, bankruptcy, or incompetency of
the undersigned, or his respective successors and assigns. In the event of any
conflict between the provisions of this document and the provisions of the
Contingent Warrant Agreement, the provisions of this document shall govern. This
document shall be governed by the laws of the State of Ohio.
The undersigned hereby executes and grants this proxy as of the _______ day of
__________, 1999.
---------------------------------------
Alan J. Ruud
<PAGE> 18
EXHIBIT E
---------
RUUD SHARES
-----------
IRREVOCABLE PROXY
-----------------
The undersigned each hereby appoint GENERAL ELECTRIC COMPANY, a New York
corporation ("GE"), attorney and proxy of each of the undersigned, with full
power of substitution, with respect to the Net Ruud Shares (as defined in the
Contingent Warrant Agreement dated _________, 1999, between Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company"), and GE (the "Contingent
Warrant Agreement")), to exercise and enjoy the right to vote the Net Ruud
Shares and to participate in and consent or refuse to consent to any and all
corporate or shareholders' actions of any character, all in its sole and
absolute discretion. The undersigned shall retain the exclusive right to receive
and retain any distributions of property (except common or preferred shares of
the Company) made by the Company in the form of dividends with respect to the
Net Ruud Shares or upon the liquidation, dissolution or winding up of the
Company. The matters regarding which GE shall be entitled to vote in its sole
and absolute discretion shall include, by way of example but not limitation, any
sale of substantially all of the assets of, or any liquidation of, the Company;
any increase or decrease in the authorized or outstanding number of shares of
any class of shares of the Company; any merger or consolidation involving the
Company; any acquisition by the Company of any other business or of
substantially all of the assets thereof; any election of directors of the
Company; any amendment to the articles of incorporation or code of regulations
of the Company; or any recapitalization or reorganization of the Company. The
proxy granted hereunder shall be effective from and after the later of (i) the
date of expiration of the Option Waiting Period (as defined in Section 2.2(c)(i)
of the Contingent Warrant Agreement), or (ii) the date of receipt by GE of the
Accountant's Certificate (as defined in the Contingent Warrant Agreement)
indicating a Third Occurrence Failure (as defined in the Contingent Warrant
Agreement), and shall terminate on the date of termination of the Hellman Shares
Proxy (as defined in the Contingent Warrant Agreement). The proxy granted
hereunder shall be irrevocable and shall be coupled with an interest and shall
be binding and enforceable on and against the respective heirs, personal
representatives, successors, and assigns of each of the undersigned, and the
proxy shall not be revoked or terminated by the death, disability, bankruptcy,
incompetency, dissolution or termination of any of the undersigned, or their
respective successors and assigns. In the event of any conflict between the
provisions of this document and the provisions of the Contingent Warrant
Agreement, the provisions of this document shall govern. This document shall be
governed by the laws of the State of Ohio.
The undersigned hereby execute and grant this proxy as of the _______ day of
__________, 1999.
---------------------------------------
Alan J. Ruud
---------------------------------------
Alan J. Ruud, as voting trustee
under the Voting Trust Agreement dated
January 2, 1998, as amended
<PAGE> 19
EXHIBIT F
---------
OPTION AGREEMENT
----------------
THIS OPTION AGREEMENT (this "Agreement"), dated as of
September 30, 1999, is among General Electric Company, a New York corporation
("Purchaser"), Wayne R. Hellman ("Hellman"), and Alan J. Ruud ("Ruud"). Hellman
and Ruud are hereinafter sometimes collectively referred to the "Shareholders".
RECITALS:
---------
A. The Shareholders are shareholders of Advanced Lighting Technologies,
Inc., an Ohio corporation (the "Company").
B. The Company and Purchaser are parties to a Stock Purchase Agreement,
dated September 28, 1999, under which the Company has agreed, among other
things, to sell and Purchaser has agreed to purchase 761,250 shares of preferred
stock of the Company (the "Stock Purchase Agreement").
C. The Company, Purchaser, the Shareholders and certain trusts
controlled by the Shareholders are parties to a Contingent Warrant Agreement of
even date herewith (the "Contingent Warrant Agreement"), under which the Company
has agreed to issue to Purchaser warrants to purchase Common Shares of the
Company upon the happening of certain events and the Shareholders have agreed to
grant Purchaser proxies to vote and options to purchase certain shares of common
stock of the Company held by the Shareholders.
D. It is a condition to Purchaser's consummating the transactions
contemplated by the Stock Purchase Agreement that the Shareholders enter into
this Agreement and grant the options contemplated hereby on the terms and
subject to the conditions contained herein.
NOW, THEREFORE, based upon the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS.
--------- ------------
The following terms when used in this Agreement shall, except where the
context otherwise requires, have the following meanings (such definitions to be
equally applicable to the singular and plural forms thereof):
"Accountant's Certificate" shall have the meaning ascribed thereto in
clause f. of Section 2.2 of the Contingent Warrant Agreement.
"Affiliate" shall mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Option Agreement as originally executed and
as amended, modified or supplemented from time to time.
1
<PAGE> 20
"Appraised Value" shall mean, in respect of any Common Share on any
date herein specified, the fair saleable value of such Common Share (determined
without giving effect to the discount for (i) a minority interest, or (ii) any
lack of liquidity of the Common Share, or (iii) to the fact that the Company may
have no class of equity registered under the Exchange Act) based on the equity
value of Company, as determined by an investment banking or valuation firm
selected in accordance with the following sentences, divided by the number of
Common Shares outstanding on a Fully Diluted Basis as determined in accordance
with GAAP (assuming the payment of the exercise prices for such shares). The
determination of the Appraised Value per Common Share shall be made by an
investment banking or valuation firm of nationally recognized standing selected
by Purchaser and acceptable to the Shareholders. If the investment banking or
valuation firm selected by Purchaser is not acceptable to the Shareholders and
the Purchaser and the Shareholders cannot agree on a mutually acceptable
investment banking or valuation firm, then Purchaser and the Shareholders,
collectively, shall each choose one such investment banking or valuation firm
and the respective chosen firms shall agree on another investment banking or
valuation firm which shall make the determination. The Shareholders shall
retain, at their sole cost, such investment banking or valuation firm as may be
necessary for the determination of Appraised Value required by the terms of this
Agreement.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required to be closed in the State of New York.
"Common Shares" shall mean the Common Shares, par value $.001, of the
Company.
"Company" shall mean Advanced Lighting Technologies, Inc., an Ohio
corporation.
"Contingent Warrant Agreement" shall mean the Contingent Warrant
Agreement, of event date herewith, among the Company, Purchaser, the
Shareholders and certain trusts controlled by the Shareholders.
"Current Market Price" shall mean, in respect of any Common Share on
any date herein specified, if there shall then be a public market for the Common
Shares, the average of the daily market prices for twenty (20) consecutive
Business Days immediately preceding such date or, if there is no such public
market, the Appraised Value per Common Share. The daily market price for each
such Business Day shall be (i) the last sale price on such day on the principal
stock exchange or NASDAQ-NMS on which such Common Shares are then listed or
admitted to trading, or (ii) if no sale takes place on such day on any such
exchange or NASDAQ-NMS, the average of the last reported closing bid and asked
prices on such day as officially quoted on any such exchange or NASDAQ-NMS, or
(iii) if the Common Shares are not then listed or admitted to trading on any
stock exchange or NASDAQ-NMS, the average of the last reported closing bid and
asked prices on such day in the over-the-counter market, as furnished by the
NASDAQ or the National Quotation Bureau, Inc., or (iv) if neither such
corporation at the time is engaged in the business of reporting such prices, as
furnished by any similar firm then engaged in such business, or (v) if there is
no such firm, as furnished by any member of the NASD selected mutually by
Purchaser and the Shareholders or, if they cannot agree upon such selection, as
selected by two such members of the NASD, one of which shall be selected by
Purchaser and one of which shall be selected by the Shareholders.
"Determination Period" shall mean any two consecutive fiscal quarters,
commencing with the fiscal quarters ending September 30, 1999 and December 31,
1999, and continuing each fiscal quarter thereafter.
"EBITDA" shall mean, for any period and without duplication, net
earnings (loss) of the Company and its Subsidiaries determined on a consolidated
basis for such period plus the sum of the
2
<PAGE> 21
following amounts (but only to the extent included in determining net income
(loss) for such period): (i) depreciation and amortization expense for such
period, plus (ii) Interest Expense for such period, plus (iii) the amount of any
reduction pursuant to the proviso of the definition of Interest Expense in this
Section 1, plus (iv) income tax expense in respect of such period, minus (v)
extraordinary gains and gains from sales of assets for such period, plus (vi)
extraordinary losses and losses from sales of assets for such period. EBITDA
shall be determined using generally accepted accounting principles and practices
in effect on the date of this Agreement.
"EBITDA Ratio" shall mean, for any period of determination, the ratio
of (i) EBITDA to (ii) Interest Expense.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fully Diluted Basis" means, with respect to any determination or
calculation, that such determination or calculation is performed on a fully
diluted basis (assuming the issuance of all Common Shares issuable under any
then outstanding options, warrants or convertible securities of any kind)
determined in accordance with GAAP for purposes of determining book value or net
income per share.
"GAAP" shall mean generally accepted accounting principles as in effect
on the date hereof and consistently applied and maintained throughout the period
indicated. Whenever any accounting term is used herein which is not otherwise
defined, it shall have the meaning ascribed thereto under GAAP.
"Hellman" shall mean Wayne R. Hellman.
"Hellman Option" shall have the meaning provided in Section 2.1.
"Hellman Option Shares" shall mean Common Shares owned by Hellman,
individually, in an amount equal to fifty percent (50%) of the Total Option
Shares.
"Interest Expense" shall mean, for any period (a) the total
consolidated interest expense of the Company and its Subsidiaries determined on
a consolidated basis and in any event shall include all interest expense with
respect to any indebtedness in respect of which the Company or any Subsidiary is
wholly or partially liable excluding interest on indebtedness to the Company
from any Subsidiary and interest on indebtedness to any Subsidiary from the
Company; provided, however, the amount of interest expense determined in
accordance with GAAP for any period shall be reduced by any amortization of
deferred financing costs in an amount up to but not exceeding $125,000 with
respect to any single fiscal quarter, minus (b) gross interest income of the
Company and its Subsidiaries determined on a consolidated basis.
"Option Closing" shall have the meaning provided in Section 2.5.
"Option Notice" shall have the meaning provided in Section 2.5.
"Option Period" shall have the meaning provided in Section 2.3.
"Option Purchase Price" shall have the meaning provided in Section 2.4.
"Options" shall have the meaning provided in Section 2.2.
3
<PAGE> 22
"Person" shall mean any natural person, corporation, firm, partnership,
association, government, governmental agency or other entity, whether acting in
an individual, fiduciary or other capacity.
"Purchaser" shall mean General Electric Company, a New York
corporation.
"Required Ratio" shall mean 2 to 1.
"Ruud" shall mean Alan J. Ruud.
"Ruud Option" shall have the meaning provided in Section 2.2.
"Ruud Option Shares" shall mean Common Shares owned by Ruud,
individually, in an amount equal to fifty percent (50%) of the Total Option
Shares.
"Second Occurrence Failure" shall mean the second occurrence of the
Company's EBITDA Ratio being less than the Required Ratio for any Determination
Period.
"Shareholders" shall mean Hellman and Ruud, collectively.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement,
dated September 28, 1999, between the Company and Purchaser.
"Subsidiary" of the Company shall mean any other corporation of which
more than 50% of the outstanding shares of capital stock having ordinary voting
power for the election of directors is owned directly or indirectly by the
Company, by the Company and one or more Subsidiaries, or by one or more other
Subsidiaries.
"Total Option Shares" shall mean the number of Common Shares that when
combined with all other Common Shares owned by Purchaser or its Affiliates at
the time of determination will result in Purchaser having twenty-five percent
(25%) of the voting power of the Company's capital stock. The time of
determination of the Total Option Shares shall be the first Business Day
immediately following Purchaser's receipt of the Accountant's Certificate
indicating a Second Occurrence Failure.
ARTICLE II. OPTION AGREEMENT
----------- ----------------
SECTION 2.1. GRANT OF HELLMAN OPTION. Hellman does hereby
grant to Purchaser, or Purchaser's nominee, the exclusive and irrevocable right,
privilege and option (the "Hellman Option") to purchase at any time or from time
to time during the Option Period, upon the terms and conditions set forth
herein, all but not less than all of the Hellman Option Shares (such Hellman
Option Shares being subject to adjustment from time to time to take into account
any action taken by the Company in respect of its Common Shares, including,
without limitation, stock splits, dividends, combinations and
reclassifications), or any securities into which the Hellman Option Shares
hereafter may be converted.
SECTION 2.2. GRANT OF RUUD OPTION. Ruud does hereby grant to
Purchaser, or Purchaser's nominee, the exclusive and irrevocable right,
privilege and option (the "Ruud Option") to purchase at any time or from time to
time during the Option Period, upon the terms and conditions set forth herein,
all but not less than all of the Ruud Option Shares (such Ruud Option Shares
being subject to adjustment from time to time to take into account any action
taken by the Company in respect of its Common Shares, including, without
limitation, stock splits, dividends, combinations and reclassifications), or any
securities
4
<PAGE> 23
into which the Ruud Option Shares hereafter may be converted. The Hellman Option
and the Ruud Option are hereinafter sometimes collectively referred to as the
"Options".
SECTION 2.3. OPTION PERIOD. The Options are granted on the date hereof
and may be exercised by Purchaser from and after the date Purchaser has received
the Accountant's Certificate indicating a Second Occurrence Failure and ending
on the date that is the later of (i) the one (1) year anniversary of the date of
Purchaser's receipt of the Accountant's Certificate indicating a Second
Occurrence Failure, and (ii) the close of business on the 30th day following
receipt of all governmental and regulatory approvals (including, without
limitation, any approvals required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended) necessary in connection with Purchaser's
ownership of a twenty-five percent (25%) interest in the Company (the "Option
Period").
SECTION 2.4. PURCHASE PRICE. The purchase price of the Hellman Option
Shares and the Ruud Option Shares shall be the Current Market Price of such
shares at the time of the Second Occurrence Failure.
SECTION 2.5. EXERCISE OF THE OPTIONS. Purchaser may exercise the
Options at any time during the Option Period by delivery to Hellman, with
respect to the exercise of the Hellman Option, and to Ruud, with respect to the
exercise of the Ruud Option, of written notice thereof at the notice address for
Hellman and Ruud, respectively, set forth in Section 4.4 hereof (an "Option
Notice"). The Hellman Option and the Ruud Option must both be exercised if
either is exercised. The closing (an "Option Closing") of the purchase and sale
of the Hellman Option Shares or the Ruud Option Shares, as the case may be,
shall occur as soon as practicable after the delivery of the Option Notice
pertaining to such shares but in no event later than ten (10) days from the date
of delivery of that Option Notice. The obligation of Purchaser to consummate the
purchase of any of the Hellman Option Shares or the Ruud Option Shares at any
Option Closing is conditioned upon the receipt by the Company and the
Shareholders of all governmental and regulatory approvals required for the
ownership of the Hellman Option Shares or the Ruud Option Shares, as the case
may be. At an Option Closing, certificates representing the Hellman Option
Shares or the Ruud Option Shares, as the case may be, shall be delivered,
together with stock powers duly executed in blank, to the Purchaser free and
clear of any and all claims, liens, charges, pledges or encumbrances and the
Purchaser shall deliver to Hellman and Ruud, as the case may be, their
respective allocable portion of the Option Purchase Price. Hellman and Ruud
shall pay any and all transfer and similar taxes imposed in connection with the
sale of the Hellman Option Shares and the Ruud Option Shares to Purchaser.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
----------- ------------------------------
The Shareholders jointly and severally represent and warrant to
Purchaser as follows:
SECTION 3.1. CAPACITY; BINDING OBLIGATION. Each Shareholder has the
capacity to enter into this Agreement, to perform its obligations hereunder, and
to consummate the transactions contemplated hereby. This Agreement constitutes
(or will constitute when executed and delivered) a legal, valid, and binding
obligation of each Shareholder, enforceable against each Shareholder in
accordance with its terms. Neither the execution, delivery, and performance of
this Agreement, nor the sale of the Hellman Option Shares or the Ruud Option
Shares will violate any provision of any law, any order of any court or other
agency of government, the Second Amended and Restated Articles of Incorporation
of the Company, as amended, the Code of Regulations of the Company or any
agreement or instrument to which either Shareholder is a party or by which
either Shareholder is bound, or be in conflict with, result in a breach of, or
constitute (with notice or lapse of time, or both) a default under any such
agreement or instrument.
5
<PAGE> 24
SECTION 3.2. SECURITIES. As of the date hereof, the Hellman Option
Shares and the Ruud Option Shares are duly authorized, validly issued, fully
paid and nonassessable. As of the date hereof, except as disclosed in writing to
the Purchaser, the Hellman Option Shares and the Ruud Option Shares are owned by
Hellman and Ruud, respectively, free and clear of all liens, encumbrances and
restrictions on transfer, other than restrictions contained in this Agreement,
the Contingent Warrant Agreement and under applicable state and federal
securities laws. Following the sale of the Hellman Option Shares or the Ruud
Option Shares or both to Purchaser in accordance with this Agreement, such
shares will be duly authorized, validly issued, fully paid and nonassessable and
will be owned by Purchaser free and clear of all liens, encumbrances and
restrictions on transfer, other than restrictions under applicable state and
federal securities laws.
ARTICLE IV. MISCELLANEOUS
---------- -------------
SECTION 4.1. BINDING EFFECT. The Options granted herein shall be
binding upon and inure to the benefit of the parties hereto and their respective
executors, heirs, administrators, successors and assigns.
SECTION 4.2. NO OUTSIDE REPRESENTATIONS. This Agreement shall be deemed
to contain all of the terms and conditions agreed upon by the parties, it being
understood that there are no outside representations or oral agreements of the
parties other than those contained in the Contingent Warrant Agreement.
SECTION 4.3. ASSIGNMENT. Purchaser shall not have the right to assign
this Agreement or any of its rights and obligations hereunder, except to any
Affiliate of Purchaser, without the consent of the Company.
SECTION 4.4. NOTICES. All notices given hereunder shall be in writing
and deemed given when mailed by registered or certified mail, return receipt
requested, postage prepaid, or sent by Federal Express or other similar
overnight service, addressed to the party to whom directed at the address set
forth below, or to such other address as may from time to time be designated by
notice given in the manner provided in this Section 4.4 or when delivered
personally.
Purchaser: GE Lighting
1975 Noble Rd.
Cleveland, OH 44112
Attention: President and Chief Executive Officer
With a copy to: GE Lighting
1975 Noble Rd.
Cleveland, OH 44112
Attention: General Counsel
The Shareholders: Wayne R. Hellman
c/o Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
6
<PAGE> 25
With a copy to: Cowden, Humphrey & Sarlson Co., L.P.A.
1414 Terminal Tower
Cleveland, Ohio 44113
Attention: James S. Hogg, Esq.
Facsimile: (216) 241-2881
and: Alan J. Ruud
c/o Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
With a copy to: Cowden, Humphrey & Sarlson Co., L.P.A.
1414 Terminal Tower
Cleveland, Ohio 44113
Attention: James S. Hogg, Esq.
Facsimile: (216) 241-2881
SECTION 4.5. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 4.6. PRUDENTIAL LETTER. At the time of execution of this
Agreement, the Shareholders shall deliver to Purchaser a letter executed by a
duly authorized officer of Prudential Securities substantially in the form of
Exhibit A attached hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
PURCHASER:
GENERAL ELECTRIC COMPANY
By:_______________________________________
Name:______________________________
Title:_____________________________
THE SHAREHOLDERS:
------------------------------------------
Wayne R. Hellman
------------------------------------------
Alan J. Ruud
7
<PAGE> 26
EXHIBIT 2.2(c)
[First Contingent Warrant]
WARRANT
to Purchase Common Shares of
ADVANCED LIGHTING TECHNOLOGIES, INC.
<PAGE> 27
TABLE OF CONTENTS
SECTION PAGE
1. DEFINITIONS..........................................................1
2. EXERCISE OF WARRANT..................................................5
2.1. Manner of Exercise..........................................5
2.2. Payment of Taxes............................................6
2.3. Fractional Shares.......................................... 6
2.4. Continued Validity......................................... 6
3. TRANSFER, DIVISION AND COMBINATION.................................. 6
3.1. Transfer................................................... 6
3.2. Division and Combination................................... 7
3.3. Expenses................................................... 7
3.4. Maintenance of Books....................................... 7
4. ADJUSTMENTS......................................................... 7
4.1. Share Dividends, Subdivisions and Combinations............. 7
4.2 Certain Other Distributions and Adjustments................ 8
4.4. Other Provisions Applicable to Adjustments
Under This Section ........................................ 8
4.5. Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets .................... 9
4.6. Other Action Affecting Common Shares.......................10
5. NOTICES TO WARRANT HOLDERS..........................................10
5.1. Notice of Adjustments......................................10
5.2. Notice of Corporate Action.................................10
6. NO IMPAIRMENT.......................................................11
7. RESERVATION AND AUTHORIZATION OF COMMON SHARES;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY ........11
8. TAXING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS..................12
9. RESTRICTIONS ON TRANSFERABILITY; REGISTRATIONS......................12
9.1. Restrictive Legend.........................................12
9.2. Notice of Proposed Transfers; Requests for Registration ...13
9.3. Registration...............................................13
10. SUPPLYING INFORMATION...............................................13
11. LOSS OR MUTILATION..................................................13
12. OFFICE OF THE COMPANY...............................................13
13. FINANCIAL AND BUSINESS INFORMATION..................................13
13.1. Quarterly Information......................................13
13.2. Annual Information.........................................14
13.3. Filings....................................................14
14. LIMITATION OF LIABILITY.............................................14
15. MISCELLANEOUS.......................................................15
15.1. Nonwaiver and Expenses.....................................15
15.2. Notice Generally...........................................15
15.3. Remedies...................................................15
15.4. Successors and Assigns.....................................16
15.5. Amendment..................................................16
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15.6. Severability............................................16
15.7. Headings................................................16
15.8. Governing Law...........................................16
SIGNATURES
EXHIBITS
Exhibit A - Subscription Form
Exhibit B - Assignment Form
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<PAGE> 29
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF
THIS WARRANT.
INITIAL WARRANT PRICE
$____________ PER SHARE
WARRANT
To Purchase Common Shares of
ADVANCED LIGHTING TECHNOLOGIES, INC.
THIS IS TO CERTIFY THAT GENERAL ELECTRIC COMPANY, or registered assigns, is
entitled, at any time during the Exercise Period (as hereinafter defined), to
purchase from ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio corporation (the
"Company"), up to __________________ Common Shares (as hereinafter defined)
(such Common Shares, subject to adjustment as provided herein, are referred to
herein as the "Warrant Shares") as described herein, in whole or in part,
including fractional parts, at the Current Warrant Price (as defined herein) per
share (subject to adjustment as provided herein) all on the terms and conditions
and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
Terms used in this Warrant have the respective meanings set
forth below:
"Additional Issuance" shall have the meaning set forth in
Section 4.3(a).
"Additional Common Shares" shall mean all Common Shares issued
by the Company after the date hereof, other than Conversion Shares, Contingent
Shares or Warrant Shares.
"Appraised Value" shall mean, in respect of any Common Share
on any date herein specified, the fair saleable value of such Common Share
(determined without giving affect to the discount for (i) a minority interest or
(ii) any lack of liquidity of the Common Share or (iii) to the fact that the
Company may have no class of equity registered under the Exchange Act) based on
the equity value of the Company, as determined by an investment banking or
valuation firm selected in accordance with the following sentences, divided by
the number of Common Shares outstanding on a Fully Diluted Basis as determined
in accordance with GAAP (assuming the payment of the exercise prices for such
shares). The determination of the Appraised Value per Common Share shall be made
by an investment banking or valuation firm of nationally recognized standing
selected by the Company and acceptable to the Majority Holders. If the
investment banking or valuation firm selected by Company is not acceptable to
the Majority
<PAGE> 30
Holders and the Company and the Majority Holders cannot agree on a mutually
acceptable investment banking or valuation firm, then the Majority Holders and
the Company shall each choose one such investment banking or valuation firm and
the respective chosen firms shall agree on another investment banking or
valuation firm which shall make the determination. The Company shall retain, at
its sole cost, such investment banking or valuation firm as may be necessary for
the determination of Appraised Value required by the terms of this Warrant.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required to be closed in the State of New
York.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act, the Exchange
Act and other federal securities laws.
"Common Share" shall mean (except where the context otherwise
indicates) a Common Share, $0.001 par value, of the Company as constituted on
the date hereof, and any capital stock into which such Common Share may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
Common Shares upon any reclassification thereof which is also not preferred as
to dividends or assets over any other class of capital stock of the Company and
which is not subject to redemption and (ii) capital stock of any successor or
acquiring corporation received by or distributed to the holders of Common Shares
of the Company in the circumstances contemplated by Section 4.5.
"Contingent Shares" shall mean Common Shares to be issued upon
the exercise of any right to purchase Common Shares pursuant to the Contingent
Warrant Agreement.
"Contingent Warrant Agreement" shall mean the Contingent
Warrant Agreement, dated as of September 30, 1999, between the Company and
General Electric Company.
"Conversion Shares" shall mean the Common Shares issued or
issuable upon the conversion of the Series A Shares.
"Convertible Securities" shall mean warrants, evidences of
indebtedness, shares of capital stock or other securities that are exercisable
for, convertible into or exchangeable, with or without payment of additional
consideration in cash or property, for Additional Common Shares, either
immediately or upon the occurrence of a specified date or a specified event.
"Current Market Price" shall mean, in respect of any Common
Share on any date herein specified, if there shall then be a public market for
the Common Shares, the average of the daily market prices for 20 consecutive
Business Days immediately preceding such date or, if there is no such public
market, the Appraised Value per Common Share. The daily market price for each
such Business Day shall be (i) the last sale price on such day on the principal
stock exchange or NASDAQ-NMS on which such Common Shares are then listed or
admitted to trading, or (ii) if no sale takes place on such day on any such
exchange or NASDAQ-NMS, the average of the last reported closing bid and asked
prices on such day as officially quoted on any
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<PAGE> 31
such exchange or NASDAQ-NMS, or (iii) if the Common Shares are not then listed
or admitted to trading on any stock exchange or NASDAQ-NMS, the average of the
last reported closing bid and asked prices on such day in the over-the-counter
market, as furnished by the NASDAQ or the National Quotation Bureau, Inc., or
(iv) if neither such corporation at the time is engaged in the business of
reporting such prices, as furnished by any similar firm then engaged in such
business, or (v) if there is no such firm, as furnished by any member of the
NASD selected mutually by the Majority Holders and the Company or, if they
cannot agree upon such selection, as selected by two such members of the NASD,
one of which shall be selected by the Majority Holders and one of which shall be
selected by the Company.
"Current Warrant Price" shall mean the Initial Warrant Price,
as adjusted from time to time in the case of share dividends, subdivisions and
combinations as set forth in Section 4.1 hereof.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
"Exercise Period" shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1.
"Expiration Date" shall mean ______________, 200__.
"Fully Diluted Basis" means, with respect to any determination
or calculation, that such determination or calculation is performed on a fully
diluted basis (assuming the issuance of all Common Shares issuable under any
then outstanding options, warrants or convertible securities of any kind)
determined in accordance with GAAP for purposes of determining book value or net
income per share.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
"GE" shall mean General Electric Company, a New York
corporation.
"Holder" shall mean the Person in whose name the Warrant set
forth herein is registered on the books of the Company maintained for such
purpose.
"Initial Warrant Price" shall mean the Initial Warrant Price
per Common Share set forth on the first page hereof.
"Majority Holders" shall mean the holders of Warrants
exercisable for in excess of 50% of the aggregate number of Common Shares then
purchasable upon exercise of all Warrants, whether or not then exercisable.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
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<PAGE> 32
"NASDAQ" shall mean the National Association of Securities
Dealers Automated Quotation System.
"NASDAQ-NMS" shall mean the NASDAQ National Market System.
"New Securities" shall have the meaning set forth in Section
4.3(a).
"New Securities Warrant" shall have the meaning set forth in
Section 4.3(a).
"Other Property" shall have the meaning set forth in Section
4.5.
"Permitted Issuances" shall mean (a) the issuance or
conversion of options issued to employees pursuant to any stock option plan or
employee incentive plan approved by the Company's board of directors, (b) the
issuance of Warrant Shares, Contingent Shares or Conversion Shares and (c) the
issuance of Common Shares to satisfy obligations in respect of acquisitions of
securities or assets of any Person, provided that (i) such contracts were
entered into prior to September 30, 1999, and (ii) the number of Common Shares
subject to this Subparagraph (c) shall not exceed 110,000 in the aggregate.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, incorporated
organization, association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
"Registration Statement" shall have the meaning set forth in
Section 9.4.
"Restricted Common Shares" shall mean Common Shares that are,
or upon their issuance on the exercise of this Warrant would be, evidenced by a
certificate bearing the restrictive legend set forth in Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Series A Shares" shall mean shares of Series A Convertible
Preferred Stock, par value $.001, of the Company.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, association or other business entity
in respect of which that Person owns securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors,
partnership committee, board of managers or trustees or other managerial body
thereof, whether directly or indirectly through one or more of the other
Subsidiaries of such Person or a combination thereof. Unless otherwise
specified, "Subsidiary" means a Subsidiary of the Company and "Subsidiaries"
means all Subsidiaries of the Company.
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<PAGE> 33
"Transfer" shall mean any disposition of any Warrant or
Warrant Share or of any interest in either thereof that would constitute a sale
thereof within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section
9.2.
"Warrants" shall mean this Warrant and all warrants issued
upon transfer, division or combination of, or in substitution for, this Warrant.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of Common Shares for which they may be exercised.
"Warrant Price" shall mean an amount equal to (i) the number
of Common Shares being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Shares" shall have the meaning set forth in the
introductory paragraph on the first page hereof.
2. EXERCISE OF WARRANT
2.1. MANNER OF EXERCISE. From and after the date hereof and
until 5:00 P.M., New York time, on the Expiration Date (the "Exercise Period"),
Holder may exercise this Warrant, on any Business Day, for all or any part of
the Warrant Shares. In order to exercise this Warrant, in whole or in part,
Holder shall deliver to the Company at its principal office at 32000 Aurora
Road, Solon, Ohio 44139, or at the office or agency designated by the Company
pursuant to Section 12: (i) a written notice of Holder's election to exercise
this Warrant, which notice shall specify the number of Common Shares to be
purchased, (ii) payment of the Warrant Price and (iii) this Warrant. Such notice
shall be substantially in the form of the subscription form appearing at the end
of this Warrant as Exhibit A, duly executed by Holder or its agent or attorney.
Upon receipt thereof, the Company shall, as promptly as practicable, and in any
event within five Business Days thereafter, execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full Common Shares issuable upon such
exercise, together with cash in lieu of any fraction of a share, as hereinafter
provided. The share certificate or certificates so delivered shall be, to the
extent possible, in such denomination or denominations as such Holder shall
request in the notice and shall be registered in the name of Holder or, subject
to Section 9, such other name as shall be designated in the notice. This Warrant
shall be deemed to have been exercised and such certificate or certificates
shall be deemed to have been issued, and Holder or any other Person so
designated to be named therein shall be deemed to have become a holder of record
of such shares for all purposes, as of the date the notice, together with the
cash or check or other payment as provided below and this Warrant, is received
by the Company as described above and all taxes required to be paid by Holder,
if any, pursuant to Section 2.2 prior to the issuance of such shares have been
paid. If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing Warrant
Shares, deliver to Holder a new Warrant evidencing the rights of Holder to
purchase the unpurchased Common Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant, or,
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<PAGE> 34
at the request of Holder, appropriate notation may be made on this Warrant and
the same returned to Holder. Payment of the Warrant Price shall be made at the
option of Holder by (i) certified or official bank check, and/or (ii) Holder's
surrender to the Company of that number of Warrant Shares (or the right to
receive such number of shares) or Common Shares having an aggregate Current
Market Price equal to or greater than the Current Warrant Price for all shares
then being purchased (including those being surrendered), or (iii) any
combination thereof, duly endorsed by or accompanied by appropriate instruments
of transfer duly executed by Holder or by Holder's attorney duly authorized in
writing.
2.2. PAYMENT OF TAXES. All Common Shares issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon Holder, in which case such
taxes or charges shall be paid by Holder. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for Common Shares issuable upon
exercise of this Warrant in any name other than that of Holder, and in such case
the Company shall not be required to issue or deliver any share certificate
until such tax or other charge has been paid or it has been established to the
reasonable satisfaction of the Company that no such tax or other charge is due.
2.3. FRACTIONAL SHARES. The Company shall not be required to
issue a fractional Common Share upon exercise of any Warrant. If any fraction of
a share would, but for this Section, be issuable upon exercise of this Warrant,
in lieu of such fractional share, the Company may, at its option, pay a cash
adjustment in respect of such final fraction in an amount equal to the same
fraction of the Current Market Price per Common Share on the date of exercise
or, if there is no Current Market Price on such date, the Current Warrant Price
per Common Share, adjusted to reflect equitably share dividends, subdivisions
and combinations after the date hereof.
2.4. CONTINUED VALIDITY. A holder of Common Shares issued upon
the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the Securities Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 9, 10 and
15 of this Warrant. The Company will, at the time of each exercise of this
Warrant, in whole or in part, upon the request of the holder of the Common
Shares issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation to afford to
such holder all such rights; PROVIDED, HOWEVER, that if such holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to compliance with Section 9 hereof,
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal
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<PAGE> 35
office of the Company referred to in Section 2.1 or the office or agency
designated by the Company pursuant to Section 12, together with a written
assignment of this Warrant substantially in the form of Exhibit B hereto duly
executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to Section 9, execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned in compliance with Section 9, may be exercised by a new Holder
for the purchase of Common Shares without having a new Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
3.1 and with Section 9, as to any transfer that may be involved in such division
or combination, the Company shall execute and deliver a new Warrant or Warrants
in exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver at
its own expense (other than transfer taxes) the new Warrant or Warrants under
this Section 3.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at
its aforesaid office or agency, books for the registration and the registration
of transfer of the Warrants.
4. ADJUSTMENTS
The number of Common Shares for which this Warrant is
exercisable, and the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event
described below in accordance with Section 5.1.
4.1. SHARE DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any
time the Company shall:
(a) take a record of the holders of its Common Shares for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Common Shares,
(b) subdivide its outstanding Common Shares into a larger
number of Common Shares, or
(c) combine its outstanding Common Shares into a smaller
number of Common Shares,
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<PAGE> 36
then (i) the number of Common Shares for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of Common Shares that a record holder of the same number of Common
Shares for which this Warrant is exercisable immediately prior to the occurrence
of such event would own or be entitled to receive after the happening of such
event, and (ii) the Current Warrant Price shall be adjusted to equal (A) the
Current Warrant Price multiplied by the number of Common Shares for which this
Warrant is exercisable immediately prior to the adjustment divided by (B) the
number of shares for which this Warrant is exercisable immediately after the
adjustment.
4.2 CERTAIN OTHER DISTRIBUTIONS AND ADJUSTMENTS. (a) If at any
time the Company shall take a record of the holders of its Common Shares for the
purpose of entitling them to receive any dividend or other distribution of:
(i) cash,
(ii) any evidences of its indebtedness, any shares of its
stock or any other securities or property of any nature whatsoever
(other than cash, Convertible Securities or Additional Common Shares),
or
(iii) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Common Shares),
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised this Warrant.
(b) A reclassification of the Common Shares (other than a
change in par value, or from par value to no par value or from no par value to
par value) into Common Shares and shares of any other class of stock shall be
deemed a distribution by the Company to the holders of its Common Shares of such
shares of such other class of stock within the meaning of paragraph (a) above
and, if the outstanding Common Shares shall be changed into a larger or smaller
number of Common Shares as a part of such reclassification, such change shall be
deemed a subdivision or combination, as the case may be, of the outstanding
Common Shares within the meaning of Section 4.1.
4.3.[INTENTIONALLY OMITTED]
4.4. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments of the number of Common Shares for which this Warrant is exercisable
and to the Current Warrant Price provided for in Section 4:
(a) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Shares shall be taken into account to
the nearest 1/1000th of a share.
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<PAGE> 37
(b) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Shares for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to shareholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(c) ESCROW OF WARRANT SHARES. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Shares, but prior to the occurrence of the event for
which such record is taken, and Holder exercises this Warrant, any Additional
Common Shares issuable upon exercise by reason of such adjustment shall be
deemed the last Common Shares for which this Warrant is exercised
(notwithstanding any other provision to the contrary herein) and such shares or
other property shall be held in escrow for Holder by the Company to be issued to
Holder upon and to the extent that the event actually takes place, upon payment
of the then Current Warrant Price. Notwithstanding any other provision to the
contrary herein, if the event for which such record was taken fails to occur or
is rescinded, then such escrowed shares shall be cancelled by the Company and
escrowed property returned to the Company.
4.5. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION
OR DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Shares), or sell,
transfer or otherwise dispose of all or substantially all its property, assets
or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, Common Shares of the successor or acquiring corporation, or any cash,
shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Shares
of the Company, then each Holder shall have the right thereafter to receive,
upon exercise of such Warrant, the number of Common Shares of the successor or
acquiring corporation or of the Company, if it is the surviving corporation, and
Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of Common Shares for which this Warrant is exercisable immediately
prior to such event. In case of any such reorganization, reclassification,
merger, consolidation or disposition of assets, the successor or acquiring
corporation (if other than the Company) shall expressly assume the due and
punctual observance and performance of each and every covenant and condition of
this Warrant to be performed and observed by the Company and all the obligations
and liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of Common Shares for which this
Warrant is exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 4. For purposes of this Section 4.5,
"common stock of the successor or acquiring corporation" shall include stock of
such corporation of any class that is not preferred as to dividends or assets
over any other class of stock of such corporation and that is not subject to
redemption and shall
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<PAGE> 38
also include any evidences of indebtedness, shares of stock or other securities
that are convertible into or exchangeable for any such stock, either immediately
or upon the arrival of a specified date or the happening of a specified event
and any warrants or other rights to subscribe for or purchase any such stock.
The foregoing provisions of this Section 4.5 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
4.6. OTHER ACTION AFFECTING COMMON SHARES. In case at any time
or from time to time the Company shall take any action in respect of its Common
Shares, other than any action described in this Section 4, then, unless such
action will not have a materially adverse effect upon the rights of Holders, the
number of Common Shares or other stock for which this Warrant is exercisable
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances.
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. Not less than 10 nor more than 30
days prior to the record date or effective date, as the case may be, of any
action that requires or might require an adjustment or readjustment pursuant to
Section 4, the Company shall forthwith prepare and deliver to each Holder a
signed copy of a certificate executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment
and the method by which such adjustment was calculated, specifying the number of
Common Shares for which this Warrant is exercisable and (if such adjustment was
made pursuant to Section 4.5 or 4.6) describing the number and kind of any other
shares of stock or Other Property for which this Warrant is exercisable, and any
change in the purchase price or prices thereof, after giving effect to such
adjustment or change. The Company shall keep at its office or agency designated
pursuant to Section 12 copies of all such certificates and cause the same to be
available for inspection at said office during normal business hours by any
Holder or any prospective purchaser of a Warrant designated by a Holder thereof.
5.2. NOTICE OF CORPORATE ACTION. If at any time
(a) the Company shall take a record of the holders of its
Common Shares for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation, person or entity, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days prior written notice of the date on which a record date shall be
selected for such dividend,
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<PAGE> 39
distribution or right or for determining rights to vote in respect of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, and (ii) in the case of any
such reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least 30 days prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause also shall specify (i) the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, the date on which the holders of Common Shares shall be entitled to any
such dividend, distribution or right, and the amount and character thereof, and
(ii) the date on which any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up is to take place and the time, if any such time is to be fixed, as of which
the holders of Common Shares shall be entitled to exchange their Common Shares
for securities or other property deliverable upon such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of Holder
appearing on the books of the Company and delivered in accordance with Section
15.2.
6. NO IMPAIRMENT
The Company shall not by any action, including, without
limitation, amending its articles of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Common Shares upon the exercise of this Warrant, including
taking such action as is necessary for the Current Warrant Price to be not less
than the par value of the Common Shares issuable upon exercise of this Warrant,
and (b) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON SHARES; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the date hereof, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued Common Shares as will be sufficient to permit the
exercise in full of all outstanding Warrants. All Common Shares that shall be so
issuable, when issued upon exercise of any Warrant and payment therefor in
accordance with the terms of such Warrant, shall be duly and validly issued and
fully paid and nonassessable, and not subject to preemptive rights.
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<PAGE> 40
Before taking any action that would result in an adjustment in
the number of Common Shares for which this Warrant is exercisable, the Company
shall obtain all such authorizations or exemptions thereof, or consents thereto,
as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
If any Common Shares required to be reserved for issuance upon
exercise of Warrants require registration or qualification with any governmental
authority or other governmental approval or filing under any federal or state
law (otherwise than as provided in Section 9) before such shares may be so
issued, the Company will in good faith and as expeditiously as possible and at
its expense endeavor to cause such shares to be duly registered or such approval
to be obtained or filing made.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Shares with respect to which any provision
of Section 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY; REGISTRATIONS
The Warrants and the Warrant Shares shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Share. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. (a) Except as otherwise provided in
this Section 9, each certificate for Warrant Shares initially issued upon the
exercise of this Warrant, and each certificate for Warrant Shares issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended,
and may not be transferred in violation of such Act
or the rules and regulations thereunder."
(b) Except as otherwise provided in this Section 9, each
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"This warrant and the securities represented hereby have not been
registered under the Securities Act of 1933, as amended,
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<PAGE> 41
and may not be transferred in violation of such Act, the rules and
regulations thereunder or the provisions of this Warrant."
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION.
Prior to any Transfer of any Warrant or any Restricted Common Share, the holder
of such Warrant or Restricted Common Share shall give written notice (a
"Transfer Notice") to the Company of such Transfer. Each certificate, if any,
evidencing such Restricted Common Share issued upon such Transfer shall bear the
restrictive legend set forth in Section 9.1(a), and each Warrant issued upon
such Transfer shall bear the restrictive legend set forth in Section 9.1(b),
unless in the opinion of counsel to such holder that is reasonably acceptable to
the Company such legend is not required in order to ensure compliance with the
Securities Act.
9.3. REGISTRATION. Each holder of Warrant Shares has certain
registration rights under the Registration Rights Agreement dated September 30,
1999, between the Company and General Electric Company, as amended from time to
time. Any Holder may obtain a copy of such agreement by notice to the Company.
10. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and
each holder of Restricted Common Shares in supplying such information as may be
reasonably necessary for such holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Shares.
11. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably satisfactory
to it (it being understood that the written agreement of GE shall be sufficient
indemnity), and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like tenor
to such Holder; PROVIDED, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company for
cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive offices
of the Company) where the Warrants may be presented for exercise, registration
of transfer, division or combination as provided in this Warrant.
13. FINANCIAL AND BUSINESS INFORMATION
13.1. QUARTERLY INFORMATION. The Company will deliver to each
Holder, as soon as practicable after the end of each of the first three quarters
of the Company, and in any event
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<PAGE> 42
within 45 days thereafter, one copy of an unaudited consolidated balance sheet
of the Company and its subsidiaries as at the close of such quarter, and the
related unaudited consolidated statements of income and cash flows of the
Company for such quarter and, in the case of the second and third quarters, for
the portion of the fiscal year ending with such quarter, setting forth in each
case in comparative form the figures for the corresponding periods in the
previous fiscal year. Such financial statements shall be prepared by the Company
in accordance with GAAP (without period-end adjustments or footnotes) and
accompanied by the certification of the Company's chief executive officer or
chief financial officer that such financial statements are complete and correct
and present fairly the consolidated financial position, results of operations
and cash flows of the Company and its subsidiaries as at the end of such quarter
and for such year-to-date period, as the case may be.
13.2. ANNUAL INFORMATION. The Company will deliver to each
Holder as soon as practicable after the end of each fiscal year of the Company,
and in any event within 90 days thereafter, one copy of:
(a) an audited consolidated balance sheet of the Company and
its subsidiaries as at the end of such year, and
(b) audited consolidated statements of income and cash flows
of the Company and its subsidiaries for such year;
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all prepared in accordance with GAAP, and
which audited financial statements shall be accompanied by (i) an opinion
thereon of the independent certified public accountants regularly retained by
the Company, or any other firm of independent certified public accountants of
recognized national standing selected by the Company and (ii) a report of such
independent certified public accountants confirming any adjustment made pursuant
to Section 4 during such year.
13.3. FILINGS. The Company will file with the Commission all
regular or periodic reports required pursuant to the Exchange Act and will
deliver to Holder promptly upon their becoming available one copy of each
report, notice or proxy statement sent by the Company to its shareholders
generally, and of each regular or periodic report (pursuant to the Exchange
Act), filed by the Company with (i) the Commission or (ii) any securities
exchange on which Common Shares are listed.
14. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by
Holder to purchase Common Shares, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of such Holder for
the purchase price of any Common Share or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
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<PAGE> 43
15. MISCELLANEOUS
15.1. NONWAIVER AND EXPENSES. No course of dealing or any
delay or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Holder's rights, powers
or remedies. If the Company fails to comply with any provision of this Warrant,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in enforcing any of
its rights, powers or remedies hereunder.
15.2. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid, or
by telecopy and confirmed by telecopy answerback, addressed as follows:
(a) If to any Holder or holder of Warrant Shares, at its last
known address appearing on the books of the Company maintained for such purpose.
(b) If to the Company at
Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
Attention: President
Telecopy Number: (440)519-0503
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback, one Business Day after the same shall have been delivered to a
nationally recognized courier service, or three Business Days after the same
shall have been deposited, postage prepaid, in the United States mail. Failure
or delay in receipt of copies of any notice, demand, request, approval,
declaration, delivery or other communication to the Person designated above
shall in no way adversely affect the effectiveness of such notice, demand,
request, approval, declaration, delivery or other communication.
15.3. REMEDIES. Each holder of a Warrant or a Warrant Share,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under Section 9 of this Warrant. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of Section 9 of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
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<PAGE> 44
15.4. SUCCESSORS AND ASSIGNS. Subject to the provisions of
Sections 3.1 and 9, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
successors and assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and, with
respect to Section 9 hereof, holders of Warrant Shares, and shall be enforceable
by any such Holder or holder of Warrant Shares.
15.5. AMENDMENT. This Warrant may be modified or amended or
the provisions hereof waived only with the written consent of the Company and
the Majority Holders; PROVIDED that no such Warrant may be modified or amended
to reduce the number of Common Shares for which such Warrant is exercisable or
to increase the price at which such Common Shares may be purchased upon exercise
of such Warrant (before giving effect to any adjustment as provided therein)
without the prior written consent of each Holder.
15.6. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
15.7. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
15.8. GOVERNING LAW. This Warrant shall be governed by the
laws of the State of New York, without regard to the provisions thereof relating
to conflict of laws.
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<PAGE> 45
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and attested by its Secretary or an Assistant Secretary.
Dated: ______________, 200___
ADVANCED LIGHTING TECHNOLOGIES, INC.
By:_________________________________
Name:
Title:
Attest:
By:__________________________________
Name:
Title:
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<PAGE> 46
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of ______ Common Shares of ADVANCED
LIGHTING TECHNOLOGIES, INC. and herewith makes payment therefor, all at the
price and on the terms and conditions specified in this Warrant and requests
that certificates for the Common Shares hereby purchased (and any securities or
other property issuable upon such exercise) be issued in the name of and
delivered to ______________________________ whose address is
____________________________ and, if such Common Shares shall not include all of
the Common Shares issuable as provided in this Warrant, that a new Warrant of
like tenor and date for the balance of the Common Shares issuable hereunder be
delivered to the undersigned.
-----------------------------------------
(Name of Registered Owner)
-----------------------------------------
(Signature of Registered Owner)
-----------------------------------------
(Street Address)
-----------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within warrant in every
particular, without alteration or enlargement or any change
whatsoever.
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<PAGE> 47
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
Common Shares set forth below:
Name and Address of Assignee No. of Common Shares
---------------------------- --------------------
and does hereby irrevocably constitute and appoint _____________________________
attorney-in-fact to register such transfer on the books of ADVANCED LIGHTING
TECHNOLOGIES, INC. maintained for the purpose, with full power of substitution
in the premises.
Dated:____________________ Print Name:______________________
Signature:________________________
Witness:__________________________
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
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<PAGE> 48
EXHIBIT 2.2(d)
--------------
[Second Contingent Warrant]
WARRANT
to Purchase Common Shares of
ADVANCED LIGHTING TECHNOLOGIES, INC.
<PAGE> 49
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
1. DEFINITIONS..........................................................1
2. EXERCISE OF WARRANT..................................................5
2.1. Manner of Exercise..........................................5
2.2. Payment of Taxes............................................6
2.3. Fractional Shares...........................................6
2.4. Continued Validity..........................................6
3. TRANSFER, DIVISION AND COMBINATION...................................6
3.1. Transfer....................................................6
3.2. Division and Combination....................................7
3.3. Expenses....................................................7
3.4. Maintenance of Books........................................7
4. ADJUSTMENTS..........................................................7
4.1. Share Dividends, Subdivisions and Combinations..............7
4.2 Certain Other Distributions and Adjustments.................8
4.4. Other Provisions Applicable to Adjustments under
this Section ...............................................8
4.5. Reorganization, Reclassification, Merger, Consolidation
or Disposition of Assets ...................................9
4.6. Other Action Affecting Common Shares.......................10
5. NOTICES TO WARRANT HOLDERS..........................................10
5.1. Notice of Adjustments.....................................10
5.2. Notice of Corporate Action................................10
6. NO IMPAIRMENT.......................................................11
7. RESERVATION AND AUTHORIZATION OF COMMON SHARES;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY .......11
8. TAXING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS.................12
9. RESTRICTIONS ON TRANSFERABILITY....................................12
9.1. Restrictive Legend................................. 12
9.2. Notice of Proposed Transfers; Requests for
Registration .............................................13
9.3. Registration..............................................13
10. SUPPLYING INFORMATION..............................................13
11. LOSS OR MUTILATION.................................................13
12. OFFICE OF THE COMPANY..............................................13
13. FINANCIAL AND BUSINESS INFORMATION.................................13
13.1. Quarterly Information.....................................13
13.2. Annual Information........................................14
13.3. Filings...................................................14
14. LIMITATION OF LIABILITY............................................14
15. MISCELLANEOUS......................................................15
15.1. Nonwaiver and Expenses....................................15
15.2. Notice Generally..........................................15
15.3. Remedies..................................................15
15.4. Successors and Assigns....................................16
15.5. Amendment.................................................16
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<PAGE> 50
15.6. Severability..............................................16
15.7. Headings..................................................16
15.8. Governing Law.............................................16
SIGNATURES
EXHIBITS
Exhibit A - Subscription Form
Exhibit B - Assignment Form
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<PAGE> 51
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF
THIS WARRANT.
INITIAL WARRANT PRICE
$___________ PER SHARE
WARRANT
To Purchase Common Shares of
ADVANCED LIGHTING TECHNOLOGIES, INC.
THIS IS TO CERTIFY THAT GENERAL ELECTRIC COMPANY, or
registered assigns, is entitled, at any time during the Exercise Period (as
hereinafter defined), to purchase from ADVANCED LIGHTING TECHNOLOGIES, INC., an
Ohio corporation (the "Company"), up to __________________ Common Shares (as
hereinafter defined) (such Common Shares, subject to adjustment as provided
herein, are referred to herein as the "Warrant Shares") as described herein, in
whole or in part, including fractional parts, at the Current Warrant Price (as
defined herein) per share (subject to adjustment as provided herein) all on the
terms and conditions and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
Terms used in this Warrant have the respective meanings set
forth below:
"Additional Issuance" shall have the meaning set forth in
Section 4.3(a).
"Additional Common Shares" shall mean all Common Shares issued
by the Company after the date hereof, other than Conversion Shares, Contingent
Shares or Warrant Shares.
"Appraised Value" shall mean, in respect of any Common Share
on any date herein specified, the fair saleable value of such Common Share
(determined without giving affect to the discount for (i) a minority interest or
(ii) any lack of liquidity of the Common Share or (iii) to the fact that the
Company may have no class of equity registered under the Exchange Act) based on
the equity value of the Company, as determined by an investment banking or
valuation firm selected in accordance with the following sentences, divided by
the number of Common Shares outstanding on a Fully Diluted Basis as determined
in accordance with GAAP (assuming the payment of the exercise prices for such
shares). The determination of the Appraised Value per Common Share shall be made
by an investment banking or valuation firm of nationally recognized standing
selected by the Company and acceptable to the Majority Holders. If the
investment banking or valuation firm selected by Company is not acceptable to
the Majority
<PAGE> 52
Holders and the Company and the Majority Holders cannot agree on a mutually
acceptable investment banking or valuation firm, then the Majority Holders and
the Company shall each choose one such investment banking or valuation firm and
the respective chosen firms shall agree on another investment banking or
valuation firm which shall make the determination. The Company shall retain, at
its sole cost, such investment banking or valuation firm as may be necessary for
the determination of Appraised Value required by the terms of this Warrant.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required to be closed in the State of New
York.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act, the Exchange
Act and other federal securities laws.
"Common Share" shall mean (except where the context otherwise
indicates) a Common Share, $0.001 par value, of the Company as constituted on
the date hereof, and any capital stock into which such Common Share may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
Common Shares upon any reclassification thereof which is also not preferred as
to dividends or assets over any other class of capital stock of the Company and
which is not subject to redemption and (ii) capital stock of any successor or
acquiring corporation received by or distributed to the holders of Common Shares
of the Company in the circumstances contemplated by Section 4.5.
"Contingent Shares" shall mean Common Shares to be issued upon
the exercise of any right to purchase Common Shares pursuant to the Contingent
Warrant Agreement.
"Contingent Warrant Agreement" shall mean the Contingent
Warrant Agreement, dated as of September 30, 1999, between the Company and
General Electric Company.
"Conversion Shares" shall mean the Common Shares issued or
issuable upon the conversion of the Series A Shares.
"Convertible Securities" shall mean warrants, evidences of
indebtedness, shares of capital stock or other securities that are exercisable
for, convertible into or exchangeable, with or without payment of additional
consideration in cash or property, for Additional Common Shares, either
immediately or upon the occurrence of a specified date or a specified event.
"Current Market Price" shall mean, in respect of any Common
Share on any date herein specified, if there shall then be a public market for
the Common Shares, the average of the daily market prices for 20 consecutive
Business Days immediately preceding such date or, if there is no such public
market, the Appraised Value per Common Share. The daily market price for each
such Business Day shall be (i) the last sale price on such day on the principal
stock exchange or NASDAQ-NMS on which such Common Shares are then listed or
admitted to trading, or (ii) if no sale takes place on such day on any such
exchange or NASDAQ-NMS, the average of the last reported closing bid and asked
prices on such day as officially quoted on any
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<PAGE> 53
such exchange or NASDAQ-NMS, or (iii) if the Common Shares are not then listed
or admitted to trading on any stock exchange or NASDAQ-NMS, the average of the
last reported closing bid and asked prices on such day in the over-the-counter
market, as furnished by the NASDAQ or the National Quotation Bureau, Inc., or
(iv) if neither such corporation at the time is engaged in the business of
reporting such prices, as furnished by any similar firm then engaged in such
business, or (v) if there is no such firm, as furnished by any member of the
NASD selected mutually by the Majority Holders and the Company or, if they
cannot agree upon such selection, as selected by two such members of the NASD,
one of which shall be selected by the Majority Holders and one of which shall be
selected by the Company.
"Current Warrant Price" shall mean the Initial Warrant Price,
as adjusted from time to time in the case of share dividends, subdivisions and
combinations as set forth in Section 4.1 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1.
"Expiration Date" shall mean ______________, 200__.
"Fully Diluted Basis" means, with respect to any determination
or calculation, that such determination or calculation is performed on a fully
diluted basis (assuming the issuance of all Common Shares issuable under any
then outstanding options, warrants or convertible securities of any kind)
determined in accordance with GAAP for purposes of determining book value or net
income per share.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
"GE" shall mean General Electric Company, a New York
corporation.
"Holder" shall mean the Person in whose name the Warrant set
forth herein is registered on the books of the Company maintained for such
purpose.
"Initial Warrant Price" shall mean the Initial Warrant Price
per Common Share set forth on the first page hereof.
"Majority Holders" shall mean the holders of Warrants
exercisable for in excess of 50% of the aggregate number of Common Shares then
purchasable upon exercise of all Warrants, whether or not then exercisable.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
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<PAGE> 54
"NASDAQ" shall mean the National Association of Securities
Dealers Automated Quotation System.
"NASDAQ-NMS" shall mean the NASDAQ National Market System.
"New Securities" shall have the meaning set forth in Section
4.3(a).
"New Securities Warrant" shall have the meaning set forth in
Section 4.3(a).
"Other Property" shall have the meaning set forth in Section
4.5.
"Permitted Issuances" shall mean (a) the issuance or
conversion of options issued to employees pursuant to any stock option plan or
employee incentive plan approved by the Company's board of directors, (b) the
issuance of Warrant Shares, Contingent Shares or Conversion Shares and (c) the
issuance of Common Shares to satisfy obligations in respect of acquisitions of
securities or assets of any Person, provided that (i) such contracts were
entered into prior to September 30, 1999, and (ii) the number of Common Shares
subject to this Subparagraph (c) shall not exceed 110,000 in the aggregate.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, incorporated
organization, association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
"Registration Statement" shall have the meaning set forth in
Section 9.4.
"Restricted Common Shares" shall mean Common Shares that are,
or upon their issuance on the exercise of this Warrant would be, evidenced by a
certificate bearing the restrictive legend set forth in Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Series A Shares" shall mean shares of Series A Convertible
Preferred Stock, par value $.001, of the Company.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, association or other business entity
in respect of which that Person owns securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors,
partnership committee, board of managers or trustees or other managerial body
thereof, whether directly or indirectly through one or more of the other
Subsidiaries of such Person or a combination thereof. Unless otherwise
specified, "Subsidiary" means a Subsidiary of the Company and "Subsidiaries"
means all Subsidiaries of the Company.
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<PAGE> 55
"Transfer" shall mean any disposition of any Warrant or
Warrant Share or of any interest in either thereof that would constitute a sale
thereof within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in
Section 9.2.
"Warrants" shall mean this Warrant and all warrants issued
upon transfer, division or combination of, or in substitution for, this Warrant.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of Common Shares for which they may be exercised.
"Warrant Price" shall mean an amount equal to (i) the number
of Common Shares being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Shares" shall have the meaning set forth in the
introductory paragraph on the first page hereof.
2. EXERCISE OF WARRANT
2.1. MANNER OF EXERCISE. From and after the date hereof and
until 5:00 P.M., New York time, on the Expiration Date (the "Exercise Period"),
Holder may exercise this Warrant, on any Business Day, for all or any part of
the Warrant Shares. In order to exercise this Warrant, in whole or in part,
Holder shall deliver to the Company at its principal office at 32000 Aurora
Road, Solon, Ohio 44139, or at the office or agency designated by the Company
pursuant to Section 12: (i) a written notice of Holder's election to exercise
this Warrant, which notice shall specify the number of Common Shares to be
purchased, (ii) payment of the Warrant Price and (iii) this Warrant. Such notice
shall be substantially in the form of the subscription form appearing at the end
of this Warrant as Exhibit A, duly executed by Holder or its agent or attorney.
Upon receipt thereof, the Company shall, as promptly as practicable, and in any
event within five Business Days thereafter, execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full Common Shares issuable upon such
exercise, together with cash in lieu of any fraction of a share, as hereinafter
provided. The share certificate or certificates so delivered shall be, to the
extent possible, in such denomination or denominations as such Holder shall
request in the notice and shall be registered in the name of Holder or, subject
to Section 9, such other name as shall be designated in the notice. This Warrant
shall be deemed to have been exercised and such certificate or certificates
shall be deemed to have been issued, and Holder or any other Person so
designated to be named therein shall be deemed to have become a holder of record
of such shares for all purposes, as of the date the notice, together with the
cash or check or other payment as provided below and this Warrant, is received
by the Company as described above and all taxes required to be paid by Holder,
if any, pursuant to Section 2.2 prior to the issuance of such shares have been
paid. If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing Warrant
Shares, deliver to Holder a new Warrant evidencing the rights of Holder to
purchase the unpurchased Common Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant, or,
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at the request of Holder, appropriate notation may be made on this Warrant and
the same returned to Holder. Payment of the Warrant Price shall be made at the
option of Holder by (i) certified or official bank check, and/or (ii) Holder's
surrender to the Company of that number of Warrant Shares (or the right to
receive such number of shares) or Common Shares having an aggregate Current
Market Price equal to or greater than the Current Warrant Price for all shares
then being purchased (including those being surrendered), or (iii) any
combination thereof, duly endorsed by or accompanied by appropriate instruments
of transfer duly executed by Holder or by Holder's attorney duly authorized in
writing.
2.2. PAYMENT OF TAXES. All Common Shares issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon Holder, in which case such
taxes or charges shall be paid by Holder. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for Common Shares issuable upon
exercise of this Warrant in any name other than that of Holder, and in such case
the Company shall not be required to issue or deliver any share certificate
until such tax or other charge has been paid or it has been established to the
reasonable satisfaction of the Company that no such tax or other charge is due.
2.3. FRACTIONAL SHARES. The Company shall not be required to
issue a fractional Common Share upon exercise of any Warrant. If any fraction of
a share would, but for this Section, be issuable upon exercise of this Warrant,
in lieu of such fractional share, the Company may, at its option, pay a cash
adjustment in respect of such final fraction in an amount equal to the same
fraction of the Current Market Price per Common Share on the date of exercise
or, if there is no Current Market Price on such date, the Current Warrant Price
per Common Share, adjusted to reflect equitably share dividends, subdivisions
and combinations after the date hereof.
2.4. CONTINUED VALIDITY. A holder of Common Shares issued upon
the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the Securities Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 9, 10 and
15 of this Warrant. The Company will, at the time of each exercise of this
Warrant, in whole or in part, upon the request of the holder of the Common
Shares issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation to afford to
such holder all such rights; PROVIDED, HOWEVER, that if such holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to compliance with Section 9 hereof,
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal
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office of the Company referred to in Section 2.1 or the office or agency
designated by the Company pursuant to Section 12, together with a written
assignment of this Warrant substantially in the form of Exhibit B hereto duly
executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to Section 9, execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned in compliance with Section 9, may be exercised by a new Holder
for the purchase of Common Shares without having a new Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
3.1 and with Section 9, as to any transfer that may be involved in such division
or combination, the Company shall execute and deliver a new Warrant or Warrants
in exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver at
its own expense (other than transfer taxes) the new Warrant or Warrants under
this Section 3.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at
its aforesaid office or agency, books for the registration and the registration
of transfer of the Warrants.
4. ADJUSTMENTS
The number of Common Shares for which this Warrant is
exercisable, and the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event
described below in accordance with Section 5.1.
4.1. SHARE DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any
time the Company shall:
(a) take a record of the holders of its Common Shares for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Common Shares,
(b) subdivide its outstanding Common Shares into a larger
number of Common Shares, or
(c) combine its outstanding Common Shares into a smaller
number of Common Shares,
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then (i) the number of Common Shares for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of Common Shares that a record holder of the same number of Common
Shares for which this Warrant is exercisable immediately prior to the occurrence
of such event would own or be entitled to receive after the happening of such
event, and (ii) the Current Warrant Price shall be adjusted to equal (A) the
Current Warrant Price multiplied by the number of Common Shares for which this
Warrant is exercisable immediately prior to the adjustment divided by (B) the
number of shares for which this Warrant is exercisable immediately after the
adjustment.
4.2 CERTAIN OTHER DISTRIBUTIONS AND ADJUSTMENTS. (a) If at any
time the Company shall take a record of the holders of its Common Shares for the
purpose of entitling them to receive any dividend or other distribution of:
(i) cash,
(ii) any evidences of its indebtedness, any shares of its
stock or any other securities or property of any nature whatsoever
(other than cash, Convertible Securities or Additional Common Shares),
or
(iii) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Common Shares),
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised this Warrant.
(b) A reclassification of the Common Shares (other than a
change in par value, or from par value to no par value or from no par value to
par value) into Common Shares and shares of any other class of stock shall be
deemed a distribution by the Company to the holders of its Common Shares of such
shares of such other class of stock within the meaning of paragraph (a) above
and, if the outstanding Common Shares shall be changed into a larger or smaller
number of Common Shares as a part of such reclassification, such change shall be
deemed a subdivision or combination, as the case may be, of the outstanding
Common Shares within the meaning of Section 4.1.
4.3.[INTENTIONALLY OMITTED]
4.4. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments of the number of Common Shares for which this Warrant is exercisable
and to the Current Warrant Price provided for in Section 4:
(a) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Shares shall be taken into account to
the nearest 1/1000th of a share.
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(b) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Shares for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to shareholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(c) ESCROW OF WARRANT SHARES. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Shares, but prior to the occurrence of the event for
which such record is taken, and Holder exercises this Warrant, any Additional
Common Shares issuable upon exercise by reason of such adjustment shall be
deemed the last Common Shares for which this Warrant is exercised
(notwithstanding any other provision to the contrary herein) and such shares or
other property shall be held in escrow for Holder by the Company to be issued to
Holder upon and to the extent that the event actually takes place, upon payment
of the then Current Warrant Price. Notwithstanding any other provision to the
contrary herein, if the event for which such record was taken fails to occur or
is rescinded, then such escrowed shares shall be cancelled by the Company and
escrowed property returned to the Company.
4.5. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION
OR DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Shares), or sell,
transfer or otherwise dispose of all or substantially all its property, assets
or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, Common Shares of the successor or acquiring corporation, or any cash,
shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Shares
of the Company, then each Holder shall have the right thereafter to receive,
upon exercise of such Warrant, the number of Common Shares of the successor or
acquiring corporation or of the Company, if it is the surviving corporation, and
Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of Common Shares for which this Warrant is exercisable immediately
prior to such event. In case of any such reorganization, reclassification,
merger, consolidation or disposition of assets, the successor or acquiring
corporation (if other than the Company) shall expressly assume the due and
punctual observance and performance of each and every covenant and condition of
this Warrant to be performed and observed by the Company and all the obligations
and liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of Common Shares for which this
Warrant is exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 4. For purposes of this Section 4.5,
"common stock of the successor or acquiring corporation" shall include stock of
such corporation of any class that is not preferred as to dividends or assets
over any other class of stock of such corporation and that is not subject to
redemption and shall
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also include any evidences of indebtedness, shares of stock or other securities
that are convertible into or exchangeable for any such stock, either immediately
or upon the arrival of a specified date or the happening of a specified event
and any warrants or other rights to subscribe for or purchase any such stock.
The foregoing provisions of this Section 4.5 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
4.6. OTHER ACTION AFFECTING COMMON SHARES. In case at any time
or from time to time the Company shall take any action in respect of its Common
Shares, other than any action described in this Section 4, then, unless such
action will not have a materially adverse effect upon the rights of Holders, the
number of Common Shares or other stock for which this Warrant is exercisable
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances.
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. Not less than 10 nor more than 30
days prior to the record date or effective date, as the case may be, of any
action that requires or might require an adjustment or readjustment pursuant to
Section 4, the Company shall forthwith prepare and deliver to each Holder a
signed copy of a certificate executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment
and the method by which such adjustment was calculated, specifying the number of
Common Shares for which this Warrant is exercisable and (if such adjustment was
made pursuant to Section 4.5 or 4.6) describing the number and kind of any other
shares of stock or Other Property for which this Warrant is exercisable, and any
change in the purchase price or prices thereof, after giving effect to such
adjustment or change. The Company shall keep at its office or agency designated
pursuant to Section 12 copies of all such certificates and cause the same to be
available for inspection at said office during normal business hours by any
Holder or any prospective purchaser of a Warrant designated by a Holder thereof.
5.2. NOTICE OF CORPORATE ACTION. If at any time
(a) the Company shall take a record of the holders of its
Common Shares for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation, person or entity, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days prior written notice of the date on which a record date shall be
selected for such dividend,
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distribution or right or for determining rights to vote in respect of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, and (ii) in the case of any
such reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least 30 days prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause also shall specify (i) the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, the date on which the holders of Common Shares shall be entitled to any
such dividend, distribution or right, and the amount and character thereof, and
(ii) the date on which any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up is to take place and the time, if any such time is to be fixed, as of which
the holders of Common Shares shall be entitled to exchange their Common Shares
for securities or other property deliverable upon such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of Holder
appearing on the books of the Company and delivered in accordance with Section
15.2.
6. NO IMPAIRMENT
The Company shall not by any action, including, without
limitation, amending its articles of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Common Shares upon the exercise of this Warrant, including
taking such action as is necessary for the Current Warrant Price to be not less
than the par value of the Common Shares issuable upon exercise of this Warrant,
and (b) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON SHARES;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the date hereof, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued Common Shares as will be sufficient to permit the
exercise in full of all outstanding Warrants. All Common Shares that shall be so
issuable, when issued upon exercise of any Warrant and payment therefor in
accordance with the terms of such Warrant, shall be duly and validly issued and
fully paid and nonassessable, and not subject to preemptive rights.
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Before taking any action that would result in an adjustment in
the number of Common Shares for which this Warrant is exercisable, the Company
shall obtain all such authorizations or exemptions thereof, or consents thereto,
as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
If any Common Shares required to be reserved for issuance upon
exercise of Warrants require registration or qualification with any governmental
authority or other governmental approval or filing under any federal or state
law (otherwise than as provided in Section 9) before such shares may be so
issued, the Company will in good faith and as expeditiously as possible and at
its expense endeavor to cause such shares to be duly registered or such approval
to be obtained or filing made.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Shares with respect to which any provision
of Section 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY; REGISTRATIONS
The Warrants and the Warrant Shares shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Share. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. (a) Except as otherwise provided in
this Section 9, each certificate for Warrant Shares initially issued upon the
exercise of this Warrant, and each certificate for Warrant Shares issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended,
and may not be transferred in violation of such Act
or the rules and regulations thereunder."
(b) Except as otherwise provided in this Section 9, each
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"This warrant and the securities represented hereby have not been
registered under the Securities Act of 1933, as amended,
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and may not be transferred in violation of such Act, the rules and
regulations thereunder or the provisions of this Warrant."
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION.
Prior to any Transfer of any Warrant or any Restricted Common Share, the holder
of such Warrant or Restricted Common Share shall give written notice (a
"Transfer Notice") to the Company of such Transfer. Each certificate, if any,
evidencing such Restricted Common Share issued upon such Transfer shall bear the
restrictive legend set forth in Section 9.1(a), and each Warrant issued upon
such Transfer shall bear the restrictive legend set forth in Section 9.1(b),
unless in the opinion of counsel to such holder that is reasonably acceptable to
the Company such legend is not required in order to ensure compliance with the
Securities Act.
9.3. REGISTRATION. Each holder of Warrant Shares has certain
registration rights under the Registration Rights Agreement dated September 30,
1999, between the Company and General Electric Company, as amended from time to
time. Any Holder may obtain a copy of such agreement by notice to the Company.
10. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and
each holder of Restricted Common Shares in supplying such information as may be
reasonably necessary for such holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Shares.
11. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably satisfactory
to it (it being understood that the written agreement of GE shall be sufficient
indemnity), and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like tenor
to such Holder; PROVIDED, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company for
cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive offices
of the Company) where the Warrants may be presented for exercise, registration
of transfer, division or combination as provided in this Warrant.
13. FINANCIAL AND BUSINESS INFORMATION
13.1. QUARTERLY INFORMATION. The Company will deliver to each
Holder, as soon as practicable after the end of each of the first three quarters
of the Company, and in any event
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within 45 days thereafter, one copy of an unaudited consolidated balance sheet
of the Company and its subsidiaries as at the close of such quarter, and the
related unaudited consolidated statements of income and cash flows of the
Company for such quarter and, in the case of the second and third quarters, for
the portion of the fiscal year ending with such quarter, setting forth in each
case in comparative form the figures for the corresponding periods in the
previous fiscal year. Such financial statements shall be prepared by the Company
in accordance with GAAP (without period-end adjustments or footnotes) and
accompanied by the certification of the Company's chief executive officer or
chief financial officer that such financial statements are complete and correct
and present fairly the consolidated financial position, results of operations
and cash flows of the Company and its subsidiaries as at the end of such quarter
and for such year-to-date period, as the case may be.
13.2. ANNUAL INFORMATION. The Company will deliver to each
Holder as soon as practicable after the end of each fiscal year of the Company,
and in any event within 90 days thereafter, one copy of:
(a) an audited consolidated balance sheet of the Company and
its subsidiaries as at the end of such year, and
(b) audited consolidated statements of income and cash flows
of the Company and its subsidiaries for such year;
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all prepared in accordance with GAAP, and
which audited financial statements shall be accompanied by (i) an opinion
thereon of the independent certified public accountants regularly retained by
the Company, or any other firm of independent certified public accountants of
recognized national standing selected by the Company and (ii) a report of such
independent certified public accountants confirming any adjustment made pursuant
to Section 4 during such year.
13.3. FILINGS. The Company will file with the Commission all
regular or periodic reports required pursuant to the Exchange Act and will
deliver to Holder promptly upon their becoming available one copy of each
report, notice or proxy statement sent by the Company to its shareholders
generally, and of each regular or periodic report (pursuant to the Exchange
Act), filed by the Company with (i) the Commission or (ii) any securities
exchange on which Common Shares are listed.
14. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by
Holder to purchase Common Shares, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of such Holder for
the purchase price of any Common Share or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
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15. MISCELLANEOUS
15.1. NONWAIVER AND EXPENSES. No course of dealing or any
delay or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Holder's rights, powers
or remedies. If the Company fails to comply with any provision of this Warrant,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in enforcing any of
its rights, powers or remedies hereunder.
15.2. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid, or
by telecopy and confirmed by telecopy answerback, addressed as follows:
(a) If to any Holder or holder of Warrant Shares, at its last
known address appearing on the books of the Company maintained for such purpose.
(b) If to the Company at
Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
Attention: President
Telecopy Number: (440)519-0503
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback, one Business Day after the same shall have been delivered to a
nationally recognized courier service, or three Business Days after the same
shall have been deposited, postage prepaid, in the United States mail. Failure
or delay in receipt of copies of any notice, demand, request, approval,
declaration, delivery or other communication to the Person designated above
shall in no way adversely affect the effectiveness of such notice, demand,
request, approval, declaration, delivery or other communication.
15.3. REMEDIES. Each holder of a Warrant or a Warrant Share,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under Section 9 of this Warrant. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of Section 9 of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
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15.4. SUCCESSORS AND ASSIGN. Subject to the provisions of
Sections 3.1 and 9, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
successors and assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and, with
respect to Section 9 hereof, holders of Warrant Shares, and shall be enforceable
by any such Holder or holder of Warrant Shares.
15.5. AMENDMENT. This Warrant may be modified or amended or
the provisions hereof waived only with the written consent of the Company and
the Majority Holders; provided that no such Warrant may be modified or amended
to reduce the number of Common Shares for which such Warrant is exercisable or
to increase the price at which such Common Shares may be purchased upon exercise
of such Warrant (before giving effect to any adjustment as provided therein)
without the prior written consent of each Holder.
15.6. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
15.7. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
15.8. GOVERNING LAW. This Warrant shall be governed by the
laws of the State of New York, without regard to the provisions thereof relating
to conflict of laws.
-16-
<PAGE> 67
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and attested by its Secretary or an Assistant Secretary.
Dated: ______________, 200___
ADVANCED LIGHTING TECHNOLOGIES, INC.
By:_________________________________
Name:
Title:
Attest:
By:__________________________________
Name:
Title:
-17-
<PAGE> 68
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of ______ Common Shares of ADVANCED
LIGHTING TECHNOLOGIES, INC. and herewith makes payment therefor, all at the
price and on the terms and conditions specified in this Warrant and requests
that certificates for the Common Shares hereby purchased (and any securities or
other property issuable upon such exercise) be issued in the name of and
delivered to ______________________________ whose address is
____________________________ and, if such Common Shares shall not include all of
the Common Shares issuable as provided in this Warrant, that a new Warrant of
like tenor and date for the balance of the Common Shares issuable hereunder be
delivered to the undersigned.
________________________________________
(Name of Registered Owner)
________________________________________
(Signature of Registered Owner)
________________________________________
(Street Address)
________________________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within warrant in every
particular, without alteration or enlargement or any change
whatsoever.
-18-
<PAGE> 69
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
Common Shares set forth below:
Name and Address of Assignee No. of Common Shares
- ---------------------------- --------------------
and does hereby irrevocably constitute and appoint _____________________________
attorney-in-fact to register such transfer on the books of ADVANCED LIGHTING
TECHNOLOGIES, INC. maintained for the purpose, with full power of substitution
in the premises.
Dated:______________________ Print Name:______________________
Signature:_______________________
Witness:_________________________
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
-19-
<PAGE> 70
EXHIBIT 2.2(f)(i)
-----------------
INDEPENDENT ACCOUNTANTS' REPORT
ON APPLYING AGREED-UPON PROCEDURES
To the Management of
Advanced Lighting Technologies, Inc.
We have performed the procedures enumerated below, which were agreed to by the
Management of Advanced Lighting Technologies, Inc., solely to assist you in
evaluating the accompanying EBITDA Coverage Ratio Calculation Schedule defined
in accordance with Section 2.2 of the Contingent Warrant Agreement dated
_________________ (prepared in accordance with the criteria specified therein)
for the quarter ended ______________________. This agreed-upon procedures
engagement was performed in accordance with standards established by the
American Institute of Certified Public Accountants. The sufficiency of these
procedures is solely the responsibility of the specified users of the report.
Consequently, we make no representation regarding the sufficiency of the
procedures described below either for the purpose for which this report has been
requested or for any other purpose.
(This paragraph will enumerate yet to be defined procedures followed and the
associated findings.)
We were not engaged to, and did not, perform an examination, the objective of
which would be the expression of an opinion on the accompanying Schedule.
Accordingly, we do not express any such opinion. Had we performed additional
procedures, other matters might have come to our attention that would have been
reported to you.
This report is intended solely for the use of Management of Advanced Lighting
Technologies, Inc., and should not be used by those who have not agreed to the
procedures and taken responsibility for the sufficiency of the procedures for
their purposes.
(Date)
<PAGE> 71
ADVANCED LIGHTING TECHNOLOGIES, INC.
AGREED-UPON PROCEDURES RELATED TO FINANCIAL COVENANT IN GENERAL ELECTRIC
CONTINGENT WARRANT AGREEMENT
1. We compared the consolidated net income (loss), depreciation,
amortization, provision for income taxes, interest expense and
extraordinary gains and losses in the EBITDA Coverage Ratio schedule
with the corresponding dollar amount included in the Company's
unaudited condensed consolidated financial statements included in the
Company's Quarterly Report on Form 10-Q and found the amounts to be in
agreement.
2. We compared the dollar amounts in the EBITDA Coverage Ratio schedule
not directly derived from the unaudited financial statements to the
corresponding dollar amounts derived from the Company's accounting
records and found them to be in agreement.
3. We proved the arithmetical accuracy of EBITDA, as defined, and Interest
Expense, as defined, and found the amounts to be in agreement with the
amounts in the EBITDA Coverage Ratio schedule.
4. We recalculated the EBITDA Coverage Ratio and Average EBITDA Coverage
Ratio for the respective Determination Period and found the amounts
calculated to be in agreement with the amounts in the EBITDA Coverage
Ratio schedule.
<PAGE> 72
ADVANCED LIGHTING TECHNOLOGIES, INC.
EBITDA Coverage Ratio Schedule
Section 2.2 of Contingent Warrant Agreement dated September 30, 1999
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Most Recent
Two Consecutive
Quarter Ended Fiscal Quarters
Sept. 30, 1999 Dec. 31, 1999 Combined
-------------- ------------- ------------------
<S> <C> <C> <C>
EBITDA COVERAGE RATIO
EBITDA, as defined
Consolidated Net Income (Loss)
Plus:
Depreciation
Amortization
Interest Expense
Provision for Income Taxes ___________ ____________ ____________
Less:
Extraordinary Gains
Gains from Sale of Assets ___________ ____________ ____________
Plus:
Extraordinary Losses
Losses from Sale of Assets ___________ ____________ ____________
EBITDA, as defined
=========== ============ ============
Interest Expense, as defined
Interest Expense
Less:
Interest Income
Deferred Financing Cost (a) ___________ ____________ ____________
Interest Expense, as defined
=========== ============ ============
EBITDA Coverage Ratio
EBITDA Coverage Ratio for Determination Period
Average EBITDA Coverage Ratio for Determination Period
Required EBITDA Coverage Ratio 2:1
EBITDA Coverage Ratio Met?
(a) Not to exceed $125 per quarter
Confidential - For Internal Use Only
</TABLE>
<PAGE> 73
EXHIBIT 2.2(f)(ii)
SPECIAL LETTER TO GENERAL ELECTRIC COMPANY
Board of Directors
Advanced Lighting Technologies, Inc.
We have audited, in accordance with generally accepted auditing standards, the
consolidated balance sheet of Advanced Lighting Technologies, Inc. and
Subsidiaries (the "Company") as of June 30, 2000, and the related consolidated
statement of earnings, retained earnings, and cash flows for the year then
ended, and have issued our report thereon dated __________________.
In connection with our audit, nothing came to our attention that caused us to
believe that the Company had failed to comply with the terms of Section 2.2
(EBITDA Coverage Ratio) of the Contingent Warrant Agreement dated _____________.
However, it should be noted that our audit was not directed primarily toward
obtaining knowledge of such noncompliance.
This report is intended solely for the information and use by the Company and
The General Electric Company and should not be used for any other purpose.
(DATE)
<PAGE> 1
Exhibit 10.7
SERIES A1 WARRANT
to Purchase Common Shares of
ADVANCED LIGHTING TECHNOLOGIES, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
1. DEFINITIONS .....................................................................1
2. EXERCISE OF WARRANT..............................................................5
2.1. Manner of Exercise......................................................5
2.2. Payment of Taxes........................................................6
2.3. Fractional Shares.......................................................6
2.4. Continued Validity......................................................6
3. TRANSFER, DIVISION AND COMBINATION...............................................7
3.1. Transfer................................................................7
3.2. Division and Combination................................................7
3.3. Expenses................................................................7
3.4. Maintenance of Books....................................................7
4. ADJUSTMENTS......................................................................7
4.1. Share Dividends, Subdivisions and Combinations..........................7
4.2 Certain Other Distributions and Adjustments.............................8
4.3. Issuance of Additional Common Shares....................................8
4.4. Issuance of Warrants or Other Rights....................................9
4.5. Issuance of Convertible Securities......................................9
4.6. Superseding Adjustment.................................................10
4.7. Other Provisions Applicable to Adjustments Under This Section .........11
4.8. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets..................................................13
4.9. Other Action Affecting Common Shares...................................13
5. NOTICES TO WARRANT HOLDERS......................................................14
5.1. Notice of Adjustments..................................................14
5.2. Notice of Corporate Action.............................................14
6. NO IMPAIRMENT...................................................................15
7. RESERVATION AND AUTHORIZATION OF COMMON SHARES; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY..................................15
8. TAXING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS..............................16
9. RESTRICTIONS ON TRANSFERABILITY.................................................16
9.1. Restrictive Legend.....................................................16
9.2. Notice of Proposed Transfers; Requests for Registration................16
10. SUPPLYING INFORMATION...........................................................17
11. LOSS OR MUTILATION..............................................................17
12. OFFICE OF THE COMPANY...........................................................17
13. FINANCIAL AND BUSINESS INFORMATION..............................................17
13.1. Quarterly Information..................................................17
13.2. Annual Information.....................................................18
13.3. Filings................................................................18
14. LIMITATION OF LIABILITY.........................................................18
15. MISCELLANEOUS...................................................................18
15.1. Nonwaiver and Expenses.................................................18
15.2. Notice Generally.......................................................19
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
15.3. Remedies...............................................................19
15.4. Successors and Assigns.................................................19
15.5. Amendment..............................................................19
15.6. Severability...........................................................20
15.7. Headings...............................................................20
15.8. Governing Law..........................................................20
</TABLE>
SIGNATURES
EXHIBITS
Exhibit A - Subscription Form
Exhibit B - Assignment Form
-ii-
<PAGE> 4
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF
THIS WARRANT.
SERIES A1 WARRANT
To Purchase Common Shares of
ADVANCED LIGHTING TECHNOLOGIES, INC.
THIS IS TO CERTIFY THAT GENERAL ELECTRIC COMPANY, or
registered assigns, is entitled, at any time during the Exercise Period (as
hereinafter defined), to purchase from ADVANCED LIGHTING TECHNOLOGIES, INC., an
Ohio corporation (the "Company"), up to 1,000,000 Common Shares (as hereinafter
defined and subject to adjustment as provided herein) as described herein, in
whole or in part, including fractional parts, at a purchase price of $.01 per
share (subject to adjustment as provided herein) all on the terms and conditions
and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
-----------
Terms used in this Warrant have the respective meanings set
forth below:
"Additional Issuance" shall have the meaning set forth in
Section 4.3(a).
"Additional Common Shares" shall mean all Common Shares issued
by the Company after the date hereof, other than Conversion Shares, Contingent
Shares or Warrant Shares.
"Appraised Value" shall mean, in respect of any Common Share
on any date herein specified, the fair saleable value of such Common Share
(determined without giving affect to the discount for (i) a minority interest or
(ii) any lack of liquidity of the Common Share or (iii) to the fact that the
Company may have no class of equity registered under the Exchange Act) based on
the equity value of the Company, as determined by an investment banking or
valuation firm selected in accordance with the following sentences, divided by
the number of Common Shares outstanding on a Fully Diluted Basis as determined
in accordance with GAAP (assuming the payment of the exercise prices for such
shares). The determination of the Appraised Value per Common Share shall be made
by an investment banking or valuation firm of nationally recognized standing
selected by the Company and acceptable to the Majority Holders. If the
investment banking or valuation firm selected by Company is not acceptable to
the Majority Holders and the Company and the Majority Holders cannot agree on a
mutually acceptable investment banking or valuation firm, then the Majority
Holders and the Company shall each choose one such investment banking or
valuation firm and the respective chosen firms shall
<PAGE> 5
agree on another investment banking or valuation firm which shall make the
determination. The Company shall retain, at its sole cost, such investment
banking or valuation firm as may be necessary for the determination of Appraised
Value required by the terms of this Warrant.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required to be closed in the State of New
York.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act, the Exchange
Act and other federal securities laws.
"Common Share" shall mean (except where the context otherwise
indicates) a Common Share, $0.001 par value, of the Company as constituted on
the date hereof, and any capital stock into which such Common Share may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
Common Shares upon any reclassification thereof which is also not preferred as
to dividends or assets over any other class of capital stock of the Company and
which is not subject to redemption and (ii) capital stock of any successor or
acquiring corporation (as defined in Section 4.8) received by or distributed to
the holders of Common Shares of the Company in the circumstances contemplated by
Section 4.8.
"Contingent Shares" shall mean Common Shares to be issued upon
the exercise of any right to purchase Common Shares pursuant to the Contingent
Warrant Agreement.
"Contingent Warrant Agreement" shall mean the Contingent
Warrant Agreement of even date herewith between the Company and General Electric
Company.
"Conversion Shares" shall mean the Common Shares issued or
issuable upon the conversion of the Series A Shares.
"Convertible Securities" shall mean evidences of indebtedness,
shares of capital stock or other securities that are convertible into or
exchangeable, with or without payment of additional consideration in cash or
property, for Additional Common Shares, either immediately or upon the
occurrence of a specified date or a specified event.
"Current Market Price" shall mean, in respect of any Common
Share on any date herein specified, if there shall then be a public market for
the Common Shares, the average of the daily market prices for 20 consecutive
Business Days immediately preceding such date or, if there is no such public
market, the Appraised Value per Common Share. The daily market price for each
such Business Day shall be (i) the last sale price on such day on the principal
stock exchange or NASDAQ-NMS on which such Common Shares are then listed or
admitted to trading, or (ii) if no sale takes place on such day on any such
exchange or NASDAQ-NMS, the average of the last reported closing bid and asked
prices on such day as officially quoted on any such exchange or NASDAQ-NMS, or
(iii) if the Common Shares are not then listed or admitted to trading on any
stock exchange or NASDAQ-NMS, the average of the last reported closing bid and
asked prices on such day in the over-the-counter market, as furnished by the
NASDAQ or
-2-
<PAGE> 6
the National Quotation Bureau, Inc., or (iv) if neither such corporation at the
time is engaged in the business of reporting such prices, as furnished by any
similar firm then engaged in such business, or (v) if there is no such firm, as
furnished by any member of the NASD selected mutually by the Majority Holders
and the Company or, if they cannot agree upon such selection, as selected by two
such members of the NASD, one of which shall be selected by the Majority Holders
and one of which shall be selected by the Company.
"Current Warrant Price" shall mean $.01 per Common Share.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1.
"Expiration Date" shall mean September 30, 2009.
"Fully Diluted Basis" means, with respect to any determination
or calculation, that such determination or calculation is performed on a fully
diluted basis (assuming the issuance of all Common Shares issuable under any
then outstanding options, warrants or convertible securities of any kind)
determined in accordance with GAAP for purposes of determining book value or net
income per share.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
"GE" shall mean General Electric Company, a New York
corporation.
"Holder" shall mean the Person in whose name the Warrant set
forth herein is registered on the books of the Company maintained for such
purpose.
"HSR Triggered Put" shall mean a put right under Section
VII(c) of the Company's Second Amended and Restated Articles of Incorporation.
"Majority Holders" shall mean the holders of Warrants
exercisable for in excess of 50% of the aggregate number of Common Shares then
purchasable upon exercise of all Warrants, whether or not then exercisable.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
"NASDAQ" shall mean the National Association of Securities
Dealers Automated Quotation System.
-3-
<PAGE> 7
"NASDAQ Approval" shall mean approval of the transactions
contemplated by the Stock Purchase Agreement by the shareholders of the Company
pursuant to NASDAQ Rule 4460(i)(D).
"NASDAQ-NMS" shall mean the NASDAQ National Market System.
"Other Property" shall have the meaning set forth in Section
4.8.
"Permitted Issuances" shall mean (a) the issuance or
conversion of options issued to employees pursuant to any stock option plan or
employee incentive plan approved by the Company's board of directors, (b) the
issuance of Warrant Shares, Contingent Shares or Conversion Shares and (c) the
issuance of Common Shares to satisfy obligations in respect of acquisitions of
securities or assets of any Person, provided that (i) such contracts were
entered into prior to September 30, 1999, and (ii) the number of Common Shares
subject to this Subparagraph (c) shall not exceed 110,000 in the aggregate.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, incorporated
organization, association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
"Purchase Price" shall mean $6.75 per Common Share (as the
same may be adjusted from time to time to take into account any action taken by
the Company in respect of its Common Shares, including, without limitation,
stock splits, dividends, combinations and reclassifications).
"Registration Statement" shall have the meaning set forth in
Section 9.4.
"Restricted Common Shares" shall mean Common Shares that are,
or upon their issuance on the exercise of this Warrant would be, evidenced by a
certificate bearing the restrictive legend set forth in Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Series A Shares" shall mean shares of Series A Convertible
Preferred Stock, par value $.001, of the Company.
"Stock Purchase Agreement" shall mean the Stock Purchase
Agreement, of even date herewith, between GE and the Company.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, association or other business entity
in respect of which that Person owns securities or other ownership interests
having ordinary voting power to elect a majority of
-4-
<PAGE> 8
the board of directors, partnership committee, board of managers or trustees or
other managerial body thereof, whether directly or indirectly through one or
more of the other Subsidiaries of such Person or a combination thereof. Unless
otherwise specified, "Subsidiary" means a Subsidiary of the Company and
"Subsidiaries" means all Subsidiaries of the Company.
"Transfer" shall mean any disposition of any Warrant or
Warrant Share or of any interest in either thereof that would constitute a sale
thereof within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section
9.2.
"Warrants" shall mean this Warrant and all warrants issued
upon transfer, division or combination of, or in substitution for, this Warrant.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of Common Shares for which they may be exercised.
"Warrant Price" shall mean an amount equal to (i) the number
of Common Shares being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Shares" shall mean the Common Shares issued or
issuable to the Holders of Warrants upon exercise of the Warrants.
2. EXERCISE OF WARRANT
-------------------
2.1. MANNER OF EXERCISE. From and after the date hereof and
until 5:00 P.M., New York time, on the Expiration Date (the "Exercise Period"),
subject to the last sentence of this Section 2.1, Holder may exercise this
Warrant, on any Business Day, for all or any part of 1,000,000 Common Shares. In
order to exercise this Warrant, in whole or in part, Holder shall deliver to the
Company at its principal office at 32000 Aurora Road, Solon, Ohio 44139, or at
the office or agency designated by the Company pursuant to Section 12: (i) a
written notice of Holder's election to exercise this Warrant, which notice shall
specify the number of Common Shares to be purchased, (ii) payment of the Warrant
Price and (iii) this Warrant. Such notice shall be substantially in the form of
the subscription form appearing at the end of this Warrant as Exhibit A, duly
executed by Holder or its agent or attorney. Upon receipt thereof, the Company
shall, as promptly as practicable, and in any event within five Business Days
thereafter, execute or cause to be executed and deliver or cause to be delivered
to Holder a certificate or certificates representing the aggregate number of
full Common Shares issuable upon such exercise, together with cash in lieu of
any fraction of a share, as hereinafter provided. The share certificate or
certificates so delivered shall be, to the extent possible, in such denomination
or denominations as such Holder shall request in the notice and shall be
registered in the name of Holder or, subject to Section 9, such other name as
shall be designated in the notice. This Warrant shall be deemed to have been
exercised and such certificate or certificates shall be deemed to have been
issued, and Holder or any other Person so designated to be named therein shall
be deemed to have become a holder of record of such shares for all purposes, as
of the date the notice, together with the cash or check or other payment as
provided below and this Warrant, is received by the
-5-
<PAGE> 9
Company as described above and all taxes required to be paid by Holder, if any,
pursuant to Section 2.2 prior to the issuance of such shares have been paid. If
this Warrant shall have been exercised in part, the Company shall, at the time
of delivery of the certificate or certificates representing Warrant Shares,
deliver to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased Common Shares called for by this Warrant, which new Warrant shall in
all other respects be identical with this Warrant, or, at the request of Holder,
appropriate notation may be made on this Warrant and the same returned to
Holder. Payment of the Warrant Price shall be made at the option of Holder by
(i) certified or official bank check, and/or (ii) by Holder's surrender to the
Company of that number of Warrant Shares (or the right to receive such number of
shares) or Common Shares having an aggregate Current Market Price equal to or
greater than the Current Warrant Price for all shares then being purchased
(including those being surrendered), or (iii) any combination thereof, duly
endorsed by or accompanied by appropriate instruments of transfer duly executed
by Holder or by Holder's attorney duly authorized in writing. This Warrant and
Holder's right to exercise this Warrant shall, to the extent not previously
exercised, terminate at such time as GE has received the Put Option Purchase
Price (as defined in Section VII(c) of the Company's Second Amended and Restated
Articles) upon an HSR Triggered Put.
2.2. PAYMENT OF TAXES. All Common Shares issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon Holder, in which case such
taxes or charges shall be paid by Holder. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for Common Shares issuable upon
exercise of this Warrant in any name other than that of Holder, and in such case
the Company shall not be required to issue or deliver any share certificate
until such tax or other charge has been paid or it has been established to the
reasonable satisfaction of the Company that no such tax or other charge is due.
2.3. FRACTIONAL SHARES. The Company shall not be required to
issue a fractional Common Share upon exercise of any Warrant. If any fraction of
a share would, but for this Section, be issuable upon exercise of this Warrant,
in lieu of such fractional share, the Company may, at its option, pay a cash
adjustment in respect of such final fraction in an amount equal to the same
fraction of the Current Market Price per Common Share on the date of exercise
or, if there is no Current Market Price on such date, $6.75 per whole Common
Share, adjusted to reflect equitably share dividends, subdivisions and
combinations after the date hereof.
2.4. CONTINUED VALIDITY. A holder of Common Shares issued upon
the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the Securities Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 9, 10 and
15 of this Warrant. The Company will, at the time of each exercise of this
Warrant, in whole or in part, upon the request of the holder of the Common
Shares issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation
-6-
<PAGE> 10
to afford to such holder all such rights; PROVIDED, HOWEVER, that if such holder
shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
----------------------------------
3.1. TRANSFER. Subject to compliance with Section 9 hereof,
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company referred to in
Section 2.1 or the office or agency designated by the Company pursuant to
Section 12, together with a written assignment of this Warrant substantially in
the form of Exhibit B hereto duly executed by Holder or its agent or attorney
and funds sufficient to pay any transfer taxes payable upon the making of such
transfer. Upon such surrender and, if required, such payment, the Company shall,
subject to Section 9, execute and deliver a new Warrant or Warrants in the name
of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned in compliance with
Section 9, may be exercised by a new Holder for the purchase of Common Shares
without having a new Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
3.1 and with Section 9, as to any transfer that may be involved in such division
or combination, the Company shall execute and deliver a new Warrant or Warrants
in exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver at
its own expense (other than transfer taxes) the new Warrant or Warrants under
this Section 3.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at
its aforesaid office or agency, books for the registration and the registration
of transfer of the Warrants.
4. ADJUSTMENTS
-----------
Subject to NASDAQ Approval, the number of Common Shares for
which this Warrant is exercisable shall be subject to adjustment from time to
time as set forth in this Section 4. The Company shall give each Holder notice
of any event described below in accordance with Section 5.1.
4.1. SHARE DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any
time the Company shall:
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<PAGE> 11
(a) take a record of the holders of its Common Shares for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Common Shares,
(b) subdivide its outstanding Common Shares into a larger
number of Common Shares, or
(c) combine its outstanding Common Shares into a smaller
number of Common Shares,
then the number of Common Shares for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of Common Shares that a record holder of the same number of Common
Shares for which this Warrant is exercisable immediately prior to the occurrence
of such event would own or be entitled to receive after the happening of such
event.
4.2 CERTAIN OTHER DISTRIBUTIONS AND ADJUSTMENTS. (a) If at any
time the Company shall take a record of the holders of its Common Shares for the
purpose of entitling them to receive any dividend or other distribution of:
(i) cash,
(ii) any evidences of its indebtedness, any shares of its
stock or any other securities or property of any nature whatsoever
(other than cash, Convertible Securities or Additional Common Shares),
or
(iii) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Common Shares),
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised this Warrant.
(b) A reclassification of the Common Shares (other than a
change in par value, or from par value to no par value or from no par value to
par value) into Common Shares and shares of any other class of stock shall be
deemed a distribution by the Company to the holders of its Common Shares of such
shares of such other class of stock within the meaning of paragraph (a) above
and, if the outstanding Common Shares shall be changed into a larger or smaller
number of Common Shares as a part of such reclassification, such change shall be
deemed a subdivision or combination, as the case may be, of the outstanding
Common Shares within the meaning of Section 4.1.
4.3. ISSUANCE OF ADDITIONAL COMMON SHARES. (a) If at any time
the Company shall (except as hereinafter provided) issue or sell any Additional
Common Shares or any security convertible or exchangeable into Additional Common
Shares (an "Additional Issuance"), other than Permitted Issuances, in exchange
for consideration in an amount per
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<PAGE> 12
Additional Common Share less than either the Purchase Price or the Current
Market Price on the date of such Additional Issuance (before giving effect to
such Additional Issuance), then, effective upon such Additional Issuance, the
number of Common Shares subject to purchase upon exercise of this Warrant shall
be increased to a number determined by multiplying the number of Common Shares
subject to purchase immediately before such Additional Issuance by a fraction,
the numerator of which shall be the number of Common Shares outstanding
immediately prior to such Additional Issuance plus the number of Additional
Common Shares so issued and the denominator of which shall be the number of
Common Shares outstanding immediately prior to such issuance of Additional
Common Shares plus the number of Common Shares which the aggregate consideration
received by the Company for the total number of Additional Common Shares so
issued would purchase at the greater of the Purchase Price or the Current Market
Value at the time of such Additional Issuance. In computing adjustments under
this paragraph, fractional interests in Common Shares shall be taken into
account to the nearest one-thousandth of a share.
(b) The provision of paragraph (a) of Section 4.3 shall not
apply to any issuance of Additional Common Shares for which an adjustment is
provided under Section 4.1 or 4.2. No adjustment of the number of Common Shares
for which this Warrant shall be exercisable shall be made under paragraph (a) of
Section 4.3 upon the issuance of any Additional Common Shares that are issued
pursuant to the exercise of any warrants or other subscription or purchase
rights or pursuant to the exercise of any conversion or exchange rights in any
Convertible Securities, if any such adjustment shall previously have been made
upon the issuance of such warrants or other rights or upon the issuance of such
Convertible Securities (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 4.4 or Section 4.5.
4.4. ISSUANCE OF WARRANTS OR OTHER RIGHTS. If at any time the
Company shall take a record of the holders of its Common Shares for the purpose
of entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any warrants or other rights to subscribe for or
purchase any Additional Common Shares or any Convertible Securities, whether or
not the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which a Common Share is issuable upon the exercise
of such warrants or other rights or upon conversion or exchange of such
Convertible Securities shall be less than either the Purchase Price or the
Current Market Price on the date of such issue or sale, then the number of
Common Shares for which this Warrant is exercisable shall be adjusted as
provided in Section 4.3 on the basis that the maximum number of Additional
Common Shares issuable pursuant to all such warrants or other rights necessary
to effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued and outstanding and the Company shall be deemed to
have received all of the consideration payable therefor, if any, as of the date
of the issuance of such warrants or other rights. No further adjustments of the
number of Common Shares for which this Warrant is exercisable shall be made upon
the actual issue of such Common Shares or of such Convertible Securities upon
exercise of such warrants or other rights or upon the actual issue of such
Common Shares upon such conversion or exchange of such Convertible Securities.
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the
Company shall take a record of the holders of its Common Shares for the purpose
of entitling them to receive a
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<PAGE> 13
distribution of, or shall in any manner (whether directly or by assumption in a
merger in which the Company is the surviving corporation) issue or sell, any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which a
Common Share is issuable upon such conversion or exchange shall be less than
either the Purchase Price or the Current Market Price on the date of such issue
or sale, then the number of Common Shares for which this Warrant is exercisable
shall be adjusted as provided in Section 4.3 on the basis that the maximum
number of Additional Common Shares necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
and outstanding and the Company shall have received all of the consideration
payable therefor, if any, as of the date of issuance of such Convertible
Securities. No adjustment of the number of Common Shares for which this Warrant
is exercisable shall be made under this Section 4.5 upon the issuance of any
Convertible Securities that are issued pursuant to the exercise of any warrants
or other subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights
pursuant to Section 4.4. No further adjustments of the number of Common Shares
for which this Warrant is exercisable shall be made upon the actual issue of
such Common Shares upon conversion or exchange of such Convertible Securities
and, if any issue or sale of such Convertible Securities is made upon exercise
of any warrant or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the number of Common Shares for
which this Warrant is exercisable have been or are to be made pursuant to other
provisions of this Section 4, no further adjustments of the number of Common
Shares for which this Warrant is exercisable and the Current Warrant Price shall
be made by reason of such issue or sale.
4.6. SUPERSEDING ADJUSTMENT. If, at any time after any
adjustment of the number of Common Shares for which this Warrant is exercisable
shall have been made pursuant to Section 4.4 or Section 4.5 as the result of any
issuance of warrants, rights or Convertible Securities,
(a) such warrants or rights, or the right of conversion or
exchange in such other Convertible Securities, shall expire, and all or a
portion of such warrants or rights, or the right of conversion or exchange with
respect to all or a portion of such other Convertible Securities, as the case
may be, shall not have been exercised, or
(b) the consideration per share for which Common Shares are
issuable pursuant to such warrants or rights, or the terms of such other
Convertible Securities, shall be increased solely by virtue of provisions
therein contained for an automatic increase in such consideration per share upon
the occurrence of a specified date or event,
then for each outstanding Warrant such previous adjustment shall be rescinded
and annulled and the Additional Common Shares that were deemed to have been
issued by virtue of the computation made in connection with the adjustment so
rescinded and annulled shall no longer be deemed to have been issued by virtue
of such computation. Thereupon, a recomputation shall be made of the effect of
such rights or options or other Convertible Securities on the basis of
(c) treating the number of Additional Common Shares or other
property, if any, theretofore actually issued or issuable pursuant to the
previous exercise of any such
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<PAGE> 14
warrants or rights or any such right of conversion or exchange, as having been
issued on the date or dates of any such exercise and for the consideration
actually received and receivable therefor, and
(d) treating any such warrants or rights or any such other
Convertible Securities that then remain outstanding as having been granted or
issued immediately after the time of such increase of the consideration per
share for which Common Shares or other property are issuable under such warrants
or rights or other Convertible Securities; whereupon a new adjustment of the
number of Common Shares for which this Warrant is exercisable shall be made,
which new adjustment shall supersede the previous adjustment so rescinded and
annulled.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments of the number of Common Shares for which this Warrant is exercisable
and the Current Warrant Price provided for in this Section 4:
(a) COMPUTATION OF CONSIDERATION. To the extent that any
Additional Common Shares or any Convertible Securities or any warrants or other
rights to subscribe for or purchase any Additional Common Shares or any
Convertible Securities shall be issued for cash consideration, the consideration
received by the Company therefor shall be the amount of the cash received by the
Company therefor, or, if such Additional Common Shares or Convertible Securities
are offered by the Company for subscription, the subscription price, or, if such
Additional Common Shares or Convertible Securities are sold to underwriters or
dealers for public offering without a subscription offering, the initial public
offering price (in any such case subtracting any amounts paid or receivable for
accrued interest or accrued dividends and without taking into account any
compensation, discounts or expenses paid or incurred by the Company for and in
the underwriting of, or otherwise in connection with, the issuance thereof). To
the extent that such issuance shall be for a consideration other than cash,
then, except as herein otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of such consideration at the
time of such issuance as determined in good faith by the Board of Directors of
the Company. In case any Additional Common Shares or any Convertible Securities
or any warrants or other rights to subscribe for or purchase such Additional
Common Shares or Convertible Securities shall be issued in connection with any
merger in which the Company issues any securities, the amount of consideration
therefor shall be deemed to be the fair value, as determined in good faith by
the Board of Directors of the Company, of such portion of the assets and
business of the nonsurviving corporation as such Board in good faith shall
determine to be attributable to such Additional Common Shares, Convertible
Securities, warrants or other rights, as the case may be. The consideration for
any Additional Common Shares issuable pursuant to any warrants or other rights
to subscribe for or purchase the same shall be the consideration received by the
Company for issuing such warrants or other rights plus the additional
consideration payable to the Company upon exercise of such warrants or other
rights. The consideration for any Additional Common Shares issuable pursuant to
the term of any Convertible Securities shall be the consideration received by
the Company for issuing warrants or other rights to subscribe for or purchase
such Convertible Securities, plus the consideration paid or payable to the
Company in respect of the subscription for or purchase of such Convertible
Securities, plus the additional consideration, if any, payable to the Company
upon
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<PAGE> 15
the exercise of the right of conversion or exchange in such Convertible
Securities. In case of the issuance at any time of any Additional Common Shares
or Convertible Securities in payment or satisfaction of any dividends upon any
class of stock other than Common Shares, the Company shall be deemed to have
received for such Additional Common Shares or Convertible Securities a
consideration equal to the amount of such dividend so paid or satisfied.
(b) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by
this Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that any adjustment of the number of
Common Shares for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
Common Shares, as provided for in Section 4.1) up to, but not beyond the date of
exercise if such adjustment either by itself or with other adjustments not
previously made adds or subtracts less than 1% of the Common Shares for which
this Warrant is exercisable immediately prior to the making of such adjustment.
Any adjustment representing a change of less than such minimum amount (except as
aforesaid) that is postponed shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section 4 and not
previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be deemed
to have occurred at the close of business on the date of its occurrence.
(c) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Shares shall be taken into account to
the nearest 1/1000th of a share.
(d) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Shares for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to shareholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(e) ESCROW OF WARRANT SHARES. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Shares, but prior to the occurrence of the event for
which such record is taken, and Holder exercises this Warrant, any Additional
Common Shares issuable upon exercise by reason of such adjustment shall be
deemed the last Common Shares for which this Warrant is exercised
(notwithstanding any other provision to the contrary herein) and such shares or
other property shall be held in escrow for Holder by the Company to be issued to
Holder upon and to the extent that the event actually takes place, upon payment
of the then Current Warrant Price. Notwithstanding any other provision to the
contrary herein, if the event for which such record was taken fails to occur or
is rescinded, then such escrowed shares shall be cancelled by the Company and
escrowed property returned to the Company.
(f) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board
of Directors of the Company shall be required to make a determination in good
faith of the fair value of any
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<PAGE> 16
item under this Section 4, such determination may be challenged in good faith by
the Majority Holders, and any dispute shall be resolved by an investment banking
or valuation firm of recognized national standing selected by the Company and
acceptable to the Majority Holders.
(g) PROHIBITION ON ADJUSTMENT. The provisions of Section 4.3,
4.4 and 4.5 shall not operate to reduce the number of Common Shares subject to
purchase upon exercise of this Warrant.
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION
OR DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Shares), or sell,
transfer or otherwise dispose of all or substantially all its property, assets
or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, Common Shares of the successor or acquiring corporation, or any cash,
shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Shares
of the Company, then each Holder shall have the right thereafter to receive,
upon exercise of such Warrant, the number of Common Shares of the successor or
acquiring corporation or of the Company, if it is the surviving corporation, and
Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of Common Shares for which this Warrant is exercisable immediately
prior to such event. In case of any such reorganization, reclassification,
merger, consolidation or disposition of assets, the successor or acquiring
corporation (if other than the Company) shall expressly assume the due and
punctual observance and performance of each and every covenant and condition of
this Warrant to be performed and observed by the Company and all the obligations
and liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of Common Shares for which this
Warrant is exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 4. For purposes of this Section 4.8,
"common stock of the successor or acquiring corporation" shall include stock of
such corporation of any class that is not preferred as to dividends or assets
over any other class of stock of such corporation and that is not subject to
redemption and shall also include any evidences of indebtedness, shares of stock
or other securities that are convertible into or exchangeable for any such
stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe for
or purchase any such stock. The foregoing provisions of this Section 4.8 shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
4.9. OTHER ACTION AFFECTING COMMON SHARES. In case at any time
or from time to time the Company shall take any action in respect of its Common
Shares, other than any action described in this Section 4, then, unless such
action will not have a materially adverse effect upon the rights of Holders, the
number of Common Shares or other stock for which this Warrant is exercisable
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances.
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<PAGE> 17
5. NOTICES TO WARRANT HOLDERS
--------------------------
5.1. NOTICE OF ADJUSTMENTS. Not less than 10 nor more than 30
days prior to the record date or effective date, as the case may be, of any
action that requires or might require an adjustment or readjustment pursuant to
Section 4, the Company shall forthwith prepare and deliver to each Holder a
signed copy of a certificate executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment
and the method by which such adjustment was calculated (including a description
of the basis on which the Board of Directors of the Company determined the fair
value of any evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights referred to in
Section 4.7 (a)), specifying the number of Common Shares for which this Warrant
is exercisable and (if such adjustment was made pursuant to Section 4.8 or 4.9)
describing the number and kind of any other shares of stock or Other Property
for which this Warrant is exercisable, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. The Company
shall keep at its office or agency designated pursuant to Section 12 copies of
all such certificates and cause the same to be available for inspection at said
office during normal business hours by any Holder or any prospective purchaser
of a Warrant designated by a Holder thereof.
5.2. NOTICE OF CORPORATE ACTION. If at any time
(a) the Company shall take a record of the holders of its
Common Shares for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation, person or entity, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 30 days prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Shares
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale,
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<PAGE> 18
transfer, disposition, dissolution, liquidation or winding up is to take place
and the time, if any such time is to be fixed, as of which the holders of Common
Shares shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 15.2.
6. NO IMPAIRMENT
-------------
The Company shall not by any action, including, without
limitation, amending its articles of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Common Shares upon the exercise of this Warrant, including
taking such action as is necessary for the Current Warrant Price to be not less
than the par value of the Common Shares issuable upon exercise of this Warrant,
and (b) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON SHARES;
-----------------------------------------------
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
-----------------------------------------------------------
From and after the date hereof, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued Common Shares as will be sufficient to permit the
exercise in full of all outstanding Warrants. All Common Shares that shall be so
issuable, when issued upon exercise of any Warrant and payment therefor in
accordance with the terms of such Warrant, shall be duly and validly issued and
fully paid and nonassessable, and not subject to preemptive rights.
Before taking any action that would result in an adjustment in
the number of Common Shares for which this Warrant is exercisable, the Company
shall obtain all such authorizations or exemptions thereof, or consents thereto,
as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
If any Common Shares required to be reserved for issuance upon
exercise of Warrants require registration or qualification with any governmental
authority or other governmental approval or filing under any federal or state
law (otherwise than as provided in
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Section 9) before such shares may be so issued, the Company will in good faith
and as expeditiously as possible and at its expense endeavor to cause such
shares to be duly registered or such approval to be obtained or filing made.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
--------------------------------------------------
In the case of all dividends or other distributions by the
Company to the holders of its Common Shares with respect to which any provision
of Section 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY; REGISTRATIONS
----------------------------------------------
The Warrants and the Warrant Shares shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Share. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. (a) Except as otherwise provided in
this Section 9, each certificate for Warrant Shares initially issued upon the
exercise of this Warrant, and each certificate for Warrant Shares issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended,
and may not be transferred in violation of such Act
or the rules and regulations thereunder."
(b) Except as otherwise provided in this Section 9, each
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"This warrant and the securities represented hereby have not
been registered under the Securities Act of 1933, as amended,
and may not be transferred in violation of such Act, the rules
and regulations thereunder or the provisions of this Warrant."
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION.
Prior to any Transfer of any Warrant or any Restricted Common Share, the holder
of such Warrant or Restricted Common Share shall give written notice (a
"Transfer Notice") to the Company of such Transfer. Each certificate, if any,
evidencing such Restricted Common Share issued upon such Transfer shall bear the
restrictive legend set forth in Section 9.1(a), and each Warrant issued upon
such Transfer shall bear the restrictive legend set forth in Section 9.1(b),
unless in the
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opinion of counsel to such holder that is reasonably acceptable to the Company
such legend is not required in order to ensure compliance with the Securities
Act.
9.3. REGISTRATION. Each holder of Warrant Shares has certain
registration rights under the Registration Rights Agreement of even date
herewith between the Company and General Electric Company, as amended from time
to time. Any Holder may obtain a copy of such agreement by notice to the
Company.
10. SUPPLYING INFORMATION
---------------------
The Company shall cooperate with each Holder of a Warrant and
each holder of Restricted Common Shares in supplying such information as may be
reasonably necessary for such holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Shares.
11. LOSS OR MUTILATION
------------------
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably satisfactory
to it (it being understood that the written agreement of GE shall be sufficient
indemnity), and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like tenor
to such Holder; PROVIDED, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company for
cancellation.
12. OFFICE OF THE COMPANY
---------------------
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive offices
of the Company) where the Warrants may be presented for exercise, registration
of transfer, division or combination as provided in this Warrant.
13. FINANCIAL AND BUSINESS INFORMATION
----------------------------------
13.1. QUARTERLY INFORMATION. The Company will deliver to each
Holder, as soon as practicable after the end of each of the first three quarters
of the Company, and in any event within 45 days thereafter, one copy of an
unaudited consolidated balance sheet of the Company and its subsidiaries as at
the close of such quarter, and the related unaudited consolidated statements of
income and cash flows of the Company for such quarter and, in the case of the
second and third quarters, for the portion of the fiscal year ending with such
quarter, setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year. Such financial statements
shall be prepared by the Company in accordance with GAAP (without period-end
adjustments or footnotes) and accompanied by the certification of the Company's
chief executive officer or chief financial officer that such financial
statements are complete and correct and present fairly the consolidated
financial position, results of operations
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and cash flows of the Company and its subsidiaries as at the end of such quarter
and for such year-to-date period, as the case may be.
13.2. ANNUAL INFORMATION. The Company will deliver to each
Holder as soon as practicable after the end of each fiscal year of the Company,
and in any event within 90 days thereafter, one copy of:
(a) an audited consolidated balance sheet of the Company and
its subsidiaries as at the end of such year, and
(b) audited consolidated statements of income and cash flows
of the Company and its subsidiaries for such year;
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all prepared in accordance with GAAP, and
which audited financial statements shall be accompanied by (i) an opinion
thereon of the independent certified public accountants regularly retained by
the Company, or any other firm of independent certified public accountants of
recognized national standing selected by the Company and (ii) a report of such
independent certified public accountants confirming any adjustment made pursuant
to Section 4 during such year.
13.3. FILINGS. The Company will file with the Commission all
regular or periodic reports required pursuant to the Exchange Act and will
deliver to Holder promptly upon their becoming available one copy of each
report, notice or proxy statement sent by the Company to its shareholders
generally, and of each regular or periodic report (pursuant to the Exchange
Act), filed by the Company with (i) the Commission or (ii) any securities
exchange on which Common Shares are listed.
14. LIMITATION OF LIABILITY
-----------------------
No provision hereof, in the absence of affirmative action by
Holder to purchase Common Shares, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of such Holder for
the purchase price of any Common Share or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
15. MISCELLANEOUS
-------------
15.1. NONWAIVER AND EXPENSES. No course of dealing or any
delay or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Holder's rights, powers
or remedies. If the Company fails to comply with any provision of this Warrant,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in enforcing any of
its rights, powers or remedies hereunder.
-18-
<PAGE> 22
15.2. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid, or
by telecopy and confirmed by telecopy answerback, addressed as follows:
(a) If to any Holder or holder of Warrant Shares, at its last
known address appearing on the books of the Company maintained for such purpose.
(b) If to the Company at
Advanced Lighting Technologies, Inc.
32000 Aurora Road
Solon, Ohio 44139
Attention: President
Telecopy Number: (440)519-0503
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback, one Business Day after the same shall have been delivered to a
nationally recognized courier service, or three Business Days after the same
shall have been deposited, postage prepaid, in the United States mail. Failure
or delay in receipt of copies of any notice, demand, request, approval,
declaration, delivery or other communication to the Person designated above
shall in no way adversely affect the effectiveness of such notice, demand,
request, approval, declaration, delivery or other communication.
15.3. REMEDIES. Each holder of a Warrant or a Warrant Share,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under Section 9 of this Warrant. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of Section 9 of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
15.4. SUCCESSORS AND ASSIGNS. Subject to the provisions of
Sections 3.1 and 9, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
successors and assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and, with
respect to Section 9 hereof, holders of Warrant Shares, and shall be enforceable
by any such Holder or holder of Warrant Shares.
15.5. AMENDMENT. This Warrant may be modified or amended or
the provisions hereof waived only with the written consent of the Company and
the Majority Holders; PROVIDED that no such Warrant may be modified or amended
to reduce the number of Common Shares for
-19-
<PAGE> 23
which such Warrant is exercisable or to increase the price at which such Common
Shares may be purchased upon exercise of such Warrant (before giving effect to
any adjustment as provided therein) without the prior written consent of each
Holder.
15.6. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
15.7. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
15.8. GOVERNING LAW. This Warrant shall be governed by the
laws of the State of New York, without regard to the provisions thereof relating
to conflict of laws.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and attested by its Secretary or an Assistant Secretary.
Dated: October 6, 1999
ADVANCED LIGHTING TECHNOLOGIES, INC.
By: /s/Wayne R. Hellman
-----------------------------------
Name: Wayne R. Hellman
Title: Chairman and Chief Executive
Officer
Attest:
By: /s/Julie Byrne
--------------------------
Name: Julie Byrne
Title: Assistant Secretary
-20-
<PAGE> 24
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of ______ Common Shares of ADVANCED
LIGHTING TECHNOLOGIES, INC. and herewith makes payment therefor, all at the
price and on the terms and conditions specified in this Warrant and requests
that certificates for the Common Shares hereby purchased (and any securities or
other property issuable upon such exercise) be issued in the name of and
delivered to ______________________________ whose address is
____________________________ and, if such Common Shares shall not include all of
the Common Shares issuable as provided in this Warrant, that a new Warrant of
like tenor and date for the balance of the Common Shares issuable hereunder be
delivered to the undersigned.
_________________________________________
(Name of Registered Owner)
_________________________________________
(Signature of Registered Owner)
_________________________________________
(Street Address)
_________________________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within warrant in every
particular, without alteration or enlargement or any change
whatsoever.
-21-
<PAGE> 25
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
Common Shares set forth below:
Name and Address of Assignee No. of Common Shares
---------------------------- --------------------
and does hereby irrevocably constitute and appoint ________________________
attorney-in-fact to register such transfer on the books of ADVANCED LIGHTING
TECHNOLOGIES, INC. maintained for the purpose, with full power of substitution
in the premises.
Dated:____________________ Print Name:_______________________
Signature:_________________________
Witness:___________________________
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
-22-
<PAGE> 1
Exhibit 10.8
LAMP MATERIALS PURCHASE AGREEMENT
THIS AGREEMENT is entered into as of the 30th day of September 1999, by
and between GENERAL ELECTRIC COMPANY, a New York corporation, acting through its
GE LIGHTING business, having offices at Nela Park, Cleveland, Ohio 44112
("Purchaser"), APL ENGINEERED MATERIALS, INC., an Ohio corporation having
offices at 2401 N. Willow Road, Urbana, Illinois 61801 ("Seller"), and ADVANCED
LIGHTING TECHNOLOGIES, INC., an Ohio corporation having offices at 32000 Aurora
Road, Solon, Ohio 44139 ("ADLT").
WITNESSETH:
WHEREAS, Purchaser purchased certain metal halide pellets,
sodium-mercury amalgams and other materials from Seller pursuant to the Metal
Halide Purchase Agreement (the "MH Purchase Agreement") dated January 1, 1989
and the Amalgam Purchase Agreement dated April 24, 1987 (the "Amalgam
Agreement"); and
WHEREAS, although the MH Agreement and the Amalgam Agreement expired on
November 30, 1998 and December 31, 1998, respectively, Purchaser has continued
purchasing Product (defined below) from Seller; and
WHEREAS, Purchaser and Seller have agreed to replace the MH Purchase
Agreement and the Amalgam Agreement with this Lamp Materials Purchase Agreement
(which is and shall be deemed to be an agreement supplementary to the License
Agreement defined below, as contemplated by section 365 of Title XI of the U.S.
Code), and to enter into a Know How and Patent License and Technical Assistance
Agreement (the "License Agreement") pursuant to which, among other things,
Purchaser has a non exclusive right to use the Know How Record (defined below)
under the conditions specified therein.
NOW THEREFORE, in consideration of the foregoing, and the mutual
promises hereinafter contained, the parties hereto agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
"Change of Control" shall mean with respect to an entity, any of the
following: (a) any person or group of persons shall have acquired beneficial
ownership (as defined in Rule 13d-3, promulgated under the Securities Exchange
Act of 1934, as amended) of 50% or more of the issued and outstanding shares of
common stock of the entity, (b) the entity shall be a party
-1-
<PAGE> 2
to a merger or consolidation in which it is not the survivor or in which the
entity's shareholders immediately prior thereto own less than a majority of the
outstanding voting stock of the survivor, or (c) the entity shall have sold,
leased or otherwise transferred all or substantially all of its assets in one
transaction or a series of related transactions.
"Consignment Agreement" shall mean the Consignment Agreement between
Purchaser and Seller, substantially in the form of EXHIBIT "D" hereto, which is
and shall be deemed to be an agreement supplementary to the License Agreement,
as contemplated by section 365 of Title XI of the U.S. Code.
"Know How Record" shall have the meaning ascribed to it in the License
Agreement, as such record has been and continues to be updated from time to
time, and shall include a written description that clearly defines the
processes, procedures, quality systems, equipment and apparatus used from time
to time in the production of metal halide pellets and sodium mercury amalgams.
The Know How Record will at all times enable technicians to produce Products to
the desired specifications.
"Products" shall mean metal halide pellets and sodium amalgams covered
by the Specifications (defined below) that are used as part of the fill in high
intensity discharge lamps for general lighting purposes manufactured by
Purchaser, and such other materials and products that are listed on EXHIBIT "A",
as such exhibit may be updated from time to time by mutual agreement of the
parties.
"QPS" shall mean the Quality Procurement Specification of Purchaser
which includes both the Product specifications currently being required by
Purchaser (the "Specifications") and the procedural requirements which are
currently being utilized by Purchaser and Seller for Products, as each of the
same may be modified from time to time by mutual agreement of the parties.
2. SCOPE. All purchases of Products by Purchaser shall be subject to
the terms and conditions of this Agreement and the Consignment Agreement. In the
event of any inconsistency between any provisions of Purchaser's purchase orders
or releases (except provisions specifying the types and quantities ordered,
delivery dates and the method of shipment), or any provisions of any Seller's
quotation, proposal, acknowledgement, acceptance, invoice, or any other writing
issued in connection herewith and this Agreement and the Consignment Agreement,
this Agreement and the Consignment Agreement shall prevail.
-2-
<PAGE> 3
3. SALE AND PURCHASE OBLIGATIONS. During the term of this Agreement:
(a) Seller agrees to sell to Purchaser one hundred percent (100%) of
Purchaser's requirements for Products and Purchaser agrees that at least fifty
percent (50%) of Purchaser's total requirements for metal halide pellets and
sodium amalgams (by volume) in each year will be purchased from Seller
(Purchaser's "Annual Purchase Obligation").
(1) Within thirty (30) days of a request from Seller received by
Purchaser on or before January 31 of a year, Purchaser shall deliver
Seller a statement from its Sourcing Manager confirming that Purchaser
fulfilled its Annual Purchase Obligation for the prior year.
(2) In the event that Purchaser does not fulfill its Annual Purchase
Obligation for any year (a "Deficiency"), Purchaser may cure such
failure in the next succeeding year by purchasing an aggregate amount
of Product (by volume) equal to the Deficiency, in addition to its
Annual Purchase Obligation for such succeeding year.
(b) Seller agrees that from the ninetieth (90th) day following the date
of this Agreement and thereafter Seller shall at all times maintain at a
location that is protected from fire, theft and other comparable risks in a
manner that is reasonably acceptable to Purchaser, an inventory of quality
approved Products specifically for supplying Purchaser (the "Product
Inventory"). The amount of the Product Inventory shall at all times be no less
than the amount that Purchaser has ordered in the immediately preceding sixty
(60) day period. Seller shall provide written certification semi-annually to
Purchaser that such stock is in place and fairly represents a reasonable mix of
the different product types based on the Purchaser's consumption during the
immediately preceding sixty (60) day period.
(c) Seller agrees to maintain and hereby acknowledges its relationship
with a secondary producer of Products (i.e., Aldrich-APL, L.L.C.), which
secondary producer is capable of fulfilling the requirements of this Agreement
if for any reason Seller is unable to do so.
4. SPECIFICATIONS; QPS. (a) All Products supplied by Seller shall be in
the form of and must strictly conform to the Specifications and the QPS.
(b) In order to monitor the implementation and ongoing execution of six
sigma processes in the manufacture of Products, Seller agrees to conduct a
minimum of one technology review per year at Seller's factory premises which
will serve to update Purchaser on the processes, quality systems, equipment and
apparatus used in manufacturing Products. This review will include close
-3-
<PAGE> 4
inspection of the production process in operation and will be deemed to be
Proprietary Information as defined in section 8(a) of this Agreement. The timing
of such reviews will be mutually agreed upon by each party at least 30 days in
advance.
5. PRICES. (a) The price, excluding all state, federal and local taxes,
for all Products during the term of this Agreement shall be as detailed in
EXHIBIT "B". Prices are FOB Seller's dock, with the terms of payment referred to
in paragraph 4 of the Consignment Agreement being 1.5%, 15 net 60 days.
(b) If Purchaser requests Product having less than 100 grams per vial,
the prices set forth in EXHIBIT "B" for that Product will be increased to
include an ampouling charge at the rates set forth in EXHIBIT "C" attached
hereto.
6. TERM. This Agreement shall become effective on the date of the last
signature hereto and shall, unless terminated earlier pursuant to the terms of
this Agreement, have a term of five (5) years. Thereafter, it shall
automatically renew for consecutive five (5) year terms unless any one of the
following occurs: (1) this Agreement is replaced by another Agreement; or (2)
this Agreement is terminated by written notice delivered by either Seller or
Purchaser at least one hundred and eighty (180) days before the expiration of
the five (5) year period. Upon a renewal of this Agreement pursuant to this
Section 6, the pricing of the Products shall remain at the prices set forth in
EXHIBIT "B".
7. TERMINATION.
(a) Purchaser may terminate this Agreement if Seller fails to deliver
to Purchaser, within sixty (60) days of the date specified in any purchase order
of Purchaser, qualified, existing Products complying with the QPS and
Specifications applicable to such order; PROVIDED, HOWEVER, if failure of
delivery is caused by an extraordinary event beyond the reasonable control of
Seller and without the gross negligence of Seller, then the sixty (60) day
period shall be extended to one hundred twenty (120) days.
(b) Either party may terminate this Agreement upon prior written notice
to the other party in the event of the occurrence of a material breach by the
other party of any of the terms and conditions of this Agreement, which breach
has continued unremedied for forty five (45) days after receipt of notice
thereof (which notice shall specify the material breach).
-4-
<PAGE> 5
8. PROPRIETARY INFORMATION.
(a) For purposes of this Agreement, the term "Proprietary Information"
is understood to mean technical information and data made available by one party
to the other in written, machine recognizable, graphic or sample form including,
without limitation, drawings, photographs, sketches, models, mockups, and design
or performance specifications, provided such information is clearly and
conspicuously labeled with "Proprietary Information" or other equivalent legend.
Proprietary Information is also understood to include such information and data
disclosed orally or visually, provided that it is identified at the time of
disclosure as proprietary and, provided further, that within thirty (30) days
thereafter, a written summary of such oral or visual disclosure bearing the
aforesaid type of label or legend, is provided to the receiving party.
(b) Proprietary Information furnished hereunder shall be:
(1) used by the receiving party solely for the purpose of this
Agreement; and
(2) held in confidence for the term of this Agreement and ten (10)
years after its termination.
Except as provided in the License Agreement, such Information shall not, without
prior written consent of the disclosing party, be used in connection with the
manufacture or purchase of metal halide pellets or sodium amalgam products for
or from any third party or for any other purpose unrelated to this Agreement.
Moreover, within the receiving party, dissemination of Proprietary Information
of GE or Proprietary Information of Seller will be restricted to those employees
involved in performance of this Agreement and who have been informed of the
terms and conditions hereof.
(c) Notwithstanding the above stated obligations of restricted use and
confidentiality, the receiving party will not be liable for disclosure or use of
such party of the information which it can establish by tangible evidence:
(1) was rightfully in its possession or known to it prior to
receipt from the disclosing party;
(2) is or becomes known to the public through disclosure in a
printed publication or in an issued patent (without breach of the
receiving party's obligations hereunder);
(3) was rightfully acquired by the receiving party from a third
party, which generated such information independently of
Proprietary Information;
-5-
<PAGE> 6
(4) was necessarily disclosed by its use or embodiment in a
product that has been placed in commerce by the disclosing party;
or
(5) was independently developed by the receiving party provided
that the person or persons developing the same have not had
access to Proprietary Information.
(d) All Proprietary Information shall remain the property of the
disclosing party. Upon demand, all Proprietary Information and any copies shall
be immediately returned, including any written notes which may have been made
regarding same, to the disclosing party.
(e) No rights or obligations other than those expressly recited herein
are to be implied. No license is hereby granted or implied, by estoppel or
otherwise, under any patents (existing or future) or for any use of Proprietary
Information except such use as is expressly contemplated by this Agreement and
the License Agreement.
9. WARRANTY. Seller warrants that any Products sold hereunder will be
free from defects in title, workmanship, and materials and will conform to the
Specifications. This warranty does not apply to defects caused by abuse, misuse,
neglect, improper application, or alteration. Seller will require the return of
Products claimed to be defective for examination. Provided that the Products are
stored as provided in the QPS and Specifications, this warranty shall apply to
Products, which are first claimed to be defective within one year after their
date of delivery to Purchaser.
SELLER MAKES NO OTHER WARRANTIES OTHER THAN THOSE SET FORTH HEREIN (INCLUDING,
WITHOUT LIMITATION, THE QPS AND SPECIFICATIONS) AND THESE WARRANTIES ARE IN LIEU
OF ALL OTHER WARRANTIES WHETHER EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED
TO, ANY WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Seller's obligation under this warranty is expressly limited to
replacement of Products involved, or if Seller is unable to replace such
Products, to refund the then current market sales price for the Products
involved. The alternative remedies granted herein shall be Purchaser's, and
anyone claiming under or through Purchaser, exclusive remedies. Seller will not
be liable in any case for any loss of use, revenue, or profit, or any
consequential damages arising out of, in connection with, or resulting from, the
Products or any defects therein, even if Seller has been advised of the
possibility of such potential damages.
-6-
<PAGE> 7
10. INSPECTION. All Products shall be subject to inspection and test as
provided for in the QPS and Specifications. If any of the Products are not in
conformity with the Specifications, Purchaser in addition to any other rights it
may have, may (a) reject the Products and return them, (b) re-inspect the
Products at Seller's expense or (c) waive the defects and equitably reduce the
price. If Purchaser does not inspect the Products or give notice of their
rejection within sixty (60) days after their receipt, such Products shall be
considered accepted. Purchaser's failure to inspect or reject any products shall
not relieve Seller from its obligations under this Agreement.
11. COMPLIANCE WITH THE LAWS. Seller agrees to comply with the
applicable provisions of any federal, state or local law or ordinance and all
lawful orders, rules, and regulations issued thereunder and any provisions,
representations or agreements, or contractual clauses required thereby to be
included or incorporated by reference or operation of law in the contract which
results from acceptance of any order and dealing with the Equal Opportunity
(Executive Order 11245 as amended by Executive Orders 11375 and 12086),
Employment of Veterans (Executive Order 11701), Employment of Handicapped
(Executive Order 11758 as amended by Executive Order 11867), Employment
Discrimination Because of Age (Executive Order 11141), Utilizations of
Disadvantaged Business Enterprises (Executive Order 11625 and Public Law
95.507). Seller certifies that with respect to orders which exceed $10,000 it is
in compliance with the requirement for non-segregated facilities set forth in 41
0CFR Chapter 60-18.
12. CHANGE OF CONTROL: TRANSFER OF SELLER. In the event there is a
Change of Control of Seller or ADLT proposes to sell, transfer or otherwise
dispose (a "Transfer") of Seller to any third party (whether as an asset or
stock transfer, or singly or as a part of a larger transaction, or otherwise),
Purchaser will have the sole right to continue or terminate this Agreement.
Purchaser may exercise this right to terminate in whole only and not in part, by
written notice to Seller and ADLT within sixty (60) days after being notified of
the circumstances of the Change of Control or Transfer of Seller and the terms
and conditions thereof. Purchaser's failure to provide notice of termination
within such sixty (60) days shall be deemed to be Purchaser's election to
continue this Agreement in accordance with its terms.
13. RIGHT OF FIRST REFUSAL. (a) In the event that ADLT receives and
proposes to accept a bona fide offer (an "Offer") from any third party lighting
products competitor of Purchaser (an "Offeror") for the purchase of all or
substantially all of Seller (whether as an asset, stock transfer, or otherwise)
then, in addition to the rights specified in Section 12:
-7-
<PAGE> 8
(1) ADLT will deliver a written notice of the Offer to Purchaser
specifying the identity of the Offeror, the proposed price and other
relevant terms and conditions of the Offer, a copy of which will be
included with the notice.
(2) Purchaser will have the right, for a period of ninety (90) days
following receipt of the notice referred to above (subject to any
extension necessary to comply with any applicable regulatory
requirement), to purchase Seller from ADLT at the price and on the
other relevant terms and conditions contained in the Offer. Such right
may be exercised by Purchaser by delivering written notice during such
ninety (90) day period to ADLT of its election to make such a
purchase. Notwithstanding the foregoing, if the Offer is not for cash,
Purchaser will have the right to make such purchase for equivalent
cash consideration as determined by an investment banking firm of
national reputation chosen by mutual agreement of Purchaser and ADLT,
which right Purchaser may exercise by delivering a written notice
during the thirty (30) day period following receipt of such investment
banking firm's determination.
(3) ADLT shall, within thirty (30) days after receipt from Purchaser
of its election to purchase, sell Seller to Purchaser at the price and
on the terms and conditions set forth in subsection (2) above.
(b) If Purchaser does not exercise its right to purchase pursuant to
subsection (a) above, ADLT may sell such business to the Offeror, but only on
the terms and conditions and at the price set forth in the Offer, PROVIDED,
HOWEVER, that any such transaction shall be subject to the continuing rights of
Seller pursuant to Section 12. If a sale or other transfer to the Offeror is not
completed within 120 days following the end of the ninety (90) day period
referred to in subsection (a)(2) above, ADLT may not sell or otherwise transfer
Seller without again complying with the provisions of this Section 13.
(c) Purchaser's rights under this Section 13 shall terminate upon
termination of this Agreement for any reason.
14. GENERAL.
(a) The failure of each party to enforce at any time, or for any period
of time, any of the provisions of this Agreement shall not be construed as a
waiver of such provision or of the right of the party thereafter to enforce each
and every such provision. Any waiver must be in writing, signed by the party to
be bound thereby. Any waiver of any term or condition of this Agreement shall
not be construed to be a waiver of any other term or condition or a waiver of
the same term and condition subsequently to be kept and performed.
-8-
<PAGE> 9
(b) Neither this Agreement nor any rights or obligations hereunder may
be assigned, subcontracted or otherwise transferred by either party without the
prior written consent of other; PROVIDED, HOWEVER, that Purchaser may assign its
rights and obligations to an entity acquiring the metal halide lamp
manufacturing business of Purchaser, without prior written consent of Seller, if
the proposed assignee accepts in writing the provisions of this Agreement and
becomes, in all respects, bound thereby in the place and stead of Purchaser.
(c) Except with regard to the provisions of the Consignment Agreement
and the License Agreement, this Agreement embodies the entire agreement of the
parties with respect to the subject matter hereof and supersedes and cancels any
and all prior understandings and/or agreements.
(d) This Agreement may not be modified except in writing signed by an
authorized representative of each party hereto.
(e) The headings of the various Articles of this Agreement are inserted
only for the convenience of the parties in locating a particular provision and
shall not limit or be utilized in construing the meaning of any Article.
(f) The law of the State of Ohio shall govern the interpretation and
application of this Agreement without regard to its conflicts of law provisions.
(g) All notice under this Agreement shall be in writing and directed to
the parties hereto at the address below:
For Purchaser:
GE Lighting
Nela Park
Cleveland, Ohio 44112
Attention: James G. Gerson, Global Sourcing Mgr.
For Seller:
APL Engineered Materials, Inc.
2401 North Willow Road
Urbana, Illinois 61810
Attention: James L. Schoolenberg, President
or at such other address which the parties may hereafter specify by written
notice.
(h) Sections 8 and 9 shall survive any termination of this Agreement.
-9-
<PAGE> 10
15. ENTIRE AGREEMENT. This Agreement, the Consignment Agreement, the License
Agreement and the Exhibits attached hereto and thereto contain the entire and
only agreement between the parties with regarding to the subject matter hereof,
there being merged herein all prior and collateral representations, promises and
conditions in connection with said matter and any representation, promise or
condition not, incorporated herein or made a part hereof shall not be binding
upon either party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their authorized representatives.
GENERAL ELECTRIC COMPANY APL ENGINEERED MATERIALS, INC.
GE Lighting
By: /s/ ROBERT H. SWAN By: /s/ JAMES SCHOOLENBERG
------------------------ -------------------------
Title: Title: PRESIDENT
------------------------ ----------------------
Date: 10/5/99 Date: OCTOBER 4,1999
------------------------ -----------------------
ADVANCED LIGHTING TECHNOLOGIES, INC.
By: /s/ NICHOLAS R. SUCIC
-------------------------
Title:
-----------------------
Date:
-----------------------
10
<PAGE> 11
EXHIBIT A
---------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
GE LOCATION MATERIAL DESCRIPTION RESOURCE NO. SPECIFICATION NO.
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ravenna #10 Iodide 2.0mg 3725788 Preliminary
- -------------------------------------------------------------------------------------------------------------------
Ravenna #15 Iodide 1.0mg 3722685 Preliminary
- -------------------------------------------------------------------------------------------------------------------
Ravenna #16 Iodide 9.0mg 3710135 Preliminary
- -------------------------------------------------------------------------------------------------------------------
Ravenna #17 Iodide 2.0mg 3723344 Preliminary
- -------------------------------------------------------------------------------------------------------------------
Ravenna #5 Iodide 11.5 mg 1753210 Preliminary
- -------------------------------------------------------------------------------------------------------------------
Ravenna #6 Iodide 11.0mg 1755662 Preliminary
- -------------------------------------------------------------------------------------------------------------------
Ravenna #7 Iodide 10.6mg 1885477 Preliminary
- -------------------------------------------------------------------------------------------------------------------
Ravenna BaO2 Getter 0.2 gram BaO2 3723774 Preliminary
- -------------------------------------------------------------------------------------------------------------------
Ravenna BaO2 Getter 0.85 gram BaO2 3724128 Preliminary
- -------------------------------------------------------------------------------------------------------------------
Ravenna Cd-Hg Amalgam 3 mol% Cd Liquid 3723980 Preliminary
- -------------------------------------------------------------------------------------------------------------------
Ravenna Cd-Hg Amalgam 1 mol% Cd Liquid 3724003 Preliminary
- -------------------------------------------------------------------------------------------------------------------
Ravenna Sc chips 0.5 mg 3722651 Preliminary
- -------------------------------------------------------------------------------------------------------------------
Ravenna Sc cubes 0.25mg 9844813 Preliminary
- -------------------------------------------------------------------------------------------------------------------
Ravenna Ba2CaWo6 8-14 Micron 3720887 33-BA-16B
- -------------------------------------------------------------------------------------------------------------------
Ravenna Na-Hg 17:83 wt% 3.3 mg 2348193 34-04-017
- -------------------------------------------------------------------------------------------------------------------
Ravenna Na0Hg 25:75 wt% 3.3mg 2598889 34-04-017
- -------------------------------------------------------------------------------------------------------------------
Ravenna Na-Hg 10.1:89.9 wt% 5.0mg 3480035 34-04-017
- -------------------------------------------------------------------------------------------------------------------
Ravenna Na-Hg 12.5:87.5 wt% 4.8mg 2655928 34-04-017
- -------------------------------------------------------------------------------------------------------------------
Ravenna #8 Iodide 10.6mg 3724417 Preliminary
- -------------------------------------------------------------------------------------------------------------------
Ravenna #9 Iodide 9.0mg 3724962 Preliminary
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE> 12
EXHIBIT A
---------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
GE LOCATION MATERIAL DESCRIPTION RESOURCE # SPEC. # AMPOULING
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TUNGSRAM Zn-Hg "HTS" 50:50 wt% 8mg/pellet
- -----------------------------------------------------------------------------------------------------------------------------------
TUNGSRAM Na-Hg 17:83 wt% 3.3mg/pellet
- -----------------------------------------------------------------------------------------------------------------------------------
TUNGSRAM Na-Hg 17:83 wt% 5mg/pellet
- -----------------------------------------------------------------------------------------------------------------------------------
TUNGSRAM Na-Hg 20:80wt% 3.3mg/pellet
- -----------------------------------------------------------------------------------------------------------------------------------
TUNGSRAM Na-Hg 20:80wt% 5mg/pellet 25 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
TUNGSRAM Na-Hg 25:75 wt% 3.3mg/pellet
- -----------------------------------------------------------------------------------------------------------------------------------
TUNGSRAM NaI 99.999% 12.6mg/pellet 25 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
TUNGSRAM Ba2CaWO6 8-14 micron
- -----------------------------------------------------------------------------------------------------------------------------------
TUNGSRAM Dy-Ho chips 50:50wt% 2.2mg + 0.2mg
- -----------------------------------------------------------------------------------------------------------------------------------
TUNGSRAM Dy-Ho chips 50:50wt% 0.6mg + 0.02mg
- -----------------------------------------------------------------------------------------------------------------------------------
TUNGSRAM Dy-Ho chips 50:50wt% 0.56mg + 0.02mg
- -----------------------------------------------------------------------------------------------------------------------------------
TUNGSRAM Dy-Ho chips 50:50wt% 4.8mg + 0.2mg
- -----------------------------------------------------------------------------------------------------------------------------------
TUNGSRAM HgI2 99.999% 0.9mg/pellet
- -----------------------------------------------------------------------------------------------------------------------------------
TUNGSRAM HgI2 99.999% 0.97mg/pellet
- -----------------------------------------------------------------------------------------------------------------------------------
TUNGSRAM HgI2 99.999% 0.6mg/pellet
- -----------------------------------------------------------------------------------------------------------------------------------
TUNGSRAM HgI2 99.999% 0.1mg/pellet
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER NAi-sCi3-THi4 85.9:12.3:1.8 WT% 10.6MG 1885477 100 g/vial
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER CsI 1mg 51010954 10 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER DyBr3 1.1mg 51011319 2 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER GaI3 0.5mg 51012512 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER FeI2 2.5mg 51013312 2 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER LiI 2.0mg 51014525 5 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER HgBr2 1.0mg 51014951 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER HgI2 1.0mg 51014954 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER HgI2 2.12mg 51014956 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER HgI2-HgBr2 20:80 wt% 1.0mg 51014957 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER HgC12 3.5mg 51014958 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER HgBr2 0.25mg 51014960 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER Na-T1-Ga 10:62:28 wt% 1.0mg 51014965 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER HgI2-HgBr2 76:24 wt% 1.0mg 51014966 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER HgI2 0.2mg 51014970 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER HgI2 0.82mg 51014972 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 13
EXHIBIT A
---------
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LEICESTER NaI-ScI3-ThI4-T1I 75.1:18.5:3.9:2.5 wt% 0.2mg 51014973 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER RbI 2.0mg 51016904 5 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER NaI-ScI3 80:20 wt% 11.0mg 51017371 15 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER NaI-T1Br 66.7:33.3 st% 1.0mg 51017386 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER NaI-InI-T1Br 25.3:33.8:40.9 wt% 1.0mg 51057389 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER NaBr 0.55mg 51017391 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER NaI-T1Br 83:17wt% 0.6mg 51017392 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER NaI-T1Br 85.9:14.1 wt% 3.0mg 51017393 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER NaI-InI-T1Br 60:20:20 wt% 1.0mg 51017394 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER NaI 0.87mg 51057398 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER NaI-T1Br 83:17wt% 0.93mg 51017399 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER NaBr-NaI 66.7:33.3wt% 0.6mg 51017400 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER NaI-T1I-DyI3-HoI3-TmI3 66.8:9.2:12:6:6 0.3mg 51057402 2 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER ThI4 0.5mg 51017747 2 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER ThI4 1.0mg 51017754 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER T1Br 0.25mg 51017755 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER Na-T1-Ga 4:64:32 wt% 2.7mg 63990018 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER Sc chips 0.2mg 63990023
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER Sc chips 0.7mg 63990025
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER Sc cubes 0.25mg 63990028
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER Sn 0.3mg 63990701 10 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER Sn 1.2mg 63990703 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER Sn-T1-In 63.6:27.3:9.2 wt% 0.84mg 63990704 1 g/vial*
- -----------------------------------------------------------------------------------------------------------------------------------
LEICESTER BaO2 Getter 0.85 gram BaO2 99990080
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 14
EXHIBIT B
The purchase prices referred to in section 5 of the Lamp Materials
Purchase Agreement for Products shall be the prices agreed on by the parties
from time to time.
EXHIBIT C
The ampouling charge for Product from the Ravenna facility (or
successor facility) shall be $15.00 per vial applied for releases (shipments) of
less than 100 grams per vial. The ampouling charge of $15.00 per vial is
included in the per gram price for the Products marked with an asterisk from the
Tungsram and Leicester facilities (or successor facilities).
<PAGE> 15
Exhibit D
AGREEMENT
---------
THIS CONSIGNMENT AGREEMENT (hereinafter "Agreement") is entered into as of this
fourth day of JANUARY, 1999, between, APL Engineered Materials, Inc.
(hereinafter "Consignor'), located at 2401 N. Willow Road, Urbana, IL
61802-7332, and GE Lighting, (hereinafter "Consignee"), located at Nela Park,
1975 Noble Road, Mail Stop 327 D, Cleveland, Ohio 44112-6300.
In consideration of the mutual promises made herein, it is agreed as follows:
1. CONSIGNMENT STOCK. Consignor will maintain a consignment stock of "Halide
Pellets" (hereinafter Consignment Stock") in the warehouse of Consignee located
at GE Lighting, Ravenna Lamp Plant, 6800 North Chestnut Street, Ravenna, Ohio
44266. Consignee may place orders upon Consignor for consignment stock either
verbally or in writing, however, if the order is placed verbally, a written
confirmation or purchase order of said order shall be provided to Consignor.
Consignee shall receive such consignment stock and furnish Consignor with a copy
of the signed packing slip for each shipment of consignment stock. The shipping
papers shall note that such shipments are for the "consignment stock". As owner
and holder of title to said consignment stock, Consignor may at any time, and at
Consignor's sole discretion, request return of any consignment stock.
2. Title. Title to the consignment stock shall be vested in Consignor until said
stock is withdrawn by any party other than Consignor from the consignment
storage area as described herein. A withdrawal shall be considered to have taken
place when any package of consignment stock is opened, at which time the entire
contents of the opened package should be physically removed from the consignment
storage area reserved for Consignor. When making withdrawals from consignment,
Consignee will endeavor to apply the first-in-first-out rule by withdrawing
consignment stock in the order that it was received from Consignor. Consignee
agrees that it will not perform any acts or make any representations which could
cause Consignee's creditors, potential creditors, customers or the general
public to believe that the stock in the consignment storage area is owned by
Consignee.
3. STORAGE. Consignee will receive the consignment stock from Consignor and,
without expense to Consignor, will (a) hold and care for the consignment stock
as the property of Consignor; (b) keep the consignment stock in a location which
is physically separate and distinct from the Consignees property or the property
of Consignee's suppliers or other consignors (referred to in this Agreement as
the "consignment storage area"), at all times maintaining identification
markings on the consignment stock indicating that said stock is the property of
Consignor; (c) post a large sign evidencing the consignment arrangement and
stating that Consignor is the owner of the property, and containing the
following information:
"This property is on consignment."
Any matter relating thereto should be directed to: Karen Edmondson
(d) keep the consignment stock in a safe, secured and protected storage area;
and (e) maintain the consignment stock in good condition and in such manner as
to be accessible for ready inspection and identification thereof by Consignor,
its employees or agents.
4. PAYMENT FOR STOCK WITHDRAWN FROM CONSIGNMENT. Consignee shall notify
Consignor on a monthly basis of consignment stock that has been withdrawn from
the consignment storage area. Consignor will invoice Consignee for any
consignment stock which has been withdrawn and Consignee shall be required to
pay the invoiced amount for such consignment stock under the terms of sale then
existing between Consignor and Consignee. Consignee shall be required to keep
records of the location of any consignment stock which has been withdrawn from
the consignment storage area and not paid for by Consignee, and shall make said
records available upon request by Consignor, its employees or agents.
<PAGE> 16
5. INVENTORY. Consignee agrees that Consignor shall be entitled to enter the
premises of Consignee at least once per year for the purpose of taking a
physical inventory of the consignment stock, which date shall be mutually agreed
upon between the parties. Consignor shall have the right to immediately invoice
Consignee for any consignment stock which is not present in the consignment
storage area when the inventory is taken, and has not already been paid for by
the Consignee, and Consignee shall be required to pay the invoiced amount under
the terms of sale then existing between Consignor and Consignee.
6. BOOKS/RECORDS. Consignee will keep correct books of account of all
consignment stock, including records of all receipts and withdrawals therefrom.
All such books and records and other documents pertaining thereto shall be open
to inspection by Consignor or its agents at any time during normal business
hours. Consignor will also maintain an accounting of consignment stock received
and withdrawn by Consignee. Such accounting will be based on shipments and
monthly inventory reports.
7. TAXES. Consignor shall be liable for all personal property or similar taxes
levied by any governmental agency. Consignee shall not include any consignment
stock owned by Consignor and maintained on Consignee's premises in Consignee's
inventory for the payment of personal property taxes. Consignee will notify
Consignor of the amount of consignment stock owned by Consignor and not
withdrawn by Consignee which is subject to personal property or similar taxes
levied by any governmental agency and Consignor will pay all such taxes directly
to the appropriate taxing agency. If Consignee includes consignment stock owned
by Consignor in Consignee's inventory for personal property tax purposes,
Consignee shall not seek reimbursement from Consignor for such payments, nor
shall Consignee offset any such payments made against any amounts due Consignor
for consignment stock.
8. LOSS/DAMAGE. Consignee shall be required to obtain and keep in force, at its
expense, insurance to cover damage to the consignment stock from theft, fire or
acts of God, with Consignor being the named beneficiary of said insurance. At
Consignor's request, Consignee shall immediately furnish proof of such
insurance. Any damage to the consignment stock while it is in Consignee's
possession up to, until and after title passes to Consignee, shall be the
responsibility of Consignee.
9. DEFAULT. In the event of default by Consignee under this Agreement, or in the
event of termination of this Agreement, Consignor or its agents shall have the
right to enter into any place where the consignment stock is located and take
possession of and remove all or part of the stock.
10. DELAYS. Consignor shall not be held responsible for delays in shipment of
orders received hereunder.
11. TERM. This Agreement shall continue in force for five (5) years or until it
is terminated. This Agreement may be terminated by either party upon giving
sixty (60) days notice in writing addressed to the other party and posted by
registered mail, provided, however, that Consignor reserves the right and option
to declare the immediate termination of the Agreement if Consignee at any time
is in default under this Agreement or, in the opinion of Consignor, has become
insolvent or is in imminent danger of becoming insolvent. If this Agreement is
terminated by Consignee, Consignee will pay costs of removal of the consignment
stock to the point from which it was shipped or any other reasonable location
specified by Consignor.
If this Agreement is terminated by Consignor, Consignor will pay costs of
removal of consignment stock from Consignee's premises. provided, however, that
Consignee will pay such costs if Consignors termination is due to any default by
Consignee under this Agreement.
Regardless of which party terminates this Agreement, Consignor shall immediately
invoice Consignee for all consignment stock withdrawn by Consignee prior to the
date of termination of this Agreement, and all such invoices and any outstanding
invoices for consignment stock shall become immediately due and payable.
12. RETURNS AND CANCELLATION. No returns of the consignment stock will be
accepted by Consignor without the prior approval of Consignor. Any orders placed
by Consignee for the consignment stock will not be subject to cancellations.
<PAGE> 17
Any goods to be shipped back to Consignor under the terms of this Agreement must
be returned to the point from which it was shipped or any other reasonable
location specified by Consignor, and shall be shipped FOB delivered destination.
If under the terms of this Agreement, consignment stock is to be shipped back to
Consignor, and said shipment is not made when required, Consignor shall have the
right to enter the Consignment storage area and take possession of and remove
any or all of the consignment stock. Removal of the consignment stock by
Consignor shall not be deemed a waiver of any other right Consignor may have
under this Agreement, and Consignor shall be entitled to reimbursement from
Consignee for any costs incurred by Consignor to remove said consignment stock
which Consignor would not otherwise be required to assume under this Agreement,
including reasonable attorney's fees and court costs.
13. PRICES. All prices and terms of sale for the consignment stock shall be
separately agreed to by the parties to this Agreement.
14. FINANCING STATEMENTS. Consignee will execute such financing statements and
other assurances and documents as Consignor shall reasonably deem appropriate to
protect its ownership of consignment stock against claims of creditors and other
persons or entities not a party to this Agreement.
15. NOTICE. All reports or notices to be furnished to Consignor under this
Agreement shall be mailed or otherwise delivered to:
APL Engineered Materials, Inc.
2401 N. Willow Road
Urbana, IL 61802-7332
Attn: Jim Schoolenberg
or to such other address as Consignor notifies Consignee in writing. Notices to
Consignee must be mailed or otherwise delivered to:
GE Lighting
Ravenna Lamp Plant
6800 North Chestnut Street
Ravenna, Ohio 44266
Attn: Karen Edmondson
All payments to be made by Consignee to Consignor pursuant to this Agreement
shall be made by Consignee to the location specified on Consignor's invoice for
the payments in question.
16. BENEFIT. This Agreement is personal to the parties and no rights pertaining
thereto are assignable by Consignee, in whole or in part, unless by written
consent of Consignor.
17. AMENDMENT. This Agreement sets forth the entire understanding and agreement
between the parties with reference to the subject matter hereof and may not be
altered, amended or modified except in writing signed by both parties hereto.
{intentionally left blank}
<PAGE> 18
18. GOVERNING LAW. This Agreement shall be construed in accordance with, and
governed by, the internal laws of the State of Ohio without giving effect to the
conflict of law provisions.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly
executed as of the day and year first above written.
CONSIGNEE: GE LIGHTING
By:
-------------------------
James G. Gerson
Title: Global Sourcing Manager - Metals
CONSIGNOR:
By
-------------------------
Title
-----------------------
<PAGE> 19
(GE logo) GE Lighting
- ----------------------------------------------------------
North American Production Department
Plant
General Electric Company
( ) -
Date:
-----------------------
Subject: PURCHASES OF
REFERENCE P.O.
Transaction for Month of ______________, 199_
1. Material invoiced from last transaction month. ______________ lbs.
(Reported on Line #6 of letter dated __________.)
2. Last period's ending perpetual inventory. ______________ lbs.
(Reported on Line #5 of letter dated __________.)
3. Receipts during current transaction month. ______________ lbs.
(Material received on __________.)
4. Total perpetual inventory. (Line #2 + Line #3) ______________ lbs.
5. Ending balance, inventoried on ____________. ______________ lbs.
6. Actual consumption during transaction month ________ ______________ lbs.
(Invoice this quantity; Line #4 - Line #5.)
If you have any questions regarding the above items, feel free to call.
Sincerely,
<PAGE> 1
EXHIBIT 10.9
PATENT
AND
TECHNICAL ASSISTANCE AGREEMENT
This Know How and Patent License and Technical Assistance Agreement,
dated as of September 30, 1999 is by and between APL Engineered Materials, Inc.
an Ohio Corporation having offices at 2401 N. Willow Road, Urbana, Illinois
61801 ("APL"), Advanced Lighting Technologies, Inc., an Ohio corporation having
offices at 32000 Aurora Road, Solon, Ohio 44139 ("ADLT") and General Electric
Company, a New York corporation acting through its GE Lighting business ("GEL")
and having offices at 1975 Noble Road, Cleveland, OH 44112.
WITNESSETH
----------
WHEREAS, APL, ADLT and GEL are parties to a Lamp Materials Purchase
Agreement dated as of September 30, 1999, (as the same may be amended from time
to time, the "Materials Purchase Agreement") which the parties deem to be an
agreement supplementary to this Agreement (as contemplated by section 365 of
Title XI of the U.S. Code) providing for the purchase and sale of metal halide
pellet and sodium amalgam products more specifically described in that Agreement
(the "Products") from APL to GEL; and
WHEREAS, GEL requires a guaranteed source of supply of Products and APL
is currently the sole source of such products that meet GEL's specification and
quality requirements; and
WHEREAS, APL has agreed to provide GEL access to the technology
utilized by APL in making Products for GEL under the circumstances and with the
constraints specified in this Agreement.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows.
1. DEFINITIONS. For the purposes of this Agreement:
"Bankruptcy" shall mean any act, event, and circumstances whereby (a)
an involuntary proceeding shall be commenced or an involuntary petition shall be
filed in a court of competent jurisdiction seeking (i) relief in respect of a
-1-
<PAGE> 2
party or of a substantial part of the property or assets of such party under
Title 11 of the United States Code, as now constituted or hereafter amended, or
any other federal or state bankruptcy, insolvency, receivership, or similar law;
(ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator, or similar official for a party or any substantial part of the
property or assets of such party; (iii) the winding-up or liquidation of a
party, and such proceeding or petition shall continue undismissed for sixty (60)
days or an order or decree approving or ordering any of the foregoing shall be
entered, or (b) a party shall (i) voluntarily commence any proceeding or
file any petition seeking relief under Title 11 of the United States Code, as
now constituted or hereafter amended, or any other federal or state bankruptcy,
insolvency, receivership or similar law; (ii) consent to the institution of, or
fail to contest in a timely and appropriate manner, any proceeding or the filing
or any petition described in Part (a) above, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator, or
similar official for such party or for a substantial part of the property or
assets of such party; (iv) file an answer admitting the material allegations of
a petition filed against it in any such proceeding; (v) make a general
assignment for the benefit of creditors; (vi) become unable, admit in writing
its inability, or fail generally to pay its debts as they become due; or (vii)
take any action for the purpose of the foregoing.
"Change of Control" shall mean with respect to an entity any of the following:
(a) any person or group of persons shall have acquired beneficial ownership (as
defined in Rule 13d-3, promulgated under the Securities Exchange Act of 1934, as
amended) of 50% or more of the issued and outstanding shares of common stock of
the entity, (b) the entity shall be a party to a merger or consolidation in
which it is not the survivor or in which the entity's shareholders immediately
prior thereto own less than a majority of the outstanding voting stock of the
survivor, or (c) the entity shall have sold, leased or otherwise transferred all
or substantially all of its assets in one transaction or a series of related
transactions.
"Equipment" shall mean machinery, equipment and apparatus used or adapted for
use in the manufacture, assembly and testing of Products and in the carrying out
of Processes.
"Know How Record" shall mean and include the written description (as the same
may be updated from time to time) that clearly defines the Product Technology,
Processes, procedures, quality systems and Equipment used from time to time in
the production of Products, which written description will at all times enable
technicians to produce Products to the desired specifications. "Patents" means:
patents (including patents of importation, patents of confirmation, patents of
improvement, patents and certificates of addition and utility model patents, as
well as divisions, reissues, continuations, continuations-in-part reexamination
certificates, renewals and extensions of
-2-
<PAGE> 3
any of the foregoing) and applications therefor, and patents which may issue on
such applications, covering inventions with respect to which the first
application for patent anywhere was filed prior to the date of expiration or any
prior termination of this Agreement.
"Processes" shall mean the processes, methods and techniques adapted for use in
the manufacture, assembly and testing of Products.
"Products" shall mean metal halide pellets and sodium amalgams referred to in
EXHIBIT "A" attached to the Materials Purchase Agreement, used as part of the
fill in high intensity discharge lamps for general lighting purposes
manufactured by GEL, and such other materials and products that are listed on
EXHIBIT "A", as such exhibit may be updated from time to time by GEL and APL.
"Product Technology" shall mean and include, all documented and undocumented
technical information, data and know how in whatever form available, which
presently exists or is developed pertaining to the Products, including, without
limitation, research and development, design, engineering, design automation,
layout, drafting, manufacturing, quality control, equipment, maintenance,
standards, procedures, processes, publications, technical writings, facilities,
services and utilities. Product Technology shall include, without limitation,
trade secrets, computer software, drawings, material lists, plans,
specifications, procedures and control data, test methods, and engineering and
manufacturing data.
"Specifications" shall mean Product specifications included in the Quality
Procurement Specification of GEL in the form attached to the Materials Purchase
Agreement as EXHIBIT "E".
"Subsidiary" shall mean a company or other entity in which GEL directly or
indirectly owns or controls at least twenty percent (20%) of the voting stock.
2. KNOW HOW AND PRODUCT TECHNOLOGY LICENSE AND TECHNICAL ASSISTANCE.
Subject to the provisions of section 3 below, APL and ADLT hereby, jointly and
severally;
(a) grant and agree to grant to GEL and its Subsidiaries a right of
access to and right to use the Know How Record and Product Technology together
with an irrevocable, worldwide, nonexclusive, nontransferable (other than as
provided in section 12), fully paid up license to make, have made and use (but
not sell to third parties) Products, and to use Equipment and Processes in all
countries of the world. The foregoing grant consists of a license under Patents
owned or controlled by either or both of APL or ADLT or which either or both has
or acquires the right to grant such licenses and right to use for such purposes.
-3-
<PAGE> 4
(b) agree to update and maintain on a continual basis the Know How
Record so that it clearly defines the current processes, procedures, quality
systems, equipment and apparatus used in producing Products in such manner and
in sufficient detail to enable technicians to produce Product to the
Specifications.
(c) deposit and agree to maintain an updated version of the Know How
Record with the General Counsel of GEL to be held in trust for GEL for use by
GEL upon the occurrence of an Access Event (referred to in section 3, below).
(d) agree that, upon the occurrence of an Access Event (referred to in
section 3, below), either or both of APL or ADLT will take all necessary action
to cause GEL to be furnished with a complete copy of all information and
documents included in the Know How Record. In addition, APL will provide two (2)
GEL representatives with training relating to the Processes, techniques and
Equipment used in producing Products and in connection therewith will exert all
reasonable efforts to enable GEL to duplicate APL's Processes, techniques and
results. GEL will reimburse APL for all reasonable out of pocket costs for
providing such training.
3. RESTRICTIONS ON RIGHT TO USE. Notwithstanding the present grant of
the irrevocable, non exclusive license by ADLT and APL to GEL pursuant to
section 2(a), above, GEL agrees that it will not exercise its rights of access
to and right to use the Know How Record or Product Technology or license and
technical assistance pertaining to the Know How Record and Product Technology,
above until the occurrence of any one or more of the following (an "Access
Event"):
(a) APL fails to deliver to GEL, as Purchaser under the Materials
Purchase Agreement, within sixty (60) days of the date specified in any purchase
order of GEL, qualified, existing Products complying with the QPS and the
Specifications applicable to such order; PROVIDED, HOWEVER, if failure of
delivery is caused by an extraordinary event beyond the reasonable control of
APL and without the gross negligence of APL, then the sixty (60) day period
shall be extended to one hundred twenty (120) days.
(b) the occurrence of a material breach by APL of section 3(b), 3(c),
4(b), 8 or 11 of the Materials Purchase Agreement, which breach has continued
unremedied for thirty (30) days after receipt of notice thereof (which notice
shall specify the material breach).
-4-
<PAGE> 5
(c) APL terminates the Materials Purchase Agreement pursuant to Section
6.(2) thereof.
(d) in the event that there is a Change of Control of APL.
(e) in the event that either ADLT or APL has an event of
Bankruptcy.
4. PROPRIETARY INFORMATION.
(a) For purposes of this Agreement, the term "Proprietary Information"
is understood to mean the Know How Record and Product Technology which is
clearly and conspicuously labeled with "Proprietary Information" or other
equivalent legend. Proprietary Information is also understood to include such
information and data disclosed orally or visually provided it is identified at
the time of disclosure as proprietary and, provided further, that within thirty
(30) days thereafter, a written summary of such oral or visual disclosure
bearing the aforesaid type of label or legend, is provided to the receiving
party.
(b) Proprietary Information furnished hereunder shall be (1) used
solely for the purpose of the license granted pursuant to section 2 and as
contemplated by this Agreement; and (2) held in confidence for the term of this
Agreement and ten (10) years after its termination.
(c) GEL agrees that Proprietary Information will be restricted to those
employees involved in performance of this Agreement and the Materials Purchase
Agreement who have been informed of the terms and conditions hereof.
(d) Notwithstanding the above stated obligations of restricted use and
confidentiality, the receiving party will not be liable for disclosure or use by
such party of the information which it can establish by tangible evidence:
(1) was rightfully in its possession or known to it prior to
receipt from the disclosing party;
(2) is or becomes known to the public through disclosure in a
printed publication or in an issued patent (without breach of the
receiving party's obligations hereunder);
(3) was rightfully acquired by the receiving party from a third
party, which generated such information independently of
Proprietary Information;
-5-
<PAGE> 6
(4) was necessarily disclosed by its use or embodiment in a product
that has been placed in commerce by the disclosing party; or
(5) was independently developed by the receiving party provided
that the person or persons developing the same have not had access
to Proprietary Information.
5. BANKRUPTCY. In the event either ADLT or APL commences or has
commenced against it a bankruptcy case or similar proceeding (such party, the
"Bankrupt Party"), GEL (the "Non-Bankrupt Party")shall have all rights available
to licensees under the Bankruptcy Code (defined below). Unless and until such
time as the Bankrupt Party or its trustee may reject any license granted
hereunder, a Non-Bankrupt Party may request in writing that the Bankrupt Party
or its trustee, as the case may be, (a) perform under the terms and conditions
of this License and other agreements deemed supplementary hereto, (b) not
interfere with the rights of the Non-Bankrupt Party as provided in this License
to the Know How Record and Product Technology and (c) require the provision of
the Know How Record and the Product Technology. The Bankrupt Party acknowledges
and agrees that if it as a debtor-in-possession or its trustee in Bankruptcy in
a case under Title 11 of the United States Code, as amended (the "Bankruptcy
Code"), rejects any of the rights granted in this License, as provided in
Section 365(n) of the Bankruptcy Code, the Non-Bankrupt Party may elect to
retain its rights to the Know How Record and Product Technology under this
License. Upon written request of the Non-Bankrupt Party to the Bankrupt Party or
its trustee, the Bankrupt Party or its trustee shall not interfere with the
rights of the Non-Bankrupt Party to continue its use of the Know How Record and
Product Technology, including any right to obtain the same from another entity.
The parties agree that the Bankrupt Party will seek an order assuming this
License Agreement within 60 days of the commencement of a bankruptcy case or
other similar proceeding. This Section 5 shall survive any termination of this
License.
6. TERM. This Agreement shall become effective as of the date first
above written upon the execution hereof by all parties and shall continue for
the longer of (a) ten (10) years after or (b) the life of the last Patent issued
or applied for prior to, the date on which GEL ceases to purchase any Products
from APL (or any successor of APL) under the Materials Purchase Agreement or
otherwise, unless the parties hereto otherwise agree in writing.
-6-
<PAGE> 7
7. REPRESENTATIONS AND WARRANTIES. APL and ADLT jointly and severally
represent and warrant to GEL that:
(a) The Know How Record and the Product Technology is and will be
maintained on a continual basis so that it will at all times clearly
define the current Processes, procedures, quality systems, Equipment
and apparatus used by APL in producing Product and be in sufficient
detail to enable technicians to produce Product to the Specifications.
(b) APL is the legal and beneficial owner of all right, title and
interest in and to the Know How Record and Product Technology, and that
neither APL nor ADLT is bound by or a party to any other contracts,
options, licenses, assignments, or agreements of any kind which would
prevent, prohibit, or otherwise interfere with the ability of APL and
ADLT to meet their respective obligations to GEL under or arising out
of this Agreement.
(c) There are no pending or threatened claims alleging, or
potential claims that could reasonably be expected to be alleged, that
any or all of the Know How Record or Product Technology infringes or
conflicts with the intellectual property rights of others.
8. INDEMNITY.
(a) Each of APL and ADLT, jointly and severally, agrees to defend,
indemnify, and hold harmless GEL against all liability, loss, cost, damages,
claims or expenses (including reasonable attorneys fees) arising out of any
claims or suits, whatever their nature and however arising, which may be brought
or made against GEL by reason of or arising from: (i) the breach by APL or ADLT
of any or all of its representations or warranties; and (ii) any allegation that
use of any or all of the Know How Record or Product Technology infringes,
interferes with, or otherwise violates the intellectual property rights or other
proprietary rights of a third party.
(b) In the event that the Know How Record or Product Technology
licensed to GEL pursuant to this Agreement, in whole or in part, is finally
determined, by settlement or judicial action, to infringe a third party
intellectual property right or other proprietary right, then at the written
request and option of GEL, APL shall (i) modify, at APL's sole cost and expense,
the allegedly infringing Know How Record or Product Technology to be
non-infringing; or (ii) substitute, at APL's sole cost and expense,
non-infringing intellectual property.
-7-
<PAGE> 8
9. NOTICES. Any notice required or permitted by this Agreement or given
in connection herewith shall be in writing and shall be given by personal
delivery, receipted facsimile, receipted e-mail, or by first-class, certified,
or registered mail, postage prepaid, at or to the addresses of the parties set
forth above. Notices shall be effective upon receipt by the party to which they
are addressed.
10. GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Ohio, without reference to its law
of conflicts.
11. WAIVERS. The failure of a party to enforce at any time, or for any
period of time, any of the provisions of this Agreement shall not be construed
as a waiver of such provision or of the right of the party thereafter to enforce
each and every such provision. Any waiver must be in writing, signed by the
party to be bound thereby. Any waiver of any term or condition of this Agreement
shall not be construed to be a waiver of any other term or condition or a waiver
of the same term and condition subsequently to be kept and performed.
12. ASSIGNMENT. Neither this Agreement nor any rights or obligations
hereunder may be assigned, subcontracted or otherwise transferred by any party
without the prior written consent of others; PROVIDED, HOWEVER, that:
(a) GEL may assign its rights and obligations to an entity acquiring
the metal halide lamp manufacturing business of GEL, without prior written
consent of APL and ADLT, if the proposed assignee accepts in writing the
provisions of this Agreement and becomes, in all respects, bound thereby in the
place and stead of GEL; and
(b) any party may assign this Agreement or any right or obligation
arising hereunder to a parent or a directly majority-owned and controlled
subsidiary of such party; provided however, that such assignment shall not in
any way affect a party's obligations or liabilities under this Agreement, and
further provided that should said assignee cease to be an Affiliate of the
assigning party, such assignee shall be obligated to reconvey all rights and
obligations so assigned back to the original assignor party.
-8-
<PAGE> 9
13. ENTIRE AGREEMENT; BINDING EFFECT. This Agreement and the Materials
Purchase Agreement embody the entire agreement of the parties with respect to
the subject matter hereof and thereof and supersede any and all prior
understandings and/or agreements. This Agreement shall inure to the benefit of
and bind the successors and permitted assigns of the parties.
14. GOVERNING LAW. The law of the State of Ohio shall govern the
interpretation and application of this Agreement without regard to its conflicts
of law provisions.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their authorized representatives.
GENERAL ELECTRIC COMPANY APL ENGINEERED MATERIALS, INC.
GE Lighting
By: /s/ Robert H. Swan By: /s/ James Schoolenberg
--------------------------------- ------------------------------
Title: Title: President
------------------------------- ---------------------------
ADVANCED LIGHTING TECHNOLOGIES, INC.
By: /s/ Nicholas R. Sucic
---------------------------------
Title:
------------------------------
9
<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 September 30,
---------------------------------
1999 1998
-------- --------
<S> <C> <C>
Loss from continuing operations before cumulative effect of
accounting change attributable to common shareholders $ (782) $ (671)
======== ========
Net income (loss)
attributable to common shareholders $ (782) $ (2,261)
======== ========
Weighted average shares -- Basic:
Outstanding at beginning of period 20,278 20,189
Issued for exercise of stock options - 14
Issued pursuant to employee stock purchase plan 3 2
Issued pursuant to 401(k) plan 3 -
-------- --------
Weighted average shares -- Basic 20,284 20,205
======== ========
Weighted average shares -- Diluted:
Basic from above 20,284 20,205
Effect of stock options - -
-------- --------
Weighted average shares -- Diluted 20,284 20,205
======== ========
Earnings (loss) per share -- Basic and diluted
Loss from continuing operations $ (.04) $ (.03)
Reclassification of discontinued operations to continuing operations - .04
Cumulative effect of change in accounting for start-up costs - (.12)
-------- --------
Earnings (loss) per share -- Basic and diluted $ (.04) $ (.11)
======== ========
</TABLE>
<PAGE> 1
ADVANCED LIGHTING TECHNOLOGIES, INC.
EXHIBIT 12 -- STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1999 1998
------- -------
<S> <C> <C>
Consolidated pretax income from continuing operations $ (564) $ (845)
Interest expense 3,790 2,741
Interest portion of rent expense 135 136
------- -------
EARNINGS $ 3,361 $ 2,032
======= =======
Interest expense $ 3,790 $ 2,741
Interest capitalized 16 209
Interest portion of rent expense 135 136
------- -------
FIXED CHARGES $ 3,941 $ 3,086
======= =======
RATIO OF EARNINGS TO FIXED CHARGES 0.9 0.7
======= =======
</TABLE>
For purposes of calculating the unaudited ratio of earnings to fixed charges,
earnings consist of income (loss) 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 three months ended September
30, 1999, earnings were inadequate to cover fixed charge requirements by $580.
In the three months ended September 30, 1998, earnings were inadequate to cover
fixed charge requirements by $1,054.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ADVANCED
LIGHTING TECHNOLOGIES, INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,259
<SECURITIES> 0
<RECEIVABLES> 36,656
<ALLOWANCES> 1,186
<INVENTORY> 41,100
<CURRENT-ASSETS> 77,667
<PP&E> 120,150
<DEPRECIATION> 18,111
<TOTAL-ASSETS> 288,932
<CURRENT-LIABILITIES> 51,930
<BONDS> 158,891
20
0
<COMMON> 0
<OTHER-SE> 77,664
<TOTAL-LIABILITY-AND-EQUITY> 288,932
<SALES> 56,180
<TOTAL-REVENUES> 56,180
<CGS> 34,844
<TOTAL-COSTS> 34,844
<OTHER-EXPENSES> 18,380
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,790
<INCOME-PRETAX> (564)
<INCOME-TAX> 218
<INCOME-CONTINUING> (782)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (782)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
