<PAGE> 1
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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
ADVANCED LIGHTING TECHNOLOGIES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NOT APPLICABLE
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
Advanced Lighting Logo
32000 Aurora Road
Solon, Ohio 44139
January 13, 2000
To Our Shareholders:
On behalf of the Board of Directors and management, I cordially invite you
to attend the Annual Shareholders Meeting to be held on Thursday, February 17,
2000, at 10:00 a.m. (E.S.T.), at KSK Color Lab (Conference Room), 32300 Aurora
Road, Solon, Ohio 44139.
The notice of meeting and proxy statement accompanying this letter describe
the specific business to be acted upon.
In addition to the specific matters to be acted upon, there will be a
report on progress of the Company and an opportunity for questions of general
interest to the shareholders.
It is important that your shares be represented at the meeting. Whether or
not you plan to attend in person, you are requested to vote, sign, date and
promptly return the enclosed proxy in the envelope provided.
Sincerely yours,
/s/ Wayne R. Hellman
Chairman of the Board
<PAGE> 3
ADVANCED LIGHTING TECHNOLOGIES, INC.
32000 Aurora Road
Solon, Ohio 44139
NOTICE OF ANNUAL SHAREHOLDERS MEETING
TO BE HELD FEBRUARY 17, 2000
To the Shareholders of ADVANCED LIGHTING TECHNOLOGIES, INC.:
Notice is hereby given that the Annual Shareholders Meeting of ADVANCED
LIGHTING TECHNOLOGIES, INC. (the "Company") will be held on Thursday, February
17, 2000, at 10:00 a.m., Eastern Standard Time at KSK Color Lab (Conference
Room), 32300 Aurora Road, Solon, Ohio 44139, for the following purposes:
1. To elect directors, the names of whom are set forth in the accompanying
proxy statement, to serve until the 2002 Annual Meeting and until their
successors have been elected and qualified.
2. To approve issuance of certain shares which may be issued to the General
Electric Company in the future under circumstances described in the
accompanying proxy statement. The issuance of such shares to GE could
result in GE having a majority of the voting power of the Company.
3. To approve an amendment to the Company's Amended and Restated Articles
of Incorporation to "opt out" of the application of Ohio Control Share
Acquisition Act to acquisitions of Company equity securities.
4. To approve an Amendment to the Company's 1998 Incentive Award Plan to
increase the number of shares available for grant from 1,500,000 to
2,250,000.
5. To ratify the appointment of Grant Thornton LLP as independent auditors
of the Company.
6. To transact such other business as may properly be brought before the
meeting.
The Board of Directors has fixed the close of business on December 30, 1999
as the record date for the determination of the shareholders entitled to notice
of and to vote at the Annual Meeting, and only shareholders of record at the
close of business on that date will be entitled to vote at the Annual Meeting.
All shareholders are cordially invited to attend the Annual Meeting in
person. WHETHER OR NOT YOU EXPECT TO BE PRESENT, YOU ARE REQUESTED TO VOTE,
SIGN, DATE, AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE PREPAID ENVELOPE
PROVIDED. If you are present at the Annual Meeting and desire to vote in person,
your proxy will not be used if you revoke your appointment of proxy so that you
may vote your shares personally.
By Order of the Board of Directors,
/s/ Alan J. Ruud
Secretary
January 13, 2000
NOTICE
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED SO THAT THE PRESENCE OF A QUORUM
MAY BE ASSURED. EACH SHAREHOLDER IS REQUESTED TO EXECUTE AND PROMPTLY RETURN THE
ENCLOSED PROXY.
<PAGE> 4
ADVANCED LIGHTING TECHNOLOGIES, INC.
32000 AURORA ROAD
SOLON, OHIO 44139
PROXY STATEMENT
ANNUAL SHAREHOLDERS MEETING
TO BE HELD FEBRUARY 17, 2000
The enclosed Proxy is solicited on behalf of the Board of Directors of
ADVANCED LIGHTING TECHNOLOGIES, INC. (the "Company") for use at the Annual
Shareholders Meeting ("Annual Meeting") to be held Thursday, February 17, 2000,
at 10:00 a.m. Eastern Standard Time or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Shareholders Meeting. The Annual Meeting will be held at KSK Color Lab
(Conference Room), 32300 Aurora Road, Solon, Ohio 44139.
The definitive proxy solicitation materials are expected to be mailed on or
about January 18, 2000 to all shareholders entitled to vote at the Annual
Meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
RECORD DATE AND SHARES OUTSTANDING
There were 293 shareholders of record at the close of business on December
30, 1999 entitled to notice of, and to vote at, the Annual Meeting. 20,310,658
shares of the Company's Common Stock, par value $.001 per share ("Common Stock")
and 761,250 shares of the Company's Series A Preferred Stock, par value $.001
per share ("Series A Stock") are issued and outstanding and entitled to vote at
the Annual Meeting. At the Annual Meeting, the Common Stock and the Series A
Stock will vote on all matters (other than Proposal 2, as to which the shares of
Series A Stock will not be voted) as a single class, with each share of Common
Stock having one vote and each share of Series A Stock having four votes (the
number of votes equal to the number of shares of Common Stock into which each
share of Series A Stock may be initially converted). The maximum aggregate votes
eligible to be cast at the annual meeting, is 23,355,658 (except with respect to
Proposal 2, where the vote will be determined by the majority of the shares of
Common Stock present and voting at the meeting).
REVOCABILITY OF PROXIES
Ohio General Corporation Law provides that any proxy given pursuant to this
solicitation may be revoked by the person giving it at any time before its use
by delivering to the Secretary of the Company or any of the Persons named as
Proxies, a written notice of revocation or a duly-executed proxy bearing a later
date than the date of the proxy being revoked or by attending the Annual Meeting
and revoking their proxy and voting in person.
VOTING AND SOLICITATION
Every shareholder voting for the election of directors is entitled to one
vote for each share of Common Stock held and four votes for each share of Series
A Stock held. Shareholders do not have the right to cumulate their votes in the
election of directors. On all other matters each share of Common Stock is
likewise entitled to one vote, and each share of Series A Stock is likewise
entitled to four votes, on each proposal or
1
<PAGE> 5
item that comes before the Annual Meeting. The shares of Series A Stock will be
excluded in the calculation of votes cast with respect to Proposal 2.
The Company intends to include abstentions and broker non-votes as present
or represented for purposes of establishing a quorum for the transaction of
business, but to exclude abstentions and broker non-votes from the determination
of votes cast with respect to any proposal, other than Proposal 3, for which
authorization to vote was withheld. In all cases, other than Proposal 3, the
number of votes required for approval is determined by the votes cast. As a
result, on Proposal 3 only, abstentions will have the same effect as a vote
against the proposal. The presence of the holders of a majority of the total
issued and outstanding shares of Common Stock and Series A Stock in person or
represented by duly executed proxies at the Annual Meeting shall constitute a
quorum for the transaction of business. The shares of Series A Stock will be
excluded in the calculation of votes cast with respect to Proposal 2. The vote
required for passage of each proposal is set forth in the discussion of the
separate proposals.
The cost of this solicitation will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners. Proxies also may be solicited by certain
Company directors, officers, and employees, without additional compensation.
The Board does not know of any other business to be presented for
consideration at the annual meeting. If any other business properly comes before
the annual meeting or any adjournments thereof, the proxies will be voted on
such matters in the discretion of the proxy holders.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors has fixed the number of directors at ten. Messrs.
Susumu Harada, John R. Buerkle and A Gordon Tunstall and Dr. John E. Breen are
currently directors whose terms expire at the Annual Meeting. Each has been
nominated for election at the Annual Meeting as a director for a term expiring
at the 2002 annual meeting, or until their successors are duly elected and
qualified. The persons named in the accompanying proxy will vote for Messrs.
Buerkle, Harada and Tunstall and Dr. Breen to serve as directors for such term.
Although it is not presently contemplated that any nominee will decline or be
unable to serve as a director, in either such event, the proxies will be voted
by the proxy holders for such other persons as may be designated by the present
Board of Directors. Pursuant to the terms of the Stock Purchase Agreement
relating to the General Electric Company ("GE") investment, attached as Annex A
to this Proxy Statement, on December 21, 1999 the Board of Directors appointed
Dr. Breen and Mr. Thomas K. Lime, selected from a list provided by GE, to fill
two vacancies.
NOMINEES
The following table sets forth certain information regarding each of the
four nominees of the Board of Directors for election as a director for the term
expiring in 2002.
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTORS' TERM EXPIRES
---- --- -------- -----------------------
<S> <C> <C> <C>
Susumu Harada 48 Director 1999
John R. Buerkle 51 Director 1999
A Gordon Tunstall 55 Director 1999
John E. Breen 54 Director 1999
</TABLE>
The four persons receiving the greatest number of votes shall be elected
directors. The Board of Directors recommends a vote "FOR" the four nominees as
directors of the Company.
2
<PAGE> 6
CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding each of the
six directors whose terms expire in 2000 and 2001, as well as the Company's
other executive officer:
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTORS' TERM EXPIRES
---- --- -------- -----------------------
<S> <C> <C> <C>
Wayne R. Hellman 53 Chief Executive Officer and Chairman 2001
of the Board of Directors
Alan J. Ruud 52 Vice Chairman, President, Chief 2000
Operating Officer and Director
Louis S. Fisi 65 Director 2000
Francis H. Beam 64 Director 2000
Theodore A. 60 Director 2001
Filson
Thomas K. Lime 61 Director 2001
Nicholas R. 53 Chief Financial Officer, Vice
Sucic President & Treasurer*
</TABLE>
- ---------------
* Executive officer only; not a director.
Wayne R. Hellman has served as the chief executive and a director of the
Company since 1995 and as chief executive or other senior officer of each of the
Company's predecessor companies since 1983. From 1968 to 1983 he was employed by
the lighting division ("GE Lighting") of General Electric Company. While at
General Electric, Mr. Hellman served as Manager of Strategy Analysis for the
Lighting Business Group; Manager of Engineering for the Photo Lamp Department;
Halarc Project Venture Manager; Manager of Quartz Halogen Engineering and
Manager of Metal Halide Engineering. As the Halarc Project Venture Capital
Manager, he was given the responsibility of developing metal halide technology.
Mr. Hellman is also currently a director of Fiberstars, Inc., a manufacturer and
marketer of fiber optic lighting systems. The Company owns approximately 26% of
the issued and outstanding shares of Fiberstars, Inc. In 1998, Mr. Hellman
married Diane Mazzola who is Mr. Fisi's step-daughter.
Alan J. Ruud founded Ruud Lighting, Inc. in December of 1982 and has served
as its chairman of the board and chief executive officer since that time. The
Company acquired Ruud Lighting on January 2, 1998. At that time, Mr. Ruud was
appointed to the Company's board. He currently serves as vice-chairman and a
member of the Executive Committee. In June 1999, Mr. Ruud was appointed to the
additional position of President and Chief Operating Officer of the Company. Mr.
Ruud founded SCI. Lighting, an HID lighting manufacturer, in 1973, which was
sold to McGraw Edison in 1978. Mr. Ruud managed SPI Lighting until 1982. From
1969 through 1979, Mr. Ruud also ran a consulting and lighting engineering group
in Milwaukee, Wisconsin. Mr. Ruud is also currently a director of Fiberstars,
Inc.
Louis S. Fisi served as the executive vice president of the Company from
1995 until his retirement in 1999, and has served as a director of the Company
since 1995. He has also served as chief financial officer of the Company from
1995 to November 1996 and chief financial officer of one or more of the
Company's predecessors from 1985 to November 1996, and assisted Mr. Hellman in
the founding of the predecessors. From 1976 to 1985, Mr. Fisi was employed in
executive and financial capacities by the Smithers Company, an international
industrial company. From 1967 to 1976, he was employed as a certified public
accountant by an international accounting and consulting firm currently known as
Ernst & Young LLP.
Francis H. Beam has served as a director of the Company since 1995. From
1988 to 1999, Mr. Beam served as President of Pepper Capital Corp., a venture
capital firm which he formed. Mr. Beam is retiring from Pepper Capital effective
at the end of 1999. Mr. Beam is also a director of The Lamson & Sessions Co., a
manufacturer of thermoplastic conduit and pipe, enclosures, wiring devices and
accessories. From 1959 to 1988 he was employed by Ernst &Young LLP (and its
predecessors). Beginning in 1967 he held various partnership positions with that
firm until his retirement in 1988 as Vice Chairman and Regional Managing
Partner.
3
<PAGE> 7
John E. Breen was appointed to the Company's board in December 1999. Dr.
Breen served as Vice President of Technology for GE Lighting from 1990 until his
retirement in 1998. Dr. Breen spent 26 years at GE Lighting focused on
technology for all lighting applications and on new product introductions.
John R. Buerkle was appointed as a director of the Company in January 1998.
Mr. Buerkle was named President -- Asia-Pacific, of S.C. Johnson & Son, Inc., a
worldwide manufacturer and marketer of consumer household products, in April
1995. From 1982 to 1995, Mr. Buerkle held positions for business and product
development in Latin America and has held other managerial positions with S.C.
Johnson since 1972. Mr. Buerkle is also currently a director of Alloyd Company,
Inc., a privately-held leading manufacturer of plastic packaging and packaging
equipment.
Theodore A. Filson has been a director of the Company since 1995. Mr.
Filson has served as an independent consultant to the lighting industry since
1994. From 1986 to 1994 he was employed as president and chief executive officer
of Advance Transformer, Inc., the largest manufacturer of lighting system power
supplies in the world.
Susumu Harada has served as a director of the Company since January 1996.
Mr. Harada is the chief executive officer of the following Japanese companies:
Koto Electric, Koto Bunkogen, Iwaki Cristal and Wakoh Corporation. Mr. Harada is
also the chief executive of Venture Lighting, Japan ("Venture Japan"), formerly,
Koto Luminous, which is a Japanese distribution and manufacturing joint venture
in which the Company owns an equity interest consisting of preferred stock. The
product lines of these companies include specialty lamps, hermetic seals for
quartz crystal and optical semiconductors, and digital display lamps. In 1981,
Mr. Harada joined Koto as the Overseas and Domestic Sales and Planning Manager.
He held a number of positions with Koto before he assumed his current position
as chief executive officer in 1992.
Thomas K. Lime was appointed to the Company's board in December 1999. Mr.
Lime retired from GE Lighting in 1998 after 37 years in sales and marketing
positions at GE Lighting. From 1995-1998, Mr. Lime served as General
Manager-World Wide Strategic Accounts Sales and from 1984-1994 as General
Manager-Consumer Sales US/Canada.
A Gordon Tunstall has served as a director of the Company since June 1996.
He is the founder of, and for more than 18 years has served as President of
Tunstall Consulting, Inc., a provider of strategic consulting and financial
planning services. Mr. Tunstall is also currently a director of Romac
International, Inc., a professional and technical placement firm; Orthodontic
Centers of America, Inc., a manager of orthodontic practices; Discount Auto
Parts, Inc., a retail chain of automotive after market parts stores; and Horizon
Medical Products, a medical device manufacturer and distributor.
Nicholas R. Sucic joined the Company in 1996 as Special Assistant to the
Chairman. He was appointed chief financial officer and treasurer in November
1996 and became Vice President in April 1997. He is a certified public
accountant. From 1989 to 1996, he was employed by The Prudential Investment
Corporation ("The Prudential") having served as chief financial officer and
comptroller for various institutional investment units. Prior to joining The
Prudential, Mr. Sucic was a partner with Ernst & Young LLP, having been
associated with that firm since 1970.
COMPOSITION OF THE BOARD OF DIRECTORS
Pursuant to the terms of the Company's Articles of Incorporation and Code
of Regulations (By-Laws), the Board of Directors has the power to change the
number of directors by resolution. The number of directors is currently set at
ten members. The directors are divided into three classes. Each director in a
particular class is elected to serve a three-year term or until his or her
successor is duly elected and qualified. The classes are staggered so that their
terms expire in successive years resulting in the election of only one class of
directors each year.
4
<PAGE> 8
BOARD MEETINGS AND COMMITTEES
Mr. Hellman serves as Chairman of the Board of Directors of the Company.
The Board of Directors held a total of four regular and four special meetings
during the fiscal year ended June 30, 1999. Other than Mr. Harada, all of the
current directors attended 75% or more of the regular and special meetings of
the Board of Directors and committees of the Board, if any, upon which such
directors served. Mr. Harada did not attend any of the special meetings of the
Board of Directors.
During fiscal 1999, the Executive Committee consisted of Mr. Hellman, Mr.
Fisi, and Mr. Ruud. The Executive Committee is authorized to exercise all of the
powers of the Board of Directors except the powers to declare dividends and
issue shares of Common Stock in excess of 50,000 shares or rights to acquire
such Common Stock. The Executive Committee is empowered to act during the
interim periods between meetings of the Board of Directors.
During fiscal 1999, the Audit Committee, consisting of Mr. Beam, Mr.
Tunstall and Mr. Filson, held six meetings. The Audit Committee makes
recommendations concerning the engagement of independent public accountants,
reviews with the independent public accountants the plans and results of the
audit engagement, approves professional services provided by the independent
public accountants, reviews the independence of the independent public
accountants, considers the range of audit and nonaudit fees, and reviews the
adequacy of the Company's internal accounting controls.
During fiscal 1999, the Compensation Committee, consisting of Mr. Buerkle,
Mr. Harada and Mr. Filson, held three meetings. The Compensation Committee
determines the compensation of the Company's executive officers. Its report is
included below at "COMPENSATION -- Report on Executive Compensation by the
Compensation Committee."
During fiscal 1999, the Incentive Award Plan Committee, consisting of
Messrs. Hellman, Fisi and Tunstall, held one meeting. On October 6, 1999 the
Board of Directors determined that, instead of two committees, the Compensation
Committee shall also serve as the Incentive Award Plan Committee. The Incentive
Award Plan Committee administers the 1995 Incentive Award Plan, the 1997 Billion
Dollar Market Capitalization Incentive Award Plan, and the 1998 Incentive Award
Plan. This committee will make all determinations as to future grants of stock
and stock options under these plans. Awards under the Billion Dollar Market
Capitalization Incentive Award Plan and the 1998 Incentive Award Plan to members
of the Incentive Award Plan Committee are subject to approval by the entire
Board of Directors.
During fiscal 1999, the Company had no Nominating Committee and the entire
Board considers candidates for directors.
5
<PAGE> 9
CERTAIN HOLDERS OF VOTING SECURITIES
The following table sets forth information regarding the ownership of the
Company's Common Stock as of December 30, 1999, by each of the directors and
executive officers of the Company, by each person or group known by the Company
to be the beneficial owner of more than five percent of the Company's
outstanding Common Stock, and by all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(2)
----------------------------------
PERCENT
PERCENT OF VOTING
NAME AND ADDRESS(1) NUMBER OF CLASS POWER
------------------- ------ -------- ---------
<S> <C> <C> <C>
Wayne R. Hellman(3).................................. 3,968,745(7) 19.5% 16.3%
Alan J. Ruud(4)...................................... 3,647,134(7) 18.0% 15.0%
Louis S. Fisi(5)..................................... 297,038(7) 1.5% 1.2%
Nicholas R. Sucic.................................... 17,741(7) * *
Francis H. Beam...................................... 42,554 * *
John E. Breen........................................ 0 * *
John R. Buerkle...................................... 16,750 * *
Theodore A. Filson................................... 43,000 * *
Susumu Harada(6)..................................... 157,368 * *
Thomas K. Lime....................................... 0 * *
A Gordon Tunstall.................................... 15,000 * *
All Directors and Executive Officers as a Group
(3)(4)(5)
(9 Persons)........................................ 7,908,292(7) 38.9% 32.5%
General Electric Company (8)......................... 4,580,887 18.8% 18.8%
Wellington Management Company (9).................... 1,518,000 7.5% 6.2%
Brown Investment Advisory & Trust Company/ Brown
Advisory Incorporated (10)......................... 1,365,117 6.7% 5.6%
</TABLE>
- ---------------
* Less than one percent
(1) The business address of each of Messrs. Hellman, Fisi, Sucic, Beam,
Buerkle, Filson and Lime and Dr. Breen is 32000 Aurora Road, Solon, Ohio
44139. The business addresses of Messrs. Ruud, Breen, Harada, Lime and
Tunstall are: Mr. Ruud -- Ruud Lighting, Inc., 9201 Washington Avenue,
Racine, Wisconsin 53406; Mr. Harada -- Koto Electric Co., Ltd., Bunmeido
Bldg., 7th Floor, 3-16-5, Taito, Taito-Ku, Tokyo 110, Japan; and Mr.
Tunstall -- Tunstall Consulting, Inc., 13153 North Dale Mabry, Suite 200,
Tampa, Florida, 33618. The business address of General Electric Company is
3135 Easton Turnpike, Fairfield, CT 06431. The business address of
Wellington Management Company is 75 State Street, Boston, MA 02109. The
business address of Brown Investment Advisory & Trust Company/ Brown
Advisory Incorporated is 19 South Street, Baltimore, MD 21202.
(2) Shares beneficially owned include the following shares which may be
acquired within 60 days of the date of this proxy by exercise of options
granted pursuant to the incentive award plans: Mr. Beam -- 15,000 shares;
Mr. Filson -- 33,000 shares; Mr. Buerkle -- 3,750 shares; Mr.
Harada -- 9,600 shares; Mr. Tunstall -- 15,000 shares; Mr. Sucic -- 14,250
shares. Shares beneficially owned by General Electric Company include
3,045,000 shares of Common Stock which may be acquired by General Electric
Company at any time upon conversion of the Series A Stock and 1,000,000
shares of Common Stock subject to a warrant which is exercisable at any
time. Percentage ownership is calculated on the basis of shares
outstanding, plus shares which may be acquired within 60 days of the date
of the proxy upon exercise or conversion by the named holder of options,
warrants and Series A Stock. Percentage voting power is calculated on the
same basis as percentage ownership, except the calculation includes for all
holders the voting power of the Series A Stock and the shares issuable upon
exercise by GE of the warrant.
6
<PAGE> 10
(3) Includes 1,928,070 shares owned by Mr. Hellman individually; 125,000 shares
owned by a limited liability company ("Hellman Ltd.") of which Mr. Hellman
is the manager and as to which Mr. Hellman has sole voting and investment
power; 50,000 shares owned by a private charitable foundation established
by Mr. Hellman and as to which Mr. Hellman has sole voting and investment
power; 70,414 shares beneficially owned by certain shareholders of the
Company held under a voting trust which expires in 2005 (the "Trust") and
1,758,984 shares formerly subject to the Trust as to which Mr. Hellman
holds an irrevocable proxy under similar terms. These shares, totaling
1,829,398, are referred to herein as the "Trust Shares." The Trust Shares
include all shares individually owned by Mr. Louis S. Fisi, Mr. Robert S.
Roller, and Mr. Juris Sulcs, Ms. Christine Hellman and Ms. Lisa Hellman,
the estate of James Sarver, and trusts for the benefit of Mr. Roller's
children. The Trust Shares also include shares owned by Mr. Brian Hellman.
Pursuant to the terms of the Trust and the irrevocable proxies, Mr. Wayne
Hellman is empowered to vote the Trust Shares for all purposes at his sole
discretion, but is not provided with investment power with respect to the
Trust Shares. Beneficial owners of the Trust Shares may remove the shares
from the Trust or release the shares from the irrevocable proxy, as the
case may be, to effect a bona fide sale free of the restrictions of the
Trust. All share distributions on account of the Trust Shares become
subject to the Trust, and all cash and other nonshare distributions on
account of the Trust Shares are to be paid over to the grantors of the
Trust. The expiration of the Trust may be accelerated under certain
circumstances. Mr. Hellman does not receive any compensation for serving as
voting trustee of the Trust. Mr. Hellman has granted to GE irrevocable
proxies with respect to shares owned by him individually and by Hellman,
Ltd. and with respect to the Trust Shares. The proxies will be effective
only under certain circumstances. See "GE Transaction." Also includes
shares beneficially owned by Mr. Hellman's wife as to which Mr. Hellman
disclaims beneficial ownership, consisting of 26,004 shares owned and
10,000 shares subject to options exercisable within 60 days of the date of
this proxy.
(4) Mr. Ruud has the sole power to vote 3,647,134 shares of Common Stock of
which 1,497,143 shares of Common Stock are subject to the terms of a voting
trust agreement dated January 2, 1998 (the "Voting Trust") or an
irrevocable proxy similar to the irrevocable proxies held by Mr. Hellman,
discussed above (collectively, the "Voting Trust Shares"), and the sole
power to dispose of 2,149,991 shares of Common Stock. The purpose of the
Voting Trust Agreement and proxies is to provide Mr. Ruud with the power to
vote all of the 1,497,143 shares of Common Stock held by the signatories to
the Voting Trust Agreement. The Voting Trust Shares include all shares
individually owned by Messrs. Donald Wandler, Theodore O. Sokoly,
Christopher A. Ruud, and Ms. Cynthia A. Johnson. Mr. Ruud has granted to GE
proxies with respect to shares owned by him individually and with respect
to the Voting Trust Shares. These proxies will be effective only under
certain circumstances. See "GE Transaction."
(5) All individually owned shares are Trust Shares subject to voting control by
Mr. Hellman.
(6) Includes 142,268 shares owned by Venture Lighting, Japan, of which Mr.
Harada is chief executive officer. Mr. Harada disclaims beneficial
ownership of these shares.
(7) Includes 1,889 shares purchased via the Employee Stock Purchase Plan by Mr.
Sucic and 273, 121, 134 and 102 shares purchased via the Company 401(k)
plan for Messrs. Hellman, Fisi, Ruud and Sucic respectively.
(8) Includes 535,887 shares of Common Stock held by General Electric Company,
3,045,000 shares issuable upon conversion of the Series A Stock held by
General Electric and 1,000,000 shares issuable upon exercise of a currently
exercisable warrant held by General Electric. General Electric owns 100% of
the issued and outstanding shares of Series A Stock.
(9) Information obtained from Schedule 13G filed by the shareholder. Includes
817,000 shares as to which Wellington has shared voting power and 1,518,000
shares as to which Wellington has shared dispositive power.
(10) Information obtained from Schedule 13G filed by the shareholder. Includes
288,786 shares as to which BIATC has sole voting power and 1,330,017 shares
as to which BIATC has sole voting power and 323,886 shares as to which
BIATC has sole dispositive power and 1,365,117 shares as to which BIATC has
sole dispositive power.
7
<PAGE> 11
COMPENSATION OF EXECUTIVE OFFICERS
The following tables set forth certain information with respect to all
compensation paid or earned for services rendered to the Company in all
capacities for the fiscal years ending June 30, 1999, June 30, 1998 and June
30,1997 by the Company's Executive Officers. No Executive Officer of the Company
received restricted stock awards, grants of options or long-term incentive plan
awards or payouts for the fiscal year ending June 30, 1999. The Company has not
granted any stock appreciation rights. The Company has no defined benefit
employee pension plan.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------------------
OTHER ANNUAL
SALARY BONUS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)
--------------------------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Wayne R. Hellman 1999 $200,000(1) $ -0- $ -0-(4)
Chief Executive Officer 1998 $200,000(1) $ -0- $ 33,882(2)
1997 $195,000(1) $ -0- $ 33,110(2)
Alan J. Ruud(3) 1999 $192,500(1) $ -0- $ -0-(4)
Vice-Chairman, President 1998 $ 92,500(1) $ -0- $ -0-(4)
Chief Operating Officer
Louis S. Fisi 1999 $175,000 $ -0- $ 19,729(2)
Executive Vice 1998 $175,000 $ -0- $ -0-(4)
President/Secretary 1997 $165,000 $ -0- $ -0-(4)
Nicholas R. Sucic 1999 $175,000(1) $ -0- $ -0-(4)
Chief Financial Officer 1998 $175,000(1) $ -0- $ -0-(4)
Vice President/Treasurer 1997 $130,000(1) $ 50,000 $ -0-(4)
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------
AWARDS PAYOUTS
---------------------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING LTIP ALL OTHER
AWARD(S) OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) (#) ($) ($)
--------------------------- ---- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C>
Wayne R. Hellman 1999 $-- -- $-- $233,764(5)
Chief Executive Officer 1998 -- -- -- $114,897(5)
1997 -- -- -- $114,897(5)
Alan J. Ruud(3) 1999 -- -- -- $ 5,065(5)
Vice-Chairman, President 1998 -- -- -- $ -0-
Chief Operating Officer
Louis S. Fisi 1999 -- -- -- $235,048(5)
Executive Vice 1998 -- -- -- $181,454(5)
President/Secretary 1997 -- -- -- $168,092(5)
Nicholas R. Sucic 1999 -- -- -- $ 26,894(5)
Chief Financial Officer 1998 -- -- -- $ 12,700(5)
Vice President/Treasurer 1997 -- 50,000 -- $ 12,700(5)
</TABLE>
- ---------------
(1) Mr. Hellman, Mr. Ruud and Mr. Sucic are each parties to Employment
Agreements with the Company. The Employment Agreement of Mr. Hellman had an
initial term expiring December 31, 1998. In fiscal 1998, Mr. Hellman's
Employment Agreement was extended through December 31, 2003. Mr. Ruud and
Mr. Sucic are parties to similar Employment Agreements with the Company: Mr.
Ruud's having an initial term expiring January 1, 2001; Mr. Sucic's having
an initial term expiring on February 11, 2001. Through these Employment
Agreements, Mr. Hellman, Mr. Ruud and Mr. Sucic are entitled to receive
8
<PAGE> 12
annual base compensation of $195,000, $185,000, and $175,000, respectively.
In addition, Mr. Hellman, Mr. Ruud and Mr. Sucic will each be entitled to
receive a bonus in amounts determined by the Compensation Committee. These
Employment Agreements provide for annual increases in annual base
compensation in amounts determined by the Compensation Committee during the
term of these Employment Agreements. For fiscal 1999, Messrs. Hellman, Ruud,
Fisi and Sucic received annual base compensation of $200,000, $192,500,
$175,000 and $175,000, respectively. The Compensation Committee has not yet
determined whether there will be an increase in compensation for Messrs.
Hellman, Ruud, and Sucic in fiscal 2000. Mr. Fisi retired as an officer of
the Company on December 31, 1999. Under the Employment Agreements, Mr.
Hellman, Mr. Ruud and Mr. Sucic participate in Company sponsored life,
health, and disability insurance coverage. Also includes compensation
deferred pursuant to the Company's 401(k) deferred compensation plan.
(2) Perquisites provided to Mr. Hellman included club dues ($21,600 in fiscal
1998 and $20,785 in fiscal 1997) and automobile use and insurance ($9,771 in
fiscal 1998 and $9,780 in fiscal 1997). Perquisites provided to Mr. Fisi
included club dues ($7,854) and automobile use and insurance ($11,875).
(3) Mr. Ruud was elected to the office of Vice Chairman effective on January 2,
1998. All compensation amounts for fiscal 1998 exclude compensation received
from Ruud Lighting, Inc. prior to its acquisition by the Company on January
2, 1998.
(4) Perquisites provided to these executive officers consisted primarily of
automobile use, automobile insurance, club dues, the total of which did not
exceed 10% of the person's salary and bonus.
(5) Since 1993, the Company and its predecessors have maintained split dollar
life insurance policies with respect to certain key employees. In order to
reduce expenses, the split dollar life insurance program was terminated
effective June 30, 1999. This program applied to approximately 25 employees,
including Messrs. Hellman, Fisi and Sucic. This program provided life
insurance benefits and a cash value benefit which vested over a ten year
period and was to be received upon termination of employment or retirement
from the Company. In connection with the termination of this program the
Company accelerated the vesting of the cash value benefits, providing full
vesting as to the cash value in each policy. For fiscal year 1999, the
amounts indicated represent the incremental value of the cash value benefits
each Executive Officer received as a result of normal and accelerated
vesting. For fiscal year 1998 and 1997 the amounts indicated represent the
split dollar life insurance premiums. For fiscal 1999 the amounts include
Company contributions to 401(k) plan in the amounts of $4,271, $2,776,
$5,065 and $1,384 for Messrs. Hellman, Fisi, Ruud and Sucic respectively.
Mr. Fisi retired as an officer and employee of the Company effective
December 31, 1999. The principal terms of Mr. Fisi's retirement arrangement are
as follows: Mr. Fisi will be retained as a consultant until June 30, 2000 for a
fixed consulting fee of $93,000 (it is anticipated that the consulting
arrangement during this period would involve the direction and completion of Mr.
Fisi's current projects); after June 30, 2000, Mr. Fisi will be available to
consult with Company management for an additional period of three years on
special projects, where Mr. Fisi's extensive industry experience, special
knowledge regarding the Company and availability to supervise substantial
projects would assist the Company's completion of these projects, with
compensation for the three-year period set at $93,000 per year. In addition, Mr.
Fisi will continue serving his existing term as a director of the Company and be
given a 5,000 share option grant under the Company's 1995 Incentive Award Plan
or 1998 Incentive Award Plan, if available.
9
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND 1999 FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT FISCAL
AT FISCAL YEAR-END YEAR-END
(#) ($)
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
---- -------------------- --------------------
<S> <C> <C>
Wayne R. Hellman...................................... -0- -0-
Alan J. Ruud.......................................... -0- -0-
Louis S. Fisi......................................... -0- -0-
Nicholas R. Sucic..................................... 14,250/50,000 -0-/-0-
</TABLE>
COMPENSATION OF DIRECTORS
All directors of the Company receive reimbursement for reasonable
out-of-pocket expenses incurred in connection with meetings of the Board of
Directors. In addition, in the fiscal year ended June 30, 1999, the nonemployee
directors were compensated $2,500 for each meeting of the full-board attended.
Such directors will be entitled to a minimum of $10,000 if they attend 75% or
more meetings of the board and committees to which they belong. No director who
is an employee of the Company will receive separate compensation for services
rendered as a director.
In December 1995, the Company granted options to purchase 9,600 shares of
Common Stock under the Incentive Award Plan to each of its nonemployee
directors. These options were granted at an exercise price of $10.00 per share.
Of these options 9,600 shares each are exercisable within 60 days of the date of
the Proxy Statement by Messrs. Beam and Filson. In January, 1996, the Company
granted options to purchase 9,600 shares of Common Stock at $10.25 per share
under the Incentive Award Plan to Mr. Harada upon appointment to the Board of
Directors, all of which are currently exercisable. In June 1996, the Company
granted options to purchase 15,000 shares of Common Stock at $17.00 per share
under the Incentive Award Plan to Mr. Tunstall upon appointment to the Board of
Directors, all of which options are currently exercisable. In June 1996, each
nonemployee director other than Mr. Harada and Mr. Tunstall (Messrs. Beam and
Filson) was granted options to purchase an additional 5,400 shares at an
exercise price of $17.00 per share. All of these options are currently
exercisable. In September 1997, Mr. Filson was granted an option to purchase
30,000 shares of Common Stock at $23.75 per share of which 18,000 shares are
currently exercisable. Each grant was made at the market price of the Company's
Common Stock on the date of grant. Each option will vest 25% in the first year,
35% in the second year, and 40% in the third year from the date of grant.
Each of the nonemployee directors of the Company was granted options to
purchase 15,000 shares of Company Common Stock in 1995 and 1996 (other than Mr.
Harada, who received options to purchase 9,600 shares). At its October 28, 1999
meeting, the board discussed and approved a policy which would make option
grants to nonemployee directors upon appointment and upon reelection. The number
of shares to be subject to option grants will be equal to 5,000 shares for each
year in a director's term. Following Mr. Fisi's anticipated retirement, he would
receive a 5,000 share option grant to reflect the unexpired portion of his
current term. There are currently not sufficient options available for grant
under the Company's 1995 Incentive Award Plan and 1998 Incentive Award Plan to
provide for the options which the policy would require to be issued to Messrs.
Harada, Buerkle, Tunstall, Lime and Fisi, and Dr. Breen. The 1998 Incentive
Award Plan is proposed to be amended. If the amendment is approved, the 1998
Incentive Award Plan would provide adequate options to provide for these grants.
In fiscal 1999, Mr. Filson provided consulting services to the Company and
received fees in the amount of $99,996. In calendar 1999, Mr. Filson has agreed
to provide consulting services to the Company.
10
<PAGE> 14
EMPLOYMENT AGREEMENTS
Mr. Hellman, Mr. Ruud and Mr. Sucic are each parties to Employment
Agreements with the Company. The Employment Agreement of Mr. Hellman had an
initial term expiring December 31, 1998 but was extended through December 31,
2003 in fiscal 1999. Mr. Ruud and Mr. Sucic are parties to similar Employment
Agreements with the Company: Mr. Ruud's having an initial term expiring January
1, 2001; and Mr. Sucic's having an initial term expiring on February 11, 2001.
Through these Employment Agreements, Mr. Hellman, Mr. Ruud, and Mr. Sucic are
entitled to receive annual base compensation of $195,000, $185,000, and
$175,000, respectively. In addition, Mr. Hellman, Mr. Ruud and Mr. Sucic will
each be entitled to receive a bonus in amounts determined by the Compensation
Committee. These Employment Agreements provide for annual increases in the
annual base compensation as determined by the Compensation Committee during the
term of these Employment Agreements. For fiscal 1999, Messrs. Hellman, Ruud and
Sucic received annual base compensation of $200,000, $192,500 and $175,000,
respectively. The Compensation Committee has not yet determined whether there
will be an increase in compensation for Messrs. Hellman, Ruud and Sucic in
fiscal 2000. Under these Employment Agreements, Mr. Hellman, Mr. Ruud and Mr.
Sucic participate in Company sponsored life, health and disability insurance
coverage. Pursuant to their Employment Agreements, Mr. Hellman has agreed not to
compete with the Company for a period of two years after termination of
employment, and Messrs. Ruud and Sucic have agreed not to compete with the
Company for a period of three years after termination of employment.
In the event the Company terminates the Employment Agreements without cause
(as defined in the Employment Agreement) Ruud and Sucic will each be entitled to
receive all payments and benefits through the remainder of the term of the
Employment Agreement. "Without cause" is defined in the Employment Agreements as
(i) the employee's not committing fraud, dishonesty, willful misconduct, or
gross negligence in performing his duties or (ii) his not materially breaching
his Employment Agreement. In the event the Employment Agreements are terminated
by Ruud or Sucic for good reason (as defined in the Employment Agreement), Ruud
and Sucic will each be entitled to receive all payments and benefits through the
remainder of the term of the Employment Agreement. "Good reason" is defined in
the Employment Agreements as (i) a material reduction in the employee's duties,
authority, compensation, benefits or responsibilities without the employee's
prior written consent or (ii) the Company's material breach of the Employment
Agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors requires a majority to
be independent directors. During fiscal 1999, this Committee consisted of Mr.
Buerkle, Mr. Filson, and Mr. Harada. Mr. Filson is a consultant to the Company
and during fiscal 1999 received consultant's fees of $99,996. Mr. Harada is
chief executive officer of Venture Japan, a company in which the Company has a
nonvoting preferred stock interest and which purchased goods from the Company in
fiscal 1999 for an aggregate price of $625,000.
The Company has also established an Incentive Award Plan Committee which
was composed of Wayne R. Hellman, the Chief Executive Officer, Louis S. Fisi,
retired Executive Vice President, and A Gordon Tunstall. On October 11, 1999,
the Board of Directors determined that the Compensation Committee should act as
the Incentive Award Plan Committee. Awards to any executive officer or director
under the 1995 Incentive Award Plan, the Billion Dollar Market Capitalization
Plan, or the 1998 Incentive Award Plan will be approved by the entire Board of
Directors.
REPORT ON EXECUTIVE COMPENSATION BY THE COMPENSATION COMMITTEE
The Compensation Committee's duty is to (i) establish a philosophy and
basic structure governing all executive compensation plans, including the
compensation of the Executive Officers of the Company and its subsidiaries, and
to make recommendations to the Board of Directors regarding such compensation;
(ii) consider and make recommendations to the Board regarding directors'
compensation and benefits; (iii) consider and make recommendations to the Board
regarding salary structure, officer gradings and salaries for other officers;
(iv) propose and review bonus and stock option guidelines for officers and key
employees;
11
<PAGE> 15
(v) make recommendations to the Board regarding grants of options and other
awards to the Chief Executive Officer under the Company's incentive compensation
plans; (vi) consider and approve perquisites and other remuneration for
officers; (vii) review major changes to the Company's retirement plans and
incentive plans to officers and hourly employees; and (viii) submit an annual
report to the Board regarding the effectiveness and appropriateness of the
Company's compensation program. The Compensation Committee's goal is to provide
the Company with an incentive-based plan to reward highly competent Executive
Officers.
Effective August 4, 1997, the Compensation Committee has adopted a charter
to compensate each Executive Officer (implemented in fiscal year 1998) based on
the stated objectives (sales, profits, return on net assets) achieved by him
within the last year. Each officer has certain stated objectives, which combines
personal, managerial and corporate aspects. At the end of the year, each
officer's stated objectives (approved by the Board of Directors), are weighed
against his achievements, and compared to the overall financial condition of the
division the officer is responsible for and compared to the overall financial
condition of the Company. Accordingly, the achievements and the profit growth of
the division and of the Company are directly related to the executive officer's
earnings. This, the Compensation Committee concludes, is the best method for the
Company to attract and reward proficient executives.
The Compensation Committee reviews the compensation of the executive
officers: Wayne R. Hellman, Chairman and Chief Executive Officer, Alan J. Ruud,
Vice Chairman, President and Chief Operating Officer, Louis S. Fisi, Executive
Vice President and Secretary, and Nicholas R. Sucic, Chief Financial Officer,
Vice President and Treasurer. Mr. Hellman, Mr. Ruud and Mr. Sucic are each
parties to an Employment Agreement with the Company, which in Mr. Hellman's case
expires in December 2003, in Mr. Ruud's case expires in January 2001, and in Mr.
Sucic's case expires in February 2001. The Compensation Committee has not
determined the annual base compensation of the executive officers for fiscal
2000. The Compensation Committee may determine that the executive officers will
be entitled to a bonus in an appropriate amount for any fiscal year. The
Compensation Committee has determined that no bonus will be paid to Mr. Hellman,
Mr. Ruud, Mr. Fisi or Mr. Sucic for the fiscal year ended June 30, 1999.
Performance criteria for Mr. Hellman during fiscal 1999 included: (a) financial
performance related to sales, operating income and the Company's debt-to-equity
ratio; (b) recruitment of senior management personnel; (c) completion of
acquisitions and investments; (d) increase in shareholder value; and (e) further
development of strategies related to ADLT's leadership in metal halide lighting
technology and markets. The Committee did not assign these performance criteria
relative weights or rankings but rather made a subjective determination after
considering all factors collectively. Accordingly, because certain important
performance criteria related to (a) and (d) above were not met, the Committee
decided that Mr. Hellman would not be awarded a bonus for fiscal 1999. Messrs.
Hellman, Ruud, Fisi and Sucic participate in Company sponsored life, health and
disability insurance coverage. Pursuant to their Employment Agreements, Mr.
Hellman and Mr. Fisi have agreed not to compete with the Company for a period of
two years after termination of employment, and Mr. Ruud and Mr. Sucic have
agreed not to compete with the Company for a period of three years after
termination of employment.
COMPENSATION COMMITTEE
John R. Buerkle
Theodore A. Filson
Susumu Harada
Dated: September 1999
12
<PAGE> 16
COMPARISON OF CUMULATIVE TOTAL RETURN*
<TABLE>
<CAPTION>
NASDAQ NON-FINANCIAL
NASDAQ STOCK MARKET STOCKS ADLT
------------------- -------------------- ----
<S> <C> <C> <C>
12/12/95 100 100 100
6/28/96 113 114 173
6/30/97 138 134 249
6/30/98 182 176 230
6/30/99 259 258 90
</TABLE>
* Five-year performance is not provided since the Company's Common Stock first
became publicly traded on December 12, 1995.
CERTAIN TRANSACTIONS WITH DIRECTORS AND OFFICERS
The Company was formed on May 19, 1995, and acquired ownership, primarily
by merger (the "Combination") of 17 affiliated operating corporations that were
previously under common ownership and management (the "Predecessors").
On September 15, 1995, one of the Predecessors transferred its nonlamp
assets to H&F Five, Inc., a company owned by Messrs. Hellman, Fisi and certain
other employees of the Company, for a demand promissory note from H&F Five, Inc.
in the amount of $200,000 bearing interest at 8.5% per annum. Total principal
and accrued interest at June 30, 1999 was $220,000, which was the largest amount
outstanding at any time during fiscal 1999.
In fiscal 1999, Mr. Filson provided consulting services to the Company and
received fees in the amount of $99,996. Mr. Filson's consulting services
included taking an active role in sales/marketing through the development of key
customer relationships, obtaining commitments from customer companies to
introduce new lighting products that include ADLT components and the
establishment of major sales agreements. Mr. Filson's services during fiscal
1999 also encompassed other activities, including joint venture activities and
recruitment of key personnel. In calendar 1999, Mr. Filson has agreed to provide
consulting services to the Company.
Mr. Harada, a director of the Company, is an executive officer, director,
and a shareholder of Venture Lighting, Japan ("Venture Japan"), formerly known
as Koto Luminous Ltd., a Japanese manufacturer and marketer of lighting
products. Venture Japan owns 142,268 shares of the Company, which were acquired
in the Combination as a result of its investment in a Predecessor. In April
1997, the Company purchased a 30% common stock interest in Venture Japan. In
November 1998, this common stock interest was exchanged for nonvoting
convertible preferred stock which Company management determined had fair value
not less than the fair value of the original common stock interest. The exchange
for this preferred stock enhanced the security of the Company's investment by
providing preferential treatment upon liquidation of Venture Japan, while the
convertibility of the preferred stock allows the Company to participate in the
future potential of Venture Japan. Additionally, Mr. Harada and members of his
family control Wakoh Corporation, a Japanese corporation. Wakoh Corporation and
the Company are each 50% joint venture partners in Pacific Lighting,
13
<PAGE> 17
Inc., a British Virgin Islands holding company. The Company uses Pacific
Lighting to own and hold a number of the Company's joint venture investments.
Venture Japan is the Company's sole trading partner in Japan and, as a result,
the Company supplies Venture Japan with materials, lamps and equipment. The
Company had sales of approximately $625,000 in fiscal 1999 to Venture Japan.
On January 22, 1996, two subsidiaries of the Company each entered into a
six-year Aircraft Operating Agreement with Levetz Investments, Inc. ("Levetz"),
an unrelated Ohio corporation, for the purpose of chartering a 1986 Beechcraft
King Air 300 airplane (the "King Air Aircraft"), which Levetz leased from
LightAir Ltd. ("LightAir"), an Ohio limited liability company owned by Mr.
Hellman (80%) and Mr. Fisi (20%). On May 27, 1997, the Company entered into a
ten-year Aircraft Dry Lease Agreement with LightAir for the purpose of leasing a
1993 Lear Jet 60 airplane (the "Lear Aircraft"). In each case, the leased
airplanes enabled the Company to have air service into locations which are not
adequately served by commercial carriers. On May 6, 1998, LightAir sold the 1986
King Air Aircraft. On April 13, 1998, LightAir purchased a 1991 Beechcraft King
Air 350 airplane (the "Replacement King Air Aircraft") which Levetz leased from
LightAir on the same terms as the original King Air Aircraft; however, there was
no commitment by the Company or any subsidiary for a minimum number of flight
hours for the Replacement King Air Aircraft (one of the subsidiaries had
committed to a minimum of 200 flight hours per year on the King Air Aircraft,
and another subsidiary had committed to a minimum of 75 flight hours per year on
the King Air Aircraft). The Company and its subsidiaries were required to pay
$950 per flight hour on the Replacement King Air Aircraft for the first 275
hours, and $550 per flight hour thereafter, plus operating and maintenance
expenses. The Company had committed to a minimum of 260 flight hours per year on
the Lear Aircraft. The lease rate for the Lear Aircraft was $2,500 per flight
hour, plus operating costs and maintenance expenses. Levetz entered into a
separate Aircraft Dry Lease Agreement with LightAir for use of the Lear Aircraft
when not in use by the Company. In addition, the Company has utilized a Saab 340
Aircraft (the"Saab Aircraft") on an hourly rental basis. The Saab Aircraft was
originally owned by LightAir and was subsequently transferred to LightAir II
Ltd. Messrs. Hellman and Fisi guaranteed the repayment of $2.8 million of
indebtedness incurred to purchase the Replacement King Air aircraft; the
repayment of $8.4 million of indebtedness incurred to purchase the Lear
Aircraft; and $3.0 million of indebtedness to purchase the Saab aircraft.
Payments to LightAir totalled approximately $554,000 in fiscal 1997; $2,071,000
in fiscal 1998, and $588,000 in fiscal 1999. In addition, at June 30, 1999, the
Company had a $59,000 payment due to LightAir. LightAir paid certain rebates and
reimbursements of amounts paid by the Company. Unpaid portions of these amounts
were recorded as non interest bearing receivables of the Company. Rebates paid
in fiscal 1998 totalled $211,000 and no subsequent rebates have been made or are
expected. The largest amount outstanding with respect to receivables relating to
reimbursements during fiscal 1999 was $137,000. There were no such receivables
at June 30, 1999.
On May 20, 1998, LightAir II Ltd. ("LightAir II"), an Ohio limited
liability company owned by Mr. Hellman (50%) and Mr. Ruud (50%), acquired a 1988
Cessna Citation III aircraft. The Citation III was chartered to the Company at
an average of $2,000 per hour prior to January 1999 and $2,400 per hour
thereafter. Scott Air Charter of Milwaukee, Wisconsin is the charter broker for
the plane. Messrs. Hellman and Ruud guaranteed the repayment of $6.4 million of
indebtedness incurred to purchase the Citation III. Following transfer to
LightAir II of the Saab aircraft, LightAir II made the Saab aircraft available
to the Company on the same terms as were made available by LightAir. Commencing
in January 1999 the arrangements with LightAir II were changed to provide for
minimum payments of $55,000 per month for the Saab aircraft. The hourly usage
rates for the plane were reduced from $2,000 per hour to $1,100 per hour for the
Saab Aircraft. LightAir II has entered into arrangements to sell both of its
aircraft and the minimum payment was reduced to $33,500 with respect to the Saab
aircraft. The planes are not expected to be used for charter by the Company
pending sale. Payments to LightAir II during fiscal 1998 totalled $90,000 and
approximately $1,030,000 in fiscal 1999. In addition, at June 30, 1999, the
Company had a $102,000 payment due to LightAir II.
On January 2, 1998, the Company acquired all of the capital stock of Ruud
Lighting, Inc. Mr. Ruud received approximately $17.8 million and 1,502,857
shares of Common Stock in the transaction. Mr. Ruud's adult children received,
in the aggregate, approximately $9.3 million and 782,857 shares of Common Stock
in connection with the Company's acquisition of Ruud Lighting. In November 1997,
certain shareholders of
14
<PAGE> 18
Ruud Lighting, including Mr. Ruud, purchased from Ruud Lighting undeveloped real
estate contiguous to its existing facility, for $345,000. The terms of the
transactions were determined by arm's-length negotiation among the parties.
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 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 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 loan is
partially secured by certain real estate owned by Mr. Hellman. Mr. Hellman has
paid accrued interest on the loan through October 6, 1999. The principal on the
loan was due on October 6, 1999. Members of the Board of Directors of the
Company and Mr. Hellman 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 Mr. Hellman believe that
these discussions will be completed by January 2000. The Board has informed Mr.
Hellman that the Company may require immediate payment during these discussions
if the Company requires the payment to prevent an unacceptable strain on cash
resources.
Diane Hellman, Mr. Hellman's wife, has served the Company in various
marketing positions since 1985, and currently serves as Vice President of Sales
and Marketing of Venture Lighting International, Inc. In fiscal 1999, Mrs.
Hellman's salary, benefits and perquisites (including the normal vesting and a
one-time charge for accelerated vesting resulting from the termination of the
split dollar life insurance program) were $126,731. Brian Hellman, Mr. Hellman's
son, has served the Company in various positions since 1992, and currently
serves as Senior Business Analyst of Venture Lighting International, Inc. In
fiscal 1999, Brian Hellman's salary, benefits and perquisites (including the
normal vesting and a one-time charge for accelerated vesting resulting from the
termination of the split dollar life insurance program) were $92,163. Deborah
Rogers, Mr. Hellman's sister-in-law, has served the Company in various positions
since 1994, and currently serves as Regional Sales Manager of Venture Lighting
International, Inc. In fiscal 1999, Ms. Rogers' salary, benefits and perquisites
were $69,857. Susan Ruud, Mr. Ruud's wife, has served the Company since 1998,
and served Ruud Lighting in various positions since 1982, and currently serves
as Vice President of Human Resources of the Company. In fiscal 1999, Mrs. Ruud's
salary and benefits were $66,846. Christopher Ruud, Mr. Ruud's son, has served
the Company since 1998, and served Ruud Lighting in various positions since
1986, and currently serves as Vice President of Continuous Improvement/Human
Resources of Ruud Lighting. In fiscal 1999, Christopher Ruud's salary and
benefits were $91,447.
The Company does not intend to enter into any material transaction with
officers or directors, or their family members, without the approval of a
majority of the disinterested directors in the future. All above-described
transactions since March 1997 were approved by a majority of disinterested
directors except Mr. Filson's consulting service fees and the employment and
compensation of the Hellman and Ruud family members.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and directors, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file reports of ownership with the Securities and Exchange Commission and the
Nasdaq National Market. Specific due dates for these reports have been
established, and the Company is required to report in this Proxy Statement any
failure to file by these dates during fiscal 1999. All of these filing
requirements were satisfied by the Company's Executive Officers and directors,
and persons who own more than ten percent of a registered class of the Company's
equity securities, except that Mr. Buerkle filed a report on Form 4 relating to
two stock purchase transactions in March 1999 after the required filing date.
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GE TRANSACTION
On October 6, 1999, GE made an investment in the Company of $20,554,000.
The additional capital resources provided by the agreed investment by GE 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. This agreement
is similar to a supply agreement with GE which expired in 1998, including a
non-exclusive technology license to protect GE in the event of an inability of
the Company to supply these products. 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, 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 18.9% 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
principal bank credit facility.
GE supplies the Company with quartz tubing, glass bases and other
components for the metal halide lamps manufactured by the Company. Although a
significant supplier of such items, GE is not the only available source for
these items. In addition, GE supplies the Company with finished lamps for resale
as a part of the Company's product line and for inclusion in the Company's
lighting systems. These lamps include both commodity-type metal halide lamps
which supplement the Company's line of specialty lamps as well as incandescent
and fluorescent lamps, which are distributed to the Company's customers. The
Company supplies GE with both components for lamps and private label specialty
metal halide lamps. GE provides unsecured trade credit terms to the Company to
finance the purchase of products from GE by the Company. The Company paid GE a
total of $13.5 million for components and finished lamps purchased from GE
during fiscal 1999 and GE paid the Company a total of $4.6 million for
components and finished lamps purchased from the Company during fiscal 1999. GE
is also a manufacturer and marketer of metal halide lamps and fixtures and a
competitor of the Company.
The expected expansion of supplier-customer relationships with GE is
expected to result in changes to the operational strategies of the Company as
agreements with GE are negotiated. In anticipation of such agreements, the
Company decided not to complete partially-finished, high-speed lamp
manufacturing equipment. Rather, the Company will rely upon its Indian joint
venture's low-cost manufacturing capability, as well as sourced commodity
products from GE, to fulfill incremental product demand.
In addition to the benefits of the GE investment which the Company has
realized and expects to realize, the GE investment presents certain risks to the
Company and its shareholders. Although the Company has not experienced any
deterioration of its customer/supplier relationships with the other major metal
halide lighting competitors, Philips and OSRAM/Sylvania, the GE investment could
impair these relationships. In fiscal 1999, the Company purchased approximately
$5 million of raw materials and finished lamps from these companies, and sold
approximately $14 million of materials, components and systems to these
companies. In addition, the GE investment also results in a large competitor
having a substantial investment in the Company. In addition to contractual
rights outlined below, GE may have the ability to influence the
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<PAGE> 20
Company's affairs through shareholder votes. Under circumstances described
below, GE could gain additional ownership and voting rights, which would result
in a greater ability to influence the Company's affairs. If the GE voting
interest exceeds 35% of the voting power of the Company's shareholders, on a
diluted basis, the Company's banks will have the right to demand payment under
its $60 million revolving and term credit facility and the Company will be
required to offer to repurchase its outstanding Senior Notes due 2008, which
could require that the Company refinance up to $100 million of indebtedness. If
the Company enters into certain transactions, including issuance of stock (other
than issuance pursuant to existing plans and agreements) or substantial asset
sales, GE would have the right to request the Company to redeem the shares of
Series A Stock. Although such redemption is not required if it would cause a
default under the indenture relating to the Senior Notes due 2008, such a
redemption would currently trigger a default (and will trigger a default until
Company earnings and proceeds of eligible equity offerings for periods after
September 30, 1999 exceed $79.4 million in the aggregate and certain other
conditions are met) and could require repayment of the Senior Notes due 2008.
The possible requirement to redeem the Series A Stock could have a negative
affect on the ability to sell Company securities and could limit the liquidity
of the Company in the future. Since GE may obtain right to acquire voting
control of the Company and could demand redemption of the Series A Stock if the
Company enters into transactions with third parties (limiting liquidity by
requiring payment of the Liquidation Preference Amount and, possibly,
refinancing of the Senior Notes due 2008), it could be difficult or impossible
for third parties to obtain control of the Company.
Purpose of Transaction
Management of the Company approached GE in the belief that a strong
relationship with one of the world's premier lighting manufacturers would be
beneficial to all shareholders. In addition to being a large competitor of the
Company, GE has always been a substantial supplier and customer of the Company,
and management believed that GE's industry knowledge and financial resources
would permit a quick decision to invest in the Company. Also, during the third
fiscal quarter of 1999, it became apparent that the Company would be unable to
achieve its long and short term goals if it did not replace its then-existing
primary bank credit arrangement. This credit arrangement was originally entered
into in January 1998 and was renegotiated in February 1999. The terms, as
revised in 1999, included covenants which required the Company to maintain
operating earnings and net worth at certain levels. In addition, the facility
was to mature in April 2000 and required the payment of a $750,000 fee if the
facility remained in place after June 30, 1999. This provided a significant
incentive to complete the replacement financing by June 30, 1999. During the
third fiscal quarter of 1999, it became apparent that the revised financial
covenants did not fully anticipate the costs related to the Company's
restructuring efforts implemented in the second quarter, and that the Company
could not comply with the covenants for the third quarter. The impending default
provided further incentive to secure prompt refinancing.
Management believed that it could obtain the best terms for the replacement
financing, allowing for the greatest flexibility to achieve its business goals,
if the Company obtained a major equity investment. The Company determined to
seek the maximum investment in the Company which could be made without prior
shareholder approval while conforming with rules applicable to Nasdaq National
Market companies and Ohio corporate law. A letter of intent was signed by the
Company and GE in March 1999, with the intention to complete the investment at
the time of the replacement credit facility. Due to the waiting period imposed
by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, described below
under "Antitrust Laws and Potential Change of Control," the GE investment was
not completed at the time of the replacement financing, but the Company believes
that the fact that the $20.6 million GE investment was not subject to
shareholder approval was a critical element to the completion of the replacement
financing in May 1999. When the GE transaction closed, the proceeds were used to
repay $3.5 million of the term loan and $17.0 million of the revolving loan
under the replacement facility. After the repayment, the Company had $20.0
million outstanding under the replacement term loan and $3.5 million under the
revolving loan.
The number of shares into which the Series A Stock is convertible,
3,045,000, was set at the number which (with the Initial Warrant) provided the
greatest number of shares which could be issued by the Company without
shareholder approval under Nasdaq rules. The $20,554,000 consideration was the
market
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<PAGE> 21
value of 3,045,000 common shares of Common Stock on the date of the letter of
intent (at $6.75 per share). The transaction also included a warrant to purchase
1,000,000 shares of common stock for nominal consideration. Management believed
that this warrant would represent (and encourage) the value of the strengthened
customer-supplier relationship with GE following the transaction. As originally
contemplated in the March 1999 letter of intent, exercisability of this warrant
was dependent, in part, on the stock price performance of the Company, however
it was also to vest if the Company did not meet required ratios of EBITDA to
interest charges for any two consecutive quarter measurement period. The size of
the investment required a notice to be filed under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976. The government extended the applicable
waiting period, and the closing of the investment was delayed until October. At
the time the final stock purchase agreement was executed, it was clear that the
Company would not meet the ratio for the first measurement period, which was to
have been the six months ending September 30, 1999. As a result, the vesting
contingencies were eliminated, the Initial Warrant became exercisable in full
upon execution of the final stock purchase agreement and the first measurement
period was postponed to the six months ended December 31, 1999.
The Company's reported results in fiscal 1999 disappointed the Company and
its shareholders. During the negotiations with GE, management discussed the
steps which it had undertaken to return the Company to profitable growth. Since
the tangible results of these efforts were not yet reflected in reported
results, one of the conditions of the GE investment was that GE be provided with
an opportunity to obtain voting control of the Company if, by an agreed
objective measure, the reported results of the Company were disappointing over
several measurement periods. This voting control was to be accomplished by a
combination of proxies granted by Messrs. Hellman and Ruud and newly issued
shares of the Company. The concept of the Contingent Warrants was to require
additional investment at market prices if GE were to obtain voting control.
The following are summaries of the terms of the Series A Stock, the Terms
of the Initial Warrant and Additional Terms of the GE Transaction. For the
information of shareholders, the complete texts of the Stock Purchase Agreement,
attached as Annex A to this Proxy Statement, and the Contingent Warrant
Agreement, attached as Annex B to this Proxy Statement, have been included in
this Proxy Statement. The Exhibits attached to the agreements, including the
form of the designation of the terms of the Series A Stock and the forms of the
warrants, proxies and options referred to below have also been included.
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 will have 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"). At December 1, 1999, the Liquidation Preference Amount was $20.8
million for all shares of Series A Stock.
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 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"; (2) failure of the Company and GE to obtain any HSR Approval (as
defined below) required in connection with GE's
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<PAGE> 22
exercise of any rights to acquire beneficial ownership of additional shares of
Common Stock as described in "Additional Terms of the GE Transaction"; or (3)
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 (other than
pursuant to the Company's employee stock plans and certain agreements in place
prior to closing), incur or have outstanding indebtedness for borrowed money in
excess of $210,000,000. 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 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 June 30, 1999, the Company had a net loss,
excluding extraordinary items, of $78,660,000 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 2.5:1.
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 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. The Initial Warrant will expire on September 30,
2009.
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"). Approval of Proposal 3 will eliminate the application of the
Ohio Control Share Acquisition Act to these rights. GE and the Company entered a
Contingent Warrant Agreement ("Contingent Warrant Agreement").
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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. 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 of Proposal 3) 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). The First Contingent
Warrant will be exercisable at any time within ten years of the date of its
issuance. 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 $100,000,000 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 3.7 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 Purchase 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
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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). The Second
Contingent Warrant will be exercisable at any time within ten years of the date
of its issuance. Subject to shareholder approval, after the Third Occurrence, 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 ratio of EBITDA (as defined below) to Interest Expense (as
defined below) 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 $125,000 in any
fiscal quarter. The measurements are based on six month periods, and the first
measurement period ended December 31, 1999. Although the final results from this
period are not yet available, the Company believes it is unlikely that the ratio
required for this period was achieved. Therefore, when the results for this
period are available, the Company believes that a First Occurrence will have
transpired. However, there is no contractual effect of the First Occurrence,
other than to make a Second Occurrence possible in following measurement
periods. The Company is implementing actions intended to improve this ratio for
future quarters, including operational changes and the Company's efforts to get
the benefit of a contractual reduction in the current interest rate on its
Senior Notes Due 2008 by completing a registered exchange offer for outstanding
Notes.
The Company also entered into a number of other agreements with GE in
connection with the transaction. The Company has entered into a standard
registration rights agreement which will require the Company to register the
sale of the shares of Company Common Stock issued in connection with the
investment. If GE were to require such registration and sell a substantial
number of shares, it could adversely affect the market price of Company shares
and the ability of the Company to sell equity securities.
In addition to the proxies granted to GE by Messrs. Hellman and Ruud,
Messrs. Hellman and Ruud have granted to GE a first refusal right on the sale of
their shares. This agreement requires that if Messrs. Hellman and Ruud, or
Hellman Ltd., wish to sell shares of Company stock, they must first offer the
shares to GE on the same terms. The effect of sales of Company stock by Messrs.
Hellman and Ruud and Hellman Ltd. to third parties would be to increase the
number of shares which GE would have to buy from the Company pursuant to the
Contingent Warrants to obtain voting control of the Company. After issuance of
the Second Contingent Warrant, such sales would eliminate GE's contractual right
to achieve complete voting control.
Antitrust Laws and Potential Change of Control
Under the antitrust laws, substantial investments by one company in another
company are subject to a requirement to provide prior notice to government
agencies. When the transaction is between competitors, this notice and waiting
period process can take a substantial period of time. Even though the
notification and waiting period was triggered by the GE investment, GE's ability
under certain circumstances to gain voting control of the Company will trigger
an additional waiting period. As the transaction is now structured, the right of
GE to obtain the proxy and option with respect to certain Hellman Shares and
Ruud Shares will trigger this process even though it will not result in a change
of voting control. This will allow GE and the Company to
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submit information to the government which may permit GE to obtain additional
interests in the Company as described herein, up to and including voting
control. As part of this triggering mechanism, Messrs. Hellman and Ruud were
required to grant options on shares subject to proxies to give GE the
contractual right to purchase shares sufficient to raise GE's ownership to 25%
of the outstanding shares.
The Contingent Warrants provide GE the right to purchase, at market price,
the number of shares determined by a mathematical formula, which together with
the proxies on the Hellman Shares and the Ruud Shares, will permit GE to achieve
its required voting control of the Company. This number cannot be calculated
currently, because additional shares may be issued by the Company and because
shares held by Mr. Hellman, Mr. Ruud, Hellman Ltd., the Hellman Voting Trust and
the Ruud Voting Trust may be sold prior to the Second Occurrence or after the
Second Occurrence and prior to the Third Occurrence. In addition, if the Company
does issue additional voting shares between the Second and Third Occurrences,
and GE does not exercise its right to cause the Class A Stock to be redeemed,
the Second Contingent Warrant, when and if issued, will have the effect of
permitting GE to achieve voting control.
In addition, the acquisition of any additional shares by GE from the
Company, whether due to antidilution protection, due to a change in the Series A
Stock conversion ratio upon a failure to redeem, or pursuant to the Contingent
Warrants, requires shareholder approval under current Nasdaq National Market
rules. Passage of Proposal 2 will constitute the required approval. Further, the
acquisition of shares and/or proxies resulting in GE having voting power in
excess of statutory thresholds (20%, 33% and 50%), would require shareholder
approvals if the shareholders do not approve Proposal 3 at the Annual Meeting.
Proposals 2 and 3 are presented to shareholders in order to obtain approval
for certain aspects of the GE Transaction which were integral to GE's decision
to invest in the Company. Failure to approve BOTH Proposal 2 and 3 will give GE
the right to demand redemption of the Series A Stock for the amount of their
initial investment plus an amount equal to 8% per annum. As discussed above, the
Company's obligation to complete such redemption within one year of the demand
is subject to the limitation that the Company is not required to cause an event
of default under its existing debt by completing such redemption. In addition,
following any redemption, GE would be permitted to retain its Initial Warrants
to purchase 1,000,000 shares of Common Stock at an exercise price of $.01 per
share.
If the shareholders approve Proposals 2 and 3, the Company does not
anticipate seeking any further shareholder approvals regarding the GE
Transaction.
PROPOSAL 2
APPROVAL OF ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK, UNDER CERTAIN
CIRCUMSTANCES, TO GENERAL ELECTRIC AS
CONTEMPLATED BY THE GE TRANSACTION
Pursuant to the requirements of the Nasdaq National Market, on which shares
of the Common Stock are admitted for trading, any transaction which could result
in the issuance of shares in excess of 20% of the number of shares of any class
of listed security outstanding immediately prior to issuance, must obtain
shareholder approval. In the case of two step transactions, the approval must
not include votes by the shares issued in the initial phase of the transaction.
This proposal will require the affirmative vote of the Common Stock outstanding
which are present and voting on the proposal. Any shares which have been issued
upon exercise of the Initial Warrants, and the Series A Stock, will be counted
as present for the purpose of a quorum, but will abstain as to Proposal 2.
Pursuant to the terms of the GE Transaction, Mr. Ruud has agreed to vote the
Ruud Shares (currently 3,647,134 shares) in favor of Proposal 2, and Mr. Hellman
has agreed to vote the shares owned by Hellman, Ltd. (currently 125,000 shares)
in favor of Proposal 2.
Pursuant to the GE transaction, the Company issued Initial Warrants
exercisable for 1,000,000 shares of Common Stock and Series A Stock convertible
into 3,045,000 shares of Common Stock, and the total of these shares is
approximately 19.9% of the Common Shares outstanding before the GE Transaction.
The terms of the Initial Warrants and the Series A Stock provide for adjustment
in the number of shares of Common Stock issuable on conversion under the
circumstances described above, however, such adjustment is subject to approval
of Proposal 2. In addition, pursuant to the terms of the GE Transaction, upon
the Second Occurrence or Third Occurrence, if any, GE will be entitled to market
price warrants to purchase additional shares of
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Common Stock. Approval of Proposal 2 will provide all necessary shareholder
approval under Nasdaq rules to permit GE to acquire all shares which may be
issued by the Company pursuant to the GE transaction. See "GE Transaction."
The number of variables involved in the calculation of shares to be subject
to the Contingent Warrants makes it impossible to predict the exact number
shares which may be purchased pursuant to the Contingent Warrants. The following
limited examples demonstrate the number of shares which may be issued to GE
pursuant to the Contingent Warrants. The Company has no way of predicting which,
if any, variables may actually occur, and the examples should not be regarded in
any way as a statement of expectations of the Company. The examples are included
only to illustrate the effect of issuance of new shares by the Company and sales
of Hellman Shares and Ruud Shares to third parties (sales of Hellman Shares and
Ruud Shares to GE or to Messrs. Hellman and Ruud do not affect the Contingent
Warrant shares). If the number common shares outstanding at the time of the
issuance of the Contingent Warrant (other than shares issued on conversion of
Series A Stock and exercise of the Initial Warrant) is 20,310,658 (the number
outstanding on December 30, 1999), and no Hellman Shares or Ruud Shares have
been transferred to third parties, the Contingent Warrant would provide for the
issuance of 134,682 shares of common stock at the market price on the date of
the triggering measurement. If the Company issued 1,000,000 shares of common
stock (e.g., pursuant to outstanding employee stock options and employee stock
purchase plan issuances) in addition to the 20,310,658 common shares outstanding
at the time of the issuance of the Contingent Warrant (other than shares issued
on conversion of Series A Stock and exercise of the Initial Warrant), and no
Hellman Shares or Ruud Shares have been transferred to third parties, the
Contingent Warrant would provide for the issuance of 1,134,682 shares of common
stock at the market price on the date of the triggering measurement; and if the
Company issued 2,000,000 shares, the Contingent Warrant would provide for the
issuance of 2,134,682 shares. If the number of common shares outstanding at the
time of the issuance of the Contingent Warrant (other than shares issued on
conversion of Series A Stock and exercise of the Initial Warrant) is 20,310,658,
and 1,000,000 Hellman Shares or Ruud Shares have been transferred to third
parties, the Contingent Warrant would provide for the issuance of 2,134,682
shares of common stock at the market price on the date of the triggering
measurement; and if 2,000,000 shares were transferred, the Contingent Warrant
would provide for the issuance of 4,134,682 shares.
If Proposal 2 is not approved by shareholders, GE will not have certain
contractual rights which were integral to its investment and GE will have the
right to require that the Company redeem the Series A Stock at the Liquidation
Preference Amount. As discussed above, the Company's obligation to complete such
redemption within one year of the demand is subject to the limitation that the
Company is not required to cause an event of default under its existing debt by
completing such redemption. Even if GE exercises this right and receives the
original amount of its investment, GE will retain Warrants to purchase one
million shares of Common Stock at $.01 per share.
The affirmative vote of the holders of a majority of the shares of common
stock present in person or represented by duly executed proxies, excluding
shares issued upon conversion of Series A Stock, or upon exercise of the Initial
Warrant, is required to approve this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
PROPOSAL 3
PROPOSAL FOR THE COMPANY TO "OPT OUT" OF THE OHIO CONTROL SHARE ACQUISITION
STATUTE
OVERVIEW OF PROPOSAL 3
The Board of Directors has approved a resolution to amend the Articles of
Incorporation of the Company which, if adopted, would make an Ohio antitakeover
statute, referred to herein as the "Control Share Acquisition Act," inapplicable
to the Company. The text of the Amendment is attached hereto as Annex C.
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Adoption of the Amendment requires the affirmative vote of the holders of a
majority of the outstanding voting power of the Company. The Company has been
informed by GE that it intends to vote for Proposal 3. Pursuant to the terms of
the GE Transaction, Mr. Ruud has agreed to vote the Ruud Shares (currently,
3,647,134 shares) in favor of Proposal 3, and Mr. Hellman has agreed to vote the
shares of Hellman, Ltd. (currently 125,000 shares) in favor of Proposal 3.
REASONS FOR THE PROPOSED AMENDMENT
The GE Transaction, described above, may give GE certain rights to acquire
voting rights in excess of 20% of the voting power of the Company. Exercise of
these rights would require one or more shareholder approvals and could require
costly special meetings and other expenses to the Company to comply with the
Ohio Control Share Acquisition Act. In addition, GE's potential rights to
acquire additional shares and proxies, under certain circumstances, were an
important component of their investment decision.
If the shareholders do not approve the "opt out" proposal, GE will have the
right to require that the Company redeem the Series A Stock at the Liquidation
Preference Amount. Even if GE exercises this right and receives the original
amount of its investment, GE will retain Warrants to purchase one million shares
of Common Stock at $.01 per share. If the shareholders approve Proposal 3, GE
may acquire all proxies and shares described under "GE Transaction" without
further shareholder approval under current Ohio law.
In addition to the GE transaction, the Company believes that the reasons
given for adoption of the Control Share Acquisition Act are not as compelling
today as they were when the law was passed in 1982. Since 1982, there have been
significant developments in Ohio and federal law, which provide substantial
additional protection to shareholders when faced with a hostile tender offer or
when large blocks of a corporation's shares are purchased. In addition, the
Company believes there are circumstances under which compliance with the Control
Share Acquisition Statute may be unnecessarily costly to the Company, have a
chilling effect on the willingness of third parties to buy shares of the
Company, may deprive shareholders of the right to sell their shares or may
adversely impact the Board's ability to act in what it believes is the best
interests of shareholders in hostile takeover attempts.
The Company believes that opting-out of the Control Share Acquisition Act
is advantageous to the Company and its shareholders for the following reasons:
Developments in Ohio Corporate and Securities Law and Federal
Securities Laws. Since the adoption of the Control Share Acquisition Act,
there have been material additions to Ohio corporate and securities laws
that provide significant protective measures against hostile takeovers.
In 1990, Ohio enacted the Ohio Interested Shareholder Transaction
Statute (the "Merger Moratorium Statute"), which severely limits a
purchaser of 10% or more of the shares of an Ohio corporation from engaging
in transactions with the corporation. Unless the purchaser first obtains
approval of the board of directors of the corporation of his acquisition,
he is precluded from taking certain actions for three years. GE has
obtained this approval with respect to the GE Transaction. Shareholders
should note that the presence on the Board of Directors of two persons
nominated by GE may make it more difficult for any other person to obtain
Board of Directors' approval of a transaction under the Merger Moratorium
Statute, even though the GE nominees are not permitted to be executive
officers, directors or employees of GE.
In 1986, Ohio corporate law was amended to confirm the authority of
Ohio corporations to adopt certain protective plans which are commonly
called "shareholder rights plans." These plans can have the effect of
strengthening the bargaining power of a Board of Directors in a hostile
change of control contest. The Board of Directors has directed management
to explore the adoption of such a plan and make a recommendation to the
Board regarding implementation. Pursuant to the terms of the GE
Transaction, adoption of any such plan would require approval from GE.
Subsequent to 1982, the provisions of the Ohio Securities Act
regulating "control bids" have been administered by the Ohio Division of
Securities in such a manner that they are presently held to be enforceable
and not preempted by federal law, or invalid under the Constitution of the
United States.
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Since 1982, there have been amendments to rules and regulations
promulgated under the Securities Exchange Act of 1934 (the "1934 Act") or
changes in the interpretation of such rules and regulations which lessen
the "coercive" effect of tender offers. These changes relate to the length
of the tender offer period, all holders and best price rule, withdrawal of
tender offers, required disclosures and timeliness of disclosures.
Untimely and Costly Special Meetings of Shareholders and Litigation.
Under the Control Share Acquisition Act, the board of directors of a
corporation is required to convene a special meeting of shareholders of the
corporation if any person, even a person who does not own any shares of the
corporation, sends an "acquiring party statement" to the corporation. The
statement must indicate, among other things, that within the next 360 days
such person may effect a control share acquisition and represents to the
corporation that he has the financial capability to effect a control share
acquisition. These procedures would be required upon both the Second
Occurrence and the Third Occurrence described above. In addition, if GE did
not exercise any acquisition right within 360 days of shareholder approval,
a new statement would be required.
Under the statute, the meeting to vote on the control share
acquisition is required to be held within 50 days of the corporation's
receipt of the acquiring party statement. Since the Company is subject to
the proxy rules promulgated under the 1934 Act, the Company would be
required immediately to convene a meeting of its Board of Directors to
determine the Company's position with respect to the proposed control share
acquisition, to authorize and approve appropriate proxy materials for the
special meeting, and generally to take all action necessary and appropriate
to convene a special meeting of shareholders of a public company. The
procedures to comply with the Control Share Acquisition Act's special
meeting and proxy counting requirements are extremely complex, uncertain as
to application and must be completed within an extremely short period of
time.
Not only would this be costly to the Company, but the uncertainty of
the outcome of the vote on the control share acquisition could adversely
affect trading in the Company's securities or could adversely impact or
delay pending corporate transactions, such as public or private equity or
debt financings, proposed acquisitions or sales, or other major
transaction.
The Ohio public corporations which have been subject to these types of
hostile attempts have also been simultaneously subjected to significant and
costly lawsuits regarding the applicability and constitutionality of the
Control Share Acquisition Act. The costs and time which a corporation must
devote to defending against such lawsuits, and in preparing for and holding
the required special meetings, are significant.
Possible Adverse Impact in a Change of Control Contest. On its face,
the Control Share Acquisition Act appears protective of the interests of
shareholders in that it allows the holders of shares which are not
interested shares to determine the outcome of a change of control contest.
In many situations, however, the Board of Directors believes that the
uncertainty and delay caused by the requirements of the statute could
hamper the ability of the Board to induce other parties to present
competing offers.
In addition, some commentators believe that where a holder who has not
proposed a control share acquisition owns a substantial percentage of the
Company's shares, e.g. 19%, such a person could be in a position to have a
virtual veto power over any subsequent and competing control share
acquisition. This results from the fact that such a 19% holder would be the
holder of a substantial portion of the shares which would be treated as
"disinterested" shares when voting on a competing control share acquisition
since the shares held by the person proposing the acquisition and by
executive officers and employee directors of the Company would be treated
as "interested" shares. The control share acquisition requires approval by
a majority of the "disinterested" voting power of the Company. As a result
of the GE transaction, GE would have approximately 18.9% of the voting
power of the Company.
Unnecessary Restriction on the Right of a Shareholder to Sell or Buy
Shares. As noted below, no shareholder is permitted, without the approval
of the holders of interested shares, to sell his shares to any person who
as a result of such purchase would first attain ownership of 20%, 33% or a
majority of the
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outstanding shares of the Company. The Company believes, as discussed
below, that such a restriction on a shareholder's right to sell shares, or
another person's right to buy shares, is unnecessary in view of the other
protections afforded shareholders by Ohio corporate and federal law.
BACKGROUND ON THE OHIO CONTROL SHARE ACQUISITION ACT
In November 1982, the Ohio General Corporation Law was amended to include
the "Control Share Acquisition Act," which requires that "control share
acquisitions" be approved by shareholders. In adopting the statute, the General
Assembly of Ohio found that Ohio corporate law did not adequately protect the
interests of shareholders of Ohio corporations when confronted with
"non-traditional" changes of control of a corporation, such as changes of
control effected by tender offers or accumulations of significant blocks of
shares in the public markets or private transactions.
The Ohio Control Share Acquisition Act gives shareholders who are not
holders of "interested shares" a veto power over certain acquisitions of shares
of an Ohio corporation. The Control Share Acquisition Act automatically applies
to all corporations incorporated in Ohio and having certain jurisdictional
contacts with Ohio, unless the shareholders vote to "opt out" of the statute.
POTENTIAL BENEFITS OF THE OHIO CONTROL SHARE ACQUISITION ACT
Even though shareholder rights advocates often express the view that state
takeover statutes, such as the Ohio Control Share Acquisition Act, are contrary
to shareholder interests, the Ohio Control Share Act was adopted by the
legislature to address serious issues. The primary purpose was to require any
person seeking to obtain ownership or voting rights with respect to a
substantial block of shares to provide the Company with detailed information
regarding the potential share acquisition and to present the acquisition to
shareholders for approval at a special meeting. With respect to transactions
which are in the best interests of the public company, the Ohio Control Share
Acquisition Act, together with federal proxy rules, assures that shareholders
will be given adequate notice and opportunity to review the transaction and
consent to the resulting effects of the acquisition. This process was intended
to prevent the unfettered ability of a single holder to obtain a substantial
block of shares, which could result in significant changes in corporate
circumstances, and to avoid the coercive environment which the legislature found
was often present in tender offers. The Ohio legislature further limited the
coercive nature of the shareholder vote by not permitting the proposed acquirer
to vote on the transaction. Since the potential acquirer can solicit proxies at
the mandatory special shareholders meeting to approve the proposed transaction,
there is a check on the power of a company's board or management to entrench
itself by using the Ohio Control Share Acquisition Act as a defensive tool. If
the Company "opts out" of the statute by passing Proposal 3, the potential
benefits of the Ohio Control Share Acquisition Act will not be available to the
Company or its shareholders.
SUMMARY OF CONTROL SHARE ACQUISITION ACT PROCEDURES
Under the Control Share Acquisition Act, a "control share acquisition" is a
direct or indirect acquisition by any person or entity of such number of voting
shares of a corporation which, when added to those shares which the person or
entity already owns or with respect to which the person or entity may exercise
or direct the exercise of the voting power, would give the person or entity
voting power within any of the following ranges: (a) one-fifth or more but less
than one-third of such voting power; (b) one-third or more but less than a
majority of such voting power; or (c) a majority or more of such voting power.
A person or entity who proposes to make a control share acquisition must
provide notice of the proposal to the corporation in accordance with specific
requirements. The board of directors must then call a special meeting of the
shareholders within 50 days for the purpose of voting on the proposed control
share acquisition. A quorum for this meeting is achieved only if there is
present at the meeting, in person or by proxy, a majority of the voting power of
the corporation in the election of directors, and a majority of the portion of
such voting power excluding the voting power of "interested shares."
"Interested shares" are those shares of the corporation in respect of which
any of the following persons may exercise or direct the exercise of the voting
power of the corporation in the election of directors: (a) the
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acquiring person; (b) any officer of the corporation elected or appointed by the
directors of the corporation; or (c) any employee of the corporation who is also
a director of the corporation. "Interested shares" include any shares of the
corporation acquired, directly or indirectly, by any person from the holder or
holders thereof for a valuable consideration during the period beginning with
the date of the first public disclosure of a proposed control share acquisition
of the corporation or any proposed merger, consolidation, or other transaction
that would result in a change in control of the corporation or in the sale of
all or substantially all of its assets, and ending on the date of any special
meeting of the corporation's shareholders held thereafter for the purpose of
voting on a control share acquisition proposed by an acquiring person if either
of the following applies: (y) the aggregate consideration paid or given by the
person who acquired the shares, and any other persons acting in concert with
him, for all such shares exceeds $250,000, or (z) the number of shares acquired
by the person who acquired the shares, and any other persons acting in concert
with him, exceeds one-half of one percent of the outstanding shares entitled to
vote in the election of directors.
A proposed control share acquisition may be consummated only if approved at
the meeting by both of the following groups: (1) holders of a majority of the
voting power of the corporation in the election of directors represented at the
meeting by person or by proxy, and (2) holders of a majority of the portion of
such voting power excluding the voting power of interested shares. A proposed
control share acquisition which receives approval in the manner described must
be consummated, in accordance with the terms so authorized, no later than 360
days following shareholder authorization of the control share acquisition.
EXISTING ANTITAKEOVER PROVISIONS OF OHIO LAW AND IN THE COMPANY'S CORPORATE
DOCUMENTS
As mentioned above, the Ohio Merger Moratorium Statute and the control bid
provisions of the Ohio Securities Act may discourage or impede a change of
control of the Company.
Merger Moratorium Law. Under the Merger Moratorium Statute, a corporation
is prohibited from entering into a "Chapter 1704 transaction" with the direct or
indirect beneficial owner of 10% or more of the shares of such corporation (a
"10% shareholder") for at least three years after the shareholder attains his
10% ownership unless the board of directors of the corporation approves, before
the shareholder attains his 10% ownership, either the transaction or the
purchase of shares resulting in his 10% ownership (the Board has given this
approval in the GE transaction). A "Chapter 1704 transaction" is broadly defined
to include, among other things, a merger or consolidation involving the
corporation and the 10% shareholder, a sale or purchase of substantial assets
between the corporation and the 10% shareholder, a reclassification,
recapitalization, or other transaction proposed by the 10% shareholder that
results in an increase in the proportion of shares beneficially owned by the 10%
shareholder and the receipt by the 10% shareholder of a loan, guarantee, other
financial assistance or tax benefit not received proportionately by all
shareholders.
Even after the three-year period, Ohio law restricts these transactions
between the corporation and the 10% shareholder. At that time, such a
transaction may proceed only if (a) the board of directors of the corporation
had approved the purchase of shares that gave the shareholder his 10% ownership
(as in the case of GE), (b) the transaction is approved by the holders of shares
of the corporation with at least two-thirds of the voting power of the
corporation (or a different proportion set forth in the corporation's articles
of incorporation), including at least a majority of the outstanding shares after
excluding shares held or controlled by the 10% shareholder, or (c) the business
combination results in shareholders, other than the 10% shareholder, receiving a
prescribed fair price plus interest for their shares.
Control Bid Provisions of the Ohio Securities Act. Ohio law further
requires that any offeror making a control bid for any securities of a "subject
company" pursuant to a tender offer must file information specified in the Ohio
Securities Act with the Ohio Division of Securities when the bid commences. The
Ohio Division of Securities must then decide, within three calendar days,
whether it will suspend the bid under the statute. If it does so, it must
initiate hearings on the suspension within 10 calendar days of the suspension
date and make a determination, within 16 calendar days of the suspension date,
of whether to maintain the suspension. For this purpose, a "control bid" is the
purchase of, or an offer to purchase, any equity security of a subject company
from a resident of Ohio that would, in general, result in the offeror acquiring
10% or more of the outstanding shares of such company. A "subject company"
includes any company with both (a) its principal
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place of business or principal executive office in Ohio or assets located in
Ohio with a fair market value of at least $1,000,000 and (b) more than 10% of
its record or beneficial equity security holders are resident in Ohio, more than
10% of its equity securities owned of record or beneficially by Ohio residents,
or more than 1,000 of its record or beneficial equity security holders resident
in Ohio.
Authorized Common and Preferred Stock. Article IV of the Articles provides
some protection against attempts by persons or entities to take control of the
Company. This Article provides for authorized Common Stock of 80,000,000 shares
and authorized voting Preferred Stock of 1,000,000 shares. As of September 30,
1999, there are 52,526,781 shares of the Common Stock unissued and not reserved
for issuance, and there are 238,750 shares of the Preferred Stock unissued and
not reserved for issuance. Under Ohio law, shareholder approval is unnecessary
for the issuance of additional authorized shares of Common Stock unless the
issuance would result in one person or entity owning, directly or indirectly,
20% or more of the outstanding stock or unless an acquisition is involved which
would result in 20% or greater increase in the outstanding shares. The Articles
provide that Preferred Stock may be issued in one or more series and expressly
vest the board of directors with authority to determine the designated
preferences and certain other rights of each series. Although the Board of
Directors has no present intent of doing so, shares of Common Stock or Preferred
Stock could be issued to a party who would vote against a particular
transaction. The issuance of such additional shares could increase the absolute
cost of a business combination and thereby discourage a potential buyer.
No Cumulative Voting. Article IX of the Articles eliminates the right of
shareholders to vote cumulatively in the election of directors. The inability to
vote cumulatively increases the difficulty of minority shareholders to obtain
even proportional representation on the board of directors.
If Proposal 3 is not approved by shareholders, GE will not have certain
contractual rights which were integral to its investment and GE will have the
right to require that the Company redeem the Series A Stock at the Liquidation
Preference Amount. As discussed above, the Company's obligation to complete such
redemption within on year of the demand is subject to the limitation that the
Company is not required to cause an event of default under its existing debt by
completing such redemption. Even if GE exercises this right and receives the
original amount of its investment, GE will retain Warrants to purchase one
million shares of Common Stock at $.01 per share.
The affirmative vote, in person or by proxy, of the holders of a majority
of the outstanding shares of common stock and Series A Stock combined is
required to approve this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT.
PROPOSAL 4
APPROVAL OF AMENDMENT TO THE COMPANY'S 1998 INCENTIVE AWARD PLAN
The Amended and Restated Advanced Lighting Technologies, Inc. 1998
Incentive Award Plan (the "1998 Incentive Award Plan,") was approved by the
Board as of January 2, 1998 and amended as of April 21, 1998 and by the
Company's shareholders at the 1998 Annual Meeting. The 1998 Incentive Award Plan
was established to encourage selected key employees, consultants, and directors
of the Company to enhance the ability of the Company to attract and retain
qualified individuals. In the second quarter of fiscal 2000, the Directors of
the Company determined that there were insufficient shares currently available
under the 1998 Incentive Award Plan to accomplish these purposes and approved
amendment of the 1998 Incentive Award Plan (the "1998 Plan Amendment") to
provide for the grant of options to purchase an additional 750,000 shares of
Common Stock, subject to shareholder approval of the 1998 Plan Amendment. The
1998 Plan Amendment is solely for the purpose of increasing the number of shares
available for grant under the 1998 Incentive Award Plan, and does not amend the
1998 Incentive Award Plan in any other way. All employees (approximately 1,700
individuals), consultants, and directors are eligible to participate in the 1998
Incentive Award Plan. The following description of the 1998 Incentive Award Plan
is qualified in its entirety by
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reference to Appendix D hereto which sets forth a complete copy of the 1998
Incentive Award Plan and Appendix E hereto which sets forth a complete copy of
the 1998 Plan Amendment.
The 1998 Incentive Award Plan is administered by the Incentive Award
Committee ("Committee"). This Committee, solely in its discretion, selects
participants and determines the amount and terms of awards under the 1998
Incentive Award Plan. In order to assure that incentive awards are granted to
key personnel in coordination with compensation, the Board of Directors has
determined that the Compensation Committee of the Board will also serve as the
Incentive Award Committee.
Subject to adjustment under certain circumstances to prevent dilution or
enlargement of the benefits or potential benefits intended to be made under the
1998 Incentive Award Plan, the number of shares of Common Stock available for
awards (whether options or restricted stock) under the 1998 Incentive Award Plan
prior to adoption of the 1998 Plan Amendment is 1,500,000, and, following
adoption of the 1998 Plan Amendment, will be a total of 2,250,000. These shares
may be issued in connection with grants of options for Common Stock or as grants
of restricted Common Stock. The 1998 Incentive Award Plan also provides that no
Option granted to an officer or director may be exercised prior to six months
after the date of its grant. The exercise price for all options will be the fair
market value of the Common Stock on the date of the grant. The option award
provides that all options expire ten years after the date of grant. No awards
may be granted under the 1998 Incentive Award Plan after January 2, 2008.
The Company has granted Incentive Options to purchase the Common Stock of
the Company pursuant to the 1998 Incentive Award Plan. 160,587 outstanding "A"
Incentive Options have been granted under the 1998 Incentive Award Plan at an
exercise price of $19.25 and will become vested based on operating performance
or at the end of five years from the date of grant (January 2, 1998); 112,500
outstanding "A" Incentive Options have been granted under the 1998 Incentive
Award Plan at an exercise price of $24.00 and will become vested based on
operating performance or at the end of five years from the date of grant
(January 28, 1998); 91,000 outstanding "A" Incentive Options have been granted
under the 1998 Incentive Award Plan at an exercise price of $23.875 and will
become vested based on operating performance or at the end of five years from
the date of grant (July 7, 1998); 340,700 outstanding "A" Incentive Options have
been granted under the 1998 Incentive Award Plan at an exercise price of $7.00
and will become vested based on stock price performance or at the end of six
years from the date of grant (June 3, 1999) and 75,000 outstanding "A" Incentive
Options have been granted under the 1998 Incentive Award Plan at an exercise
price of $7.625 and will become vested based on stock price performance or at
the end of six years from the date of grant (October 11, 1999). The October 11,
1999 grant of 75,000 "A" Incentive Options was part of a grant of a total of
200,000 "A" Incentive Options to Mr. Hellman under the 1995 Incentive Award Plan
and 100,000 "A" Incentive Options to Mr. Ruud under the 1998 Incentive Award
Plan and the 1995 Incentive Award Plan. The options granted to Messrs. Hellman
and Ruud will become void if Proposal 4 is not approved by shareholders. "A"
Incentive Options which vest based on stock price performance vest as follows:
10% may be exercised when the stock price reaches two times the grant price, 20%
may be exercised when the stock price reaches three times the grant price, 30%
may be exercised when the stock price reaches four times the grant price and 40%
may be exercised when the stock price reaches five times the grant price. Any
portion of such option which has not become exercisable within 6 years following
the date of grant will become exercisable on such anniversary.
715,900 outstanding "B" Incentive Options have been granted under the 1998
Incentive Award Plan. The "B" Incentive Options will vest as follows: 25% in
year one, 35% in year two, and 40% in year three, from the date of grant. The
outstanding "B" Incentive Options have been granted since January 1, 1998, at
market value exercise prices of $6.938 per share to $25.938 per share. As a
result of these grants (net of forfeitures), of the originally authorized
1,500,000 shares authorized, there are 4,313 additional shares available for
grant of options under the 1998 Incentive Award Plan. After the shareholder
approval of the 1998 Plan Amendment, there will be 754,313 additional shares
available for grant of options under the 1998 Incentive Award Plan. Any Options
granted in excess of the number previously approved by shareholders will provide
that they will not be exercisable and will be void unless the amendment is
approved by shareholders within twelve months of the amendment. Other than the
employees' services, the Company will receive no additional consideration for
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the grant of any award under the Plan. The Company will receive the exercise
price upon exercise of any option.
The 1998 Incentive Award Plan further provides that to the extent required
to comply with Section 16 of the Exchange Act and the applicable rules
thereunder, any equity security issued pursuant to the 1998 Incentive Award Plan
may not be sold for at least six months after acquisition, and any derivative
security issued pursuant to the Plan will not be exercisable for six months from
its date of grant. The 1998 Incentive Award Plan may be amended, altered,
suspended, discontinued, or terminated by the Company's Board of Directors
except to the extent prohibited by applicable law and as expressly provided in
an award agreement or in the 1998 Incentive Award Plan. The Committee, however,
may amend the terms of any award previously granted with the consent of the
holder.
FEDERAL INCOME TAX CONSEQUENCES
Under present federal income tax laws, awards under the 1998 Incentive
Award Plan will have the following consequences:
(1) The grant of an award, by itself, will generally neither result in
the recognition of taxable income to the participant nor entitle
the Company to a deduction at the time of such grant.
(2) In order to qualify as an "Incentive Stock Option" within the
meaning of Section 422 of the Code, a stock option awarded under
the 1998 Incentive Award Plan must meet the conditions contained
in Section 422 of the Code, including the requirement that the
plan be approved by shareholders within twelve months following
its effective date and that the shares acquired upon the exercise
of the stock option be held for one year after the date of
exercise and two years after the grant of the option. The exercise
of an Incentive Stock Option will generally not, by itself, result
in the recognition of taxable income to the participant nor
entitle the Company to a deduction at the time of such exercise.
However, the difference between the exercise price and the fair
market value of the option shares on the date of exercise is an
item of tax preference which may, in certain situations, trigger
the alternative minimum tax ("AMT"). The AMT is incurred only when
it exceeds the regular income tax. The AMT will be payable at the
rate of 26% on the first $175,000 ($87,500 if married filing
separately) of "alternative minimum taxable income" above the
exemption amount ($33,750 single person, $45,000 married person
filing jointly or $22,500 married person filing separately). This
tax applies at a flat rate of 28% on alternative minimum taxable
income more than $175,000 ($87,500 if married filing separately)
above the applicable exemption amounts. However, to the extent
that capital gains rates are lower than the AMT rates, then the
lower capital gains rates will apply when computing a person's AMT
liability with respect to the amount of capital gains included as
an item of tax preference. Provided the applicable holding periods
described above are satisfied, the participant will recognize long
term capital gain or loss upon the resale of the shares received
upon such exercise.
(3) The exercise of a stock option which is not an Incentive Stock
Option will result in the recognition of ordinary income by the
participant on the date of exercise in an amount equal to the
difference between the exercise price and the fair market value on
the date of exercise of the shares acquired pursuant to the stock
option.
(4) The Company will be allowed a deduction at the time, and in the
amount of, any ordinary income recognized by the participant under
the various circumstances described above, provided that the
Company meets its federal withholding tax obligations.
An affirmative vote of a majority of the shares present or represented by
duly executed proxies and voting at the Annual Meeting is required for approval
of the 1998 Plan Amendment.
THE COMPENSATION COMMITTEE AND THE BOARD OF DIRECTORS RECOMMEND THE
SHAREHOLDERS VOTE "FOR" THIS PROPOSAL.
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PROPOSAL 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
CHANGE OF INDEPENDENT AUDITORS
On May 17, 1999, the Company engaged Grant Thornton LLP as its new
independent accountants to act as the principal accountant to audit the
Company's consolidated financial statements.
The Company's Audit Committee of the Board of Directors participated in and
approved the engagement of Grant Thornton LLP.
During the two most recent fiscal years and through May 17, 1999, the
Company has not consulted with Grant Thornton LLP regarding (i) the application
of accounting principles to a specified transaction, either completed or
proposed; or the type of audit opinion that might be rendered on the Company's
consolidated financial statements, and in no case was a written report provided
to the Company nor was oral advice provided that was an important factor in
reaching a decision by the Company as to an accounting, auditing or financial
reporting issue; or (ii) any matter that was either the subject of a
disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K
and the related instructions to Item 304 of Regulation S-K, or a reportable
event, as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
On March 29, 1999, Ernst & Young LLP ("E&Y") resigned as independent
auditors of the Company.
The reports of E&Y on the Company's consolidated financial statements for
each of the past two fiscal years did not contain an adverse opinion or a
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, or accounting principles.
In connection with the audit of the Company's financial statements for the
fiscal year ended June 30, 1998, there were no disagreements with E&Y on any
matters of accounting principles or practices, financial statement disclosure,
or auditing scope and procedures which, if not resolved to the satisfaction of
E&Y, would have caused E&Y to make reference to the matter in their report
("Disagreements") with respect to the fiscal year ended June 30, 1998. In
connection with the audit of the Company's consolidated financial statements for
the fiscal year ended June 30, 1997, there were no Disagreements with E&Y with
respect to the fiscal year ended June 30, 1997, except as follows: E&Y disagreed
with the accounting for deferred advertising costs, the valuation of inventories
acquired in purchase business combinations, and the capitalization of certain
joint venture formation costs. E&Y identified and discussed the above matters
with the Company's management and the audit committee of the Company's board of
directors. Such matters were, however, resolved to the satisfaction of E&Y prior
to the issuance of their report on the Company's consolidated financial
statements for the fiscal year ended June 30, 1997. There were no Disagreements
with E&Y for the interim period subsequent to June 30, 1998.
E&Y has not advised the Company that information has come to its attention
that would materially impact the fairness or reliability of any interim or
audited financial statements issued by the Company.
Subject to shareholder approval, the Board of Directors, acting on the
recommendation of its Audit Committee, has appointed Grant Thornton LLP, a firm
of independent public accountants, as auditors, to audit the consolidated
financial statements of the Company and its subsidiaries for fiscal 2000.
Representatives of Grant Thornton LLP will be present at the Annual Meeting and
will be given the opportunity to make a statement if they so desire and will be
available to respond to appropriate questions. An affirmative vote of a majority
of the shares present or represented and voting at the Annual Meeting is
required for ratification of Grant Thornton LLP as the Company's auditors.
THE AUDIT COMMITTEE AND THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
PROPOSAL 5.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows the Company to "incorporate by reference" the
documents that it files with the Commission. This means that the Company can
disclose certain information to you by referring to those documents. Any
information the Company incorporates in this manner is considered part of this
proxy statement except to the extent updated or superseded by disclosure in this
proxy statement. Any information the Company files with the Commission after the
date of this proxy statement and until the date of the annual meeting of
shareholders will automatically update and supersede the information contained
in this proxy statement.
The Company incorporates by reference the following portions of its Annual
Report on Form 10-K for the fiscal year ended June 30, 1999, a copy of which is
enclosed with this proxy statement:
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
The Company will provide without charge, upon written or oral request, a
copy of any or all of the documents which are incorporated by reference into
this proxy statement. Requests should be directed to: Advanced Lighting
Technologies, Inc., Attention: Corporate Secretary, 32000 Aurora Road, Solon,
Ohio 44139; telephone (440) 519-0500.
1999 ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 1999
A copy (excluding exhibits) of the Company's 1999 Annual Report on Form
10-K for the fiscal year ended June 30, 1999 as filed with the Securities and
Exchange Commission is enclosed with this proxy statement. Copies of the
exhibits may be obtained by shareholders by addressing a request to Director of
Investor Relations, Advanced Lighting Technologies, Inc., 32000 Aurora Road,
Solon, Ohio 44139. Anyone requesting this information will be charged an amount
equal to the reproduction cost if the exhibits are requested.
SHAREHOLDERS' PROPOSALS FOR NEXT ANNUAL MEETING
Proposals of shareholders of the Company which are intended to be presented
by such shareholders at the Company's 2000 Annual Meeting should be received by
the Secretary of the Company no later than June 30, 2000, in order to be
considered for inclusion in the Company's proxy statement and form of proxy
relating to that meeting.
WHERE YOU CAN FIND MORE INFORMATION
The Company currently files reports, proxy statements, and other
information with the Securities and Exchange Commission. These reports, proxy
statements, and other information can be read and copied at the Commission's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please
call the Commission at 1-800-SEC-0330 for further information on the Public
Reference Room. The Commission maintains an internet site at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission, including the
Company.
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ANNEX A
[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> 37
"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.
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"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.
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"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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<PAGE> 40
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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<PAGE> 41
"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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<PAGE> 42
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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<PAGE> 43
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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<PAGE> 47
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.
17
<PAGE> 53
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."
18
<PAGE> 54
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.
19
<PAGE> 55
(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
20
<PAGE> 56
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.
21
<PAGE> 57
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.
22
<PAGE> 58
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
23
<PAGE> 59
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> 60
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> 61
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> 62
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> 63
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> 64
EXHIBIT 1
---------
SERIES A1 WARRANT
to Purchase Common Shares of
ADVANCED LIGHTING TECHNOLOGIES, INC.
<PAGE> 65
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> 66
<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> 67
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> 68
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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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.
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"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
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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
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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
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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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(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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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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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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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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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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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> 80
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> 81
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> 82
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> 83
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> 84
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> 85
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> 86
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> 87
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> 88
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> 89
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> 90
(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> 91
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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(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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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
----------------------------
Intentionally omitted. See Annex B to this Proxy Statement for
a conformed copy of original Contingent Warrant Agreement.
<PAGE> 110
ANNEX B
-------
[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> 111
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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<PAGE> 112
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> 113
"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> 114
"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> 115
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> 116
(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> 117
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> 118
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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<PAGE> 120
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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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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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> 123
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> 124
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> 125
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> 126
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> 127
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> 128
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.
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<PAGE> 129
"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> 130
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> 131
"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> 132
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> 133
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> 134
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> 135
EXHIBIT 2.2(c)
[First Contingent Warrant]
WARRANT
to Purchase Common Shares of
ADVANCED LIGHTING TECHNOLOGIES, INC.
<PAGE> 136
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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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> 139
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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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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<PAGE> 152
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> 153
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> 154
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> 155
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> 156
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> 157
EXHIBIT 2.2(d)
--------------
[Second Contingent Warrant]
WARRANT
to Purchase Common Shares of
ADVANCED LIGHTING TECHNOLOGIES, INC.
<PAGE> 158
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> 159
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> 160
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> 161
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> 162
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> 163
"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> 164
"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.
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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:
-17-
<PAGE> 177
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> 178
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> 179
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> 180
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> 181
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> 182
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> 183
ANNEX C
-------
AMENDMENT TO SECOND AMENDED AND RESTATED ARTICLES OF INCORPORTION TO TERMINATE
APPLICATION OF THE OHIO CONTROL SHARE ACQUISITION ACT WITH RESPECT TO THE
COMPANY
RESOLVED, that, pursuant to Section 1701.71(A) of the Ohio Revised Code
(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, the Second Amended
and Restated Articles of Incorporation, as amended, of the Corporation are
hereby amended to add the following new Article TWELFTH:
"TWELFTH: Section 1701.831 of the Ohio Revised Code shall not apply to
control share acquisitions of shares of the Corporation."
Such amendment shall, and does hereby, amend such Second Amended and Restated
Articles of Incorporation effective on such date.
<PAGE> 184
ANNEX D
AS AMENDED AND RESTATED APRIL 21, 1998
AMENDED AND RESTATED
ADVANCED LIGHTING TECHNOLOGIES, INC.
1998 INCENTIVE AWARD PLAN
SECTION 1. PURPOSE.
The purposes of this Amended and Restated Advanced Lighting
Technologies, Inc. 1998 Incentive Award Plan (the "Plan") are to encourage
selected employees, advisors, consultants, and directors of Advanced Lighting
Technologies, Inc. (together with any successor thereto, the "Company") and its
Affiliates (as defined below) to acquire a proprietary interest in the growth
and performance of the Company, to generate an increased incentive to contribute
to the Company's future success and prosperity, thus enhancing the value of the
Company for the benefit of its shareholders, and to enhance the ability of the
Company and its Affiliates to attract and retain exceptionally qualified
individuals upon whom, in large measure, the sustained progress, growth and
profitability of the Company depend. The Plan will be submitted for approval by
the shareholders of the Company at the next annual shareholders' meeting.
SECTION 2. DEFINITIONS.
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean (i) any entity that, directly or
through one or more intermediaries, is controlled by the
Company and (ii) any entity in which the Company has a
significant equity interest, as determined by the Committee.
(b) " 'A' Option" shall mean an "A" Option granted under Section
6(a) of the Plan.
(c) "Award" shall mean any "A" Option or "B" Option granted under
the Plan.
<PAGE> 185
(d) "Award Agreement" shall mean any written agreement, contract,
or other instrument or document evidencing any Award granted
under the Plan.
(e) " 'B' Option" shall mean a "B" Option granted under Section
6(a) of the Plan.
(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(g) "Committee" shall mean a committee of the Board of Directors
of the Company designated by such Board to administer the Plan
and composed of not less than three (3) directors.
(h) "Employee" shall mean any employee of the Company or of any
Affiliate.
(i) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other
securities), the fair market value of such property determined
by such methods or procedures as shall be established from
time to time by the Committee.
(j) "Incentive Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is intended to meet the
requirements of Section 422 of the Code, or any successor
provision thereto.
(k) "Non-Employee Participant" shall mean any advisor, consultant
or director of the Company or any Affiliate designated to be
granted an Award (other than an Incentive Stock Option) under
the Plan and eligible to be a Participant under Section 5 of
the Plan.
(l) "Non-Qualified Stock Option" shall mean an option granted
under Section 6(a) of the Plan that is not intended to be an
Incentive Stock Option.
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<PAGE> 186
(m) "Option" shall mean an "A" Option or a "B" Option.
(n) "Participant" shall mean any Employee or Non-Employee
Participant designated to be granted an Award under the Plan.
(o) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated
organization, or governmental or political subdivision
thereof.
(p) "Section 16" shall mean Section 16 of the Securities Exchange
Act of 1934, as amended.
(q) "Shares" shall mean the shares of Common Stock of the Company,
$.001 par value, and such other securities or property as may
become the subject of Awards, or become subject to Awards,
pursuant to an adjustment made under Section 4(b) of the Plan.
SECTION 3. ADMINISTRATION.
The Plan shall be administered solely by the Committee. Subject to the
terms of the Plan and applicable law, the Committee shall have full power and
authority to: (i) designate Participants; (ii) determine the type or types of
Awards to be granted to each Participant under the Plan; (iii) determine the
number of Shares to be covered by Awards; (iv) determine the terms and
conditions of any Award; (v) determine whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares, other
securities, other Awards, or other property, or canceled, forfeited or
suspended, and the method or methods by which Awards may be settled, exercised,
canceled, forfeited, or suspended; (vi) determine whether, to what extent, and
under what circumstances cash, Shares, other securities, other
3
<PAGE> 187
Awards, other property, and other amounts payable with respect to an Award under
the Plan shall be deferred either automatically or at the election of the holder
thereof or of the Committee; (vii) interpret and administer the Plan and any
instrument or agreement relating to, or Award made under, the Plan; (viii)
establish, amend, suspend, or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan;
and (ix) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan or any Award shall be within the sole discretion of the Committee, may
be made at any time, and shall be final, conclusive, and binding upon all
Persons, including the Company, any Affiliate, any Participant, any holder or
beneficiary of any Award, any shareholders, and any employee of the Company or
of any Affiliate.
SECTION 4. SHARES AVAILABLE FOR AWARDS.
(a) SHARES AVAILABLE. Subject to adjustment as provided in
Section 4(b):
(i) CALCULATION OF NUMBER OF SHARES AVAILABLE. The
number of Shares available for granting Awards under the Plan shall be 1,500,000
Shares, subject to adjustment as provided in Section 4(b). Further if, after the
effective date of the Plan, any Shares covered by an Award granted under the
Plan, or to which such an Award relates, are forfeited, or if an Award otherwise
terminates without the delivery of Shares or of other consideration, then the
Shares covered by such Award, or to which such Award relates, or the number of
Shares otherwise counted against the aggregate number of Shares available under
the Plan with respect to such
4
<PAGE> 188
Award, to the extent of any such forfeiture or termination, shall again be, or
shall become, available for granting Awards under the Plan.
(ii) ACCOUNTING FOR AWARDS. For purposes of this
Section 4, the number of Shares covered by an Award shall be counted on the date
of grant of such Award against the aggregate number of Shares available for
granting Awards under the Plan; provided, however, that Awards that operate in
tandem with (whether granted simultaneously with or at a different time from),
or that are substituted for, other Awards may be counted or not counted under
procedures adopted by the Committee in order to avoid double counting. Any
Shares that are delivered by the Company, and any Awards that are granted by, or
become obligations of, the Company, through the assumption by the Company or any
Affiliate of, or in substitution for, outstanding awards previously granted by
an acquired company shall not, except in the case of Awards granted to
Participants who are officers or directors of the Company for purposes of
Section 16, be counted against the Shares available for granting Awards under
the Plan.
(iii) SOURCES OF SHARES DELIVERABLE UNDER AWARDS. Any
Shares delivered pursuant to an Award may consist, in whole or in part, of
authorized and unissued Shares or of Treasury Shares.
(b) ADJUSTMENTS. In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of cash,
Shares, other securities, or other property) recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Shares such that an adjustment is
5
<PAGE> 189
determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such
manner as it may deem equitable, adjust any or all of (i) the number
and type of Shares (or other securities or property) which thereafter
may be made the subject of Awards, (ii) the number and type of Shares
(or other securities or property) subject to outstanding award, or, if
deemed appropriate, make provision for a cash payment to the holder of
an outstanding Award; provided, however, in each case, that with
respect to Awards of Incentive Stock Options no such adjustment shall
be authorized to the extent that such authority would cause the Plan to
violate Section 422 of the Code or any successor provision thereto; and
provided further, however, that the number of Shares subject to any
Award denominated in Shares shall always be a whole number.
SECTION 5. ELIGIBILITY.
Any Employee, advisor, consultant or director of the Company
or of any Affiliate, shall be eligible to be designated a Participant;
provided however, no officer or director of the Company shall be
eligible to be designated a Participant unless the shareholders of the
Company shall have approved the Plan in accordance with the Company's
Regulations.
SECTION 6. AWARDS.
(a) OPTIONS. The Committee is hereby authorized to grant "A"
Options and "B" Options to Participants with the following terms and
conditions and with such additional terms and conditions, in either
case not inconsistent with the provisions of the Plan, as the Committee
shall determine:
6
<PAGE> 190
(i) EXERCISE PRICE FOR "A" OPTIONS. The purchase
price per Share purchasable under an "A" Option shall be the
Fair Market Value per Share on the date of grant of such "A"
Options.
(ii) EXERCISE PRICE FOR "B" OPTIONS. The purchase
price per Share purchasable under a "B" Option shall be
determined by the Committee; provided, however, that such
purchase price shall not be less than the Fair Market Value of
a Share on the date of grant of such "B" Option (or, if the
Committee so determines, in the case of any "B" Option
retroactively granted in tandem with or in substitution for
another Award, on the date of grant of such Award).
(iii) OPTION TERM. The term of each Option shall be
fixed by the Committee.
(iv) TIME AND METHOD OF EXERCISE. The Committee shall
determine the time or times at which an Option may be
exercised in whole or in part, and the method or methods by
which, and the form or forms, including, without limitation,
cash, Shares, other Awards, or other property, or any
combination thereof, having a Fair Market Value on the
exercise date equal to the relevant exercise price, in which,
payment of the exercise price with respect thereto may be made
or deemed to have been made; provided, however, that no Option
may be exercised prior to six months after its date of grant.
(v) INCENTIVE STOCK OPTIONS. The terms of any
Incentive Stock Option granted under the Plan shall comply in
all respects with the provisions of Section 422 of the Code,
or any successor provisions thereto, and any regulations
promulgated thereunder. An Incentive Stock Option may be
granted only to an Employee and no Incentive Stock Option may
be granted to any owner of ten percent or more of the total
combined voting power of the
7
<PAGE> 191
Company and its Affiliates. The aggregate Fair Market Value, determined as of
the date of the Award, of Shares subject to an Incentive Stock Option which are
exercisable for the first by an Employee during any calendar year (under all
plans of the Company and its Affiliates) shall not exceed $100,000.
(b) GENERAL.
(i) CONSIDERATION FOR AWARDS. Awards may be granted
for no cash consideration or such cash consideration as may be required by
applicable law. Awards also may be granted for cash or such other consideration
as the Committee may deem appropriate.
(ii) AWARDS MAY BE GRANTED SEPARATELY OR TOGETHER.
Awards may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for any other Award or any award
granted under any other plan of the Company or any Affiliate. Awards granted in
addition to or in tandem with other Awards may be granted either at the same
time as or at a different time from the grant of such other Awards.
(iii) LIMITS ON TRANSFER OF AWARDS. No Award and no
right under any such Award, shall be assignable, alienable, saleable, or
transferable by a Participant otherwise than by will or by the laws of descent
and distribution; provided, however, that, if so determined by the Committee, a
Participant may, in the manner established by the Committee, designate a
beneficiary or beneficiaries to exercise the rights of the Participant, and to
receive any property distributable with respect to any Award upon the death of
the Participant. Each Award, and each right under any Award, shall be
exercisable, during the Participant's lifetime, only by the Participant or, if
permissible under applicable law, by the Participant's guardian or legal
representative. No Award, and no right under any such Award, may be pledged,
alienated,
8
<PAGE> 192
attached, or otherwise encumbered, and any purported pledge,
alienation, attachment, or encumbrance thereof shall be void
and unenforceable against the Company or any Affiliate.
(iv) TERM OF AWARDS. The term of each Award shall be
for such period as may be determined by the Committee;
provided, however, that in no event shall the term of any
Incentive Stock Option exceed a period of ten years from the
date of its grant.
(v) SECTION 16 SIX MONTH LIMITATIONS. If necessary to
comply with Section 16 and its rules only, any equity security
issued pursuant to the Plan may not be sold for at least six
months after acquisition and any derivative security issued
pursuant to the Plan will not be exercisable for six months
from its date of grant. Terms used in the preceding sentence
shall, for the purposes of such sentence only, have the
meanings, if any, assigned or attributed to them under Section
16 and the rules promulgated thereunder.
(vi) SHARE CERTIFICATES. All certificates for Shares
or other securities delivered under the Plan pursuant to any
Award or the exercise thereof shall be subject to such stop
transfer orders and other restrictions as the Committee may
deem advisable under the Plan, or the rules, regulations, and
other requirements of the Securities and Exchange Commission,
any stock exchange or over the counter market upon which such
Shares or other securities are then listed or traded, and any
applicable federal or state securities laws, and the Committee
may cause a legend or legends to be put on any certificates to
make appropriate reference to such restrictions.
SECTION 7. AMENDMENT AND TERMINATION.
Except to the extent prohibited by applicable law and unless
otherwise expressly provided in an Award Agreement or in the Plan:
9
<PAGE> 193
(a) AMENDMENTS TO THE PLAN. Subject to the last sentence of
this Section 7(a), the Board of Directors of the Company may amend,
alter, suspend, discontinue, or terminate the Plan, without the consent
of any shareholders, Participant, other holder or beneficiary of an
Award, or other person; provided, however, that, notwithstanding any
other provision of the Plan or any Award Agreement, no such amendment,
alteration, suspension, discontinuation, or termination shall be made,
without the approval of the shareholders of the Company within twelve
(12) months from the date thereof, that would:
(i) increase the total number of Shares available for
Awards under the Plan, except as provided in Section 4 hereof;
or
(ii) permit Options to be granted with per Share
grant, purchase, or exercise prices of less than the Fair
Market Value of a Share on the date of grant thereof, except
to the extent permitted under Section 6(a) hereof.
No amendment, alteration, suspension, discontinuation or termination
shall in any manner adversely affect any outstanding Option without the
prior written consent of the Participant holding the Option.
(b) AMENDMENTS TO AWARDS. Unless otherwise provided in the
Award Agreement, the Committee may waive any conditions or rights
under, amend any terms of, or amend, alter, suspend, discontinue, or
terminate, any Award theretofore granted, prospectively or
retroactively, without the consent of any relevant Participant or
holder or beneficiary of an Award.
(c) ADJUSTMENTS OF AWARDS UPON CERTAIN ACQUISITIONS. In the
event the Company or any Affiliate shall assume outstanding employee
awards or the right or obligation to make future such awards in
connection with the acquisition of another business or another
corporation or
10
<PAGE> 194
business entity, the Committee may make such adjustments, not
inconsistent with the terms of the Plan, in the terms of Awards as it
shall deem appropriate in order to achieve reasonable comparability or
other equitable relationship between the assumed awards and the Awards
granted under the Plan as so adjusted.
(d) ADJUSTMENTS OF AWARDS UPON THE OCCURRENCE OF CERTAIN
UNUSUAL OR NONRECURRING EVENTS. The Committee shall be authorized to
make adjustments in the terms and conditions of, and the criteria
included in, Awards in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section 4(b)
hereof) affecting the Company, any Affiliate, or the financial
statements of the Company or any Affiliate, or the changes in
applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits
to be made available under the Plan.
(e) CORRECTION OF DEFECTS, OMISSIONS, AND INCONSISTENCIES. The
Committee may correct any defect, supply any omission, or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent
it shall deem desirable to carry the Plan into effect.
SECTION 8. GENERAL PROVISIONS.
(a) NO RIGHTS TO AWARDS. No Employee, Non-Employee Participant
or other Person shall have any claim to be granted any Award under the
Plan, and there is no obligation for uniformity of treatment of
Employees, Non-Employee Participants, or holders or beneficiaries of
Awards under the Plan. The terms and conditions of Awards need not be
the same with respect to each recipient.
11
<PAGE> 195
(b) DELEGATION. The Committee may delegate to one or more
officers or managers of the Company or any Affiliate, or a committee of
such officers or managers, the authority, subject to such terms and
limitations as the Committee shall determine, to grant Awards to, or to
cancel, modify, waive rights with respect to, alter, discontinue,
suspend, or terminate Awards held by, Salaried Employees who are not
officers or directors of the Company, for purposes of Section 16.
(c) WITHHOLDING. The Company or any Affiliate shall be
authorized to withhold from any Award granted or any payment due or
transfer made under any Award or under the Plan the amount (in cash,
Shares, other securities, other Awards, or other property) of
withholding taxes due in respect of an Award, its exercise, or any
payment or transfer under such Award or under the Plan and to take such
other action as may be necessary in the opinion of the Company or
Affiliate to satisfy all obligations for the payment of such taxes.
(d) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing
contained in the Plan shall prevent the Company or any Affiliate from
adopting or continuing in effect other or additional compensation
arrangements, and such arrangements may be either generally applicable
or applicable only in specific cases.
(e) NO RIGHT TO EMPLOYMENT. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the
employ of the Company or any Affiliate. Further, the Company or an
Affiliate may at any time dismiss a Participant from employment, free
from any liability, or any claim under the Plan, unless otherwise
expressly provided in the Plan or in any Award Agreement.
12
<PAGE> 196
(f) GOVERNING LAW. The validity, construction, and effect of
the Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of Ohio and
applicable federal law.
(g) SEVERABILITY. If any provision of the Plan or any Award is
or becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction, or as to any Person or Award, or would disqualify the
Plan or any Award under any law deemed applicable by the Committee,
such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended
without, in the determination of the Committee, materially altering the
intent of the Plan or the Award, such provisions shall be stricken as
to such jurisdiction, Person, or Award, and the remainder of the Plan
and any such Award shall remain in full force and effect.
(h) NO TRUST OR FUND CREATED. Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund of any
kind or a fiduciary relationship between the Company or any Affiliate
and a Participant or any other Person. To the extent that any Person
acquires a right to receive payments from the Company or any Affiliate
pursuant to an Award, such right shall be no greater than the right of
an unsecured general creditor of the Company or any Affiliate.
(i) NO FRACTIONAL SHARES. No fractional Shares shall be issued
or delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash, other securities, or other property shall be
paid or transferred in lieu of any fractional Shares, or whether such
fractional Shares or any rights thereto shall be canceled, terminated,
or otherwise eliminated.
13
<PAGE> 197
(j) HEADINGS. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision thereof.
SECTION 9. EFFECTIVE DATE OF THE PLAN.
The Plan shall be effective as of the later of (a) the effective date
of its approval by the Board of Directors of the Company or (b) January 2, 1998.
SECTION 10. TERM OF THE PLAN.
No Award shall be granted under the Plan after January 2, 2008.
However, unless otherwise expressly provided in the Plan or in an applicable
Award Agreement, any Award theretofore granted may extend beyond such date, and
the authority of the Committee to amend, alter, adjust, suspend, discontinue, or
terminate any such Award, or to waive any conditions or rights under any such
Award, and the authority of the Board of Directors of the Company to amend the
Plan, shall extend beyond such date.
14
<PAGE> 198
"A" OPTION GRANT, INTENDED TO QUALIFY AS AN INCENTIVE STOCK OPTION
Date of Grant: _______________, 199_.
THIS "A" OPTION GRANT is delivered by Advanced Lighting Technologies,
Inc., an Ohio corporation (the "Company") to ______________________________ (the
"Grantee"), who is an employee of the Company or one of its Affiliates (the
Grantee's employer is referred to herein as the "Employer").
WHEREAS, the Board of Directors of the Company (the "Board") has
adopted the Amended and Restated Advanced Lighting Technologies, Inc. 1998
Incentive Award Plan (the "Plan") with an effective date of January ____, 1998;
WHEREAS, the Plan provides for the granting of Incentive Stock Options
by a committee to be appointed by the Board (the "Committee") to eligible
employees, advisors, consultants or directors of the Company or any Affiliate to
purchase Common Stock, $.001 par value, of the Company (the "Stock"), in
accordance with the terms and provisions thereof; and
WHEREAS, the Committee considers the Grantee to be a person who is
eligible for a grant of an Incentive Stock Option under the Plan, and has
determined that it would be in the best interest of the Company to grant the
Incentive Stock Option award herein as an "A" Option pursuant to the Plan.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Grant of "A" Option.
Subject to the terms and conditions hereinafter set forth, the Company,
with the approval and at the direction of the Committee, hereby grants to the
Grantee, as of the date of grant noted above ("Date of Grant"), an "A" Option to
purchase up to ____________________ (____) shares of Stock at a price of
$________ per share, which the Committee has determined to be the Fair Market
Value of the Stock as of the date hereof. The shares of stock purchasable upon
exercise of the Option are hereinafter sometimes referred to as the " 'A' Option
Shares." The "A" Option is intended by the parties hereto to be, and shall be
treated as, an incentive stock option (as such term is defined under Section 422
of the Internal Revenue Code of 1986), unless the Plan has not been approved by
Company shareholders in accordance with such Section 422.
2. Installment Exercise.
Subject to such further limitations as are provided herein, the Grantee
having the right hereunder to purchase from the Company the following number of
"A" Option Shares upon exercise of the "A" Option, on and after the following
dates, and so long as the Employer shall have attained
<PAGE> 199
the "A" Option Vesting Schedule Goals established by the Committee with respect
to the relevant calendar years noted below:
(a) on and after ______________, ____, up to 25% of the total number of
"A" Option Shares if the Employer has attained its Goal during the prior
calendar year;
(b) on and after ______________, ____, up to an additional 35% of the
total number of "A" Option Shares if the Employer has attained its Goal during
the prior calendar year;
(c) on and after ______________, ____, up to an additional 40% of the
total number of "A" Option Shares if the Employer has attained its Goal during
the prior calendar year;
(d) Should any of the Goals not be attained by the Employer during any
fiscal year, then any unearned "A" Options may become exercisable on and after
______________, ____, so long as the Employer has attained its Goal during the
prior calendar year;
(e) Any unearned "A" Options remaining after the fifth anniversary of
the Date of Grant shall become immediately exercisable if the Grantee has been
continuously employed by the Employer, the Company and/or any affiliate of the
Company from the Date of Grant through such date;
(f) The Committee reserves the right to revise the Goals at any time.
3. Termination of "A" Option.
(a) The "A" Option and all rights hereunder with respect thereto, to
the extent such rights shall not have been exercised, shall terminate and become
null and void after the expiration of ten years from the Date of Grant (the
"Option Term").
(b) Upon a termination of the Grantee's employment for any reason
(other than by retirement, disability or death), the "A" Option may be exercised
for sixty (60) days thereafter, but only to the extent that the "A" Option was
outstanding and exercisable on the date of termination of the Grantee's
employment. Upon a termination of the Grantee's employment by reason of
retirement, disability or death, the "A" Option may be exercised during the
following periods, but only to the extent that the "A" Option was outstanding
and exercisable on any such date of retirement, disability or death: (i) the
one-year period following the date of such termination of the Grantee's
employment in the case of a disability (within the meaning of Section 22(e)(3)
of the Code), (ii) the six-month period following the date of issuance of
letters testamentary or letters of administration to the executor or
administrator of a deceased Grantee, in the case of the Grantee's death during
his employment by the Employer, but not later than one year after the Grantee's
death, and (iii) the three-month period following the date of such termination
in the case of retirement on or after attainment of age 65, or in the case of
disability other than as described in (i) above. In no event, however, shall any
such period extend beyond the Option Term.
<PAGE> 200
(c) A transfer of the Grantee's employment between the Company and any
Affiliate, or between any Affiliates of the Company, shall not be deemed to be a
termination of the Grantee's employment.
(d) Notwithstanding any other provisions set forth herein or in the
Plan, if the Grantee shall (i) commit any act of malfeasance or wrongdoing
affecting the Company or Affiliate, (ii) breach any covenant not to compete, or
employment contract, with the Company or Affiliate, or (iii) engage in conduct
that would warrant the Grantee's discharge for cause (excluding general
dissatisfaction with the performance of the Grantee's duties, but including any
act of disloyalty or any conduct clearly tending to bring discredit upon the
Company or any Affiliate), any unexercised portion of the "A" Option shall
immediately terminate and be void.
4. Procedure to Exercise "A" Options.
(a) The Grantee may exercise the "A" Option with respect to all or any
part of the number of "A" Option Shares then exercisable hereunder by giving the
Secretary of the Company written notice of intent to exercise. The notice of
exercise shall specify the number of "A" Option Shares as to which the "A"
Option is to be exercised and the date of exercise thereof, which date shall be
at least five days after the giving of such notice unless an earlier time shall
have been mutually agreed upon.
(b) Full payment (in U.S. dollars) by the Grantee of the option price
for the "A" Option Shares purchased shall be made on or before the exercise date
specified in the notice of exercise in cash, or, with the prior written consent
of the Committee, in whole or in part through the surrender of previously
acquired shares of Stock at their fair market value on the exercise date.
(c) On the exercise date specified in the Grantee's notice or as soon
thereafter as is practicable, the Company shall cause to be delivered to the
Grantee, a certificate or certificates for the "A" Option Shares then being
purchased (out of theretofore unissued Stock or Treasury Stock, as the Company
may elect) upon full payment for such "A" Option Shares. The obligation of the
Company to deliver Stock shall, however, be subject to the condition that if at
any time the Committee shall determine in its discretion that the listing,
registration or qualification of the "A" Option or the "A" Option Shares upon
any securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the "A" Option or the issuance or purchase
of Stock thereunder, the "A" Option may not be exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the
Committee.
(d) If the Grantee fails to pay for any of the "A" Option Shares
specified in such notice or fails to accept delivery thereof, the Grantee's
right to purchase such "A" Option Shares may be terminated by the Company. The
date specified in the Grantee's notice as the date of exercise shall be deemed
the date of exercise of the "A" Option, provided that payment in full for the
"A" Option Shares to be purchased upon such exercise shall have been received by
such date.
<PAGE> 201
5. No Rights of Shareholders.
Neither the Grantee nor any personal representative shall be, or shall
have any of the rights and privileges of, a shareholder of the Company with
respect to any shares of Stock purchasable or issuable upon the exercise of the
"A" Option, in whole or in part, prior to the date of exercise of the "A"
Option.
6. Non-Transferability of Option.
During the Grantee's lifetime, the "A" Option hereunder shall be
exercisable only by the Grantee or any guardian or legal representative of the
Grantee, and the "A" Option shall not be transferable except, in case of the
death of the Grantee, by will or the laws of descent and distribution, nor shall
the "A" Option be subject to attachment, execution or other similar process. In
the event of (a) any attempt by the Grantee to assign, alienate, sell, pledge,
hypothecate or otherwise dispose of the "A" Option, except as provided for
herein, or (b) the levy of any installment, execution or similar process upon
the rights or interest hereby conferred, the Company may terminate the "A"
Option by notice to the Grantee and it shall thereupon become null and void.
7. Employment Not Affected.
Neither the granting of the "A" Option nor its exercise shall not be
construed as granting to the Grantee any right with respect to continuance of
employment of the Employer. Except as may otherwise be limited by a written
agreement between the Employer and the Grantee, the right of the Employer to
terminate at will the Grantee's employment with it at any time (whether
specifically reserved by the Company, as the Employer or on behalf of the
Employer (whichever the case may be), and acknowledged by the Grantee.
8. Amendment of "A" Option.
The "A" Option may be amended by the Committee at any time (i) if the
Committee determines, in its sole discretion, that amendment is necessary or
advisable in the light of any addition to or change in the Internal Revenue Code
of 1986 or in the regulations issued thereunder, or any federal or state
securities law or other law or regulation, which change occurs after the Date of
Grant and by its terms applies to the "A" Option; or (ii) other than in the
circumstances described in clause (i), with the consent of the Grantee.
9. Notice.
Any notice to the Company provided for in this instrument shall be
addressed to it in care of its Secretary at its executive offices at 2307 East
Aurora Road, Suite 1, Twinsburg, Ohio 44087, or such other address as the
Company shall specify by written notice to the Grantee, and any notice to the
Grantee shall be addressed to the Grantee at the current address shown on the
payroll records of the Employer. Any notice shall be deemed to be duly given if
and when properly addressed and posted by registered or certified mail, postage
prepaid.
<PAGE> 202
10. Incorporation of Plan by Reference.
The "A" Option is granted pursuant to the terms of the Plan, the terms
of which are incorporated herein by reference, and the "A" Option shall in all
respects be interpreted in accordance with the Plan. The Committee shall
interpret and construe the Plan and this instrument, and its interpretations and
determinations shall be conclusive and binding on the parties hereto and any
other person claiming an interest hereunder, with respect to any issue arising
hereunder or thereunder.
11. Governing Law.
The validity, construction, interpretation and effect of this
instrument shall exclusively be governed by and determined in accordance with
the law of the State of Ohio, except to the extent preempted by federal law,
which shall to the extent govern.
IN WITNESS WHEREOF, the Company has caused its duly authorized officers
to execute and attest this grant of an "A" Option, and the Grantee has placed
his or her signature hereon, effective as of the Date of Grant.
ADVANCED LIGHTING TECHNOLOGIES, INC.
By:_______________________________
ACCEPTED AND AGREED TO:
By:_______________________________
Grantee
<PAGE> 203
"B" OPTION GRANT, INTENDED TO QUALIFY AS AN INCENTIVE STOCK OPTION
Date of Grant: ____________, 199__.
THIS "B" OPTION GRANT is delivered by Advanced Lighting Technologies,
Inc., an Ohio corporation (the "Company") to ______________________________ (the
"Grantee"), who is an employee of the Company or one of its Affiliates (the
Grantee's employer is referred to herein as the "Employer").
WHEREAS, the Board of Directors of the Company (the "Board") has
adopted the Amended and Restated Advanced Lighting Technologies, Inc. 1998
Incentive Award Plan (the "Plan") with an effective date of January _______,
1998;
WHEREAS, the Plan provides for the granting of Incentive Stock Options
by a committee to be appointed by the Board (the "Committee") to eligible
employees, advisors, consultants or directors of the Company or any Affiliate to
purchase Common Stock of the Company (the "Stock"), in accordance with the terms
and provisions thereof; and
WHEREAS, the Committee considers the Grantee to be a person who is
eligible for a grant of an Incentive Stock Option under the Plan, and has
determined that it would be in the best interest of the Company to grant the
Incentive Stock Option award herein as an "B" Option pursuant to the Plan.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
5. Grant of "B" Option.
Subject to the terms and conditions hereinafter set forth, the Company,
with the approval and at the direction of the Committee, hereby grants to the
Grantee, as of the date of grant noted above ("Date of Grant"), a "B" Option to
purchase up to ____________________ (____) shares of Stock at a price of
$__________ per share, which the Committee has determined to be the Fair Market
Value of the Stock as of the date hereof. The shares of stock purchasable upon
exercise of the Option are hereinafter sometimes referred to as the " 'B' Option
Shares." The "B" Option is intended by the parties hereto to be, and shall be
treated as, an incentive stock option (as such term is defined under Section 422
of the Internal Revenue Code of 1986), unless the Plan has not been approved by
Company shareholders in accordance with such Section 422.
6. Installment Exercise.
Subject to such further limitations as are provided herein, the Grantee
having the right hereunder to purchase from the Company the following number of
"B" Option Shares upon exercise of the "B" Option, on and after the following
dates:
<PAGE> 204
(a) on and after the first anniversary of the Date of Grant, 25% of the
total number of "B" Option Shares;
(b) on and after the second anniversary of the Date of Grant, an
additional 35% of the total number of "B" Option Shares; and
(c) on and after the third anniversary of the Date of Grant, an
additional 40% of the total number of "B" Option Shares.
7. Termination of "B" Option.
(a) The "B" Option and all rights hereunder with respect thereto, to
the extent such rights shall not have been exercised, shall terminate and become
null and void after the expiration of ten years from the Date of Grant (the
"Option Term").
(b) Upon a termination of the Grantee's employment for any reason
(other than by retirement, disability or death), the "B" Option may be exercised
for 60 days thereafter, but only to the extent that the "B" Option was
outstanding and exercisable on the date of termination of the Grantee's
employment. Upon a termination of the Grantee's employment by reason of
retirement, disability or death, the "B" Option may be exercised during the
following periods, but only to the extent that the "B" Option was outstanding
and exercisable on any such date of retirement, disability or death: (i) the
one-year period following the date of such termination of the Grantee's
employment in the case of a disability (within the meaning of Section 22(e)(3)
of the Code), (ii) the six-month period following the date of issuance of
letters testamentary or letters of administration to the executor or
administrator of a deceased Grantee, in the case of the Grantee's death during
his employment by the Employer, but not later than one year after the Grantee's
death, and (iii) the three-month period following the date of such termination
in the case of retirement on or after attainment of age 65, or in the case of
disability other than as described in (i) above. In no event, however, shall any
such period extend beyond the Option Term.
(c) A transfer of the Grantee's employment between the Company and any
Affiliate, or between any Affiliates of the Company, shall not be deemed to be a
termination of the Grantee's employment. The term "Employer" shall thereafter
mean the Affiliate for which the Grantee is then employed.
(d) Notwithstanding any other provisions set forth herein or in the
Plan, if the Grantee shall (i) commit any act of malfeasance or wrongdoing
affecting the Company or Affiliate, (ii) breach any covenant not to compete, or
employment contract, with the Company or Affiliate, or (iii) engage in conduct
that would warrant the Grantee's discharge for cause (excluding general
dissatisfaction with the performance of the Grantee's duties, but including any
act of disloyalty or any conduct clearly tending to bring discredit upon the
Company or any Affiliate), any unexercised portion of the "B" Option shall
immediately terminate and be void.
<PAGE> 205
ANNEX D
-------
8. Procedure to Exercise "B" Options.
(a) The Grantee may exercise the "B" Option with respect to all or any
part of the number of "B" Option Shares then exercisable hereunder by giving the
Secretary of the Company written notice of intent to exercise. The notice of
exercise shall specify the number of "B" Option Shares as to which the "B"
Option is to be exercised and the date of exercise thereof, which date shall be
at least five days after the giving of such notice unless an earlier time shall
have been mutually agreed upon.
(b) Full payment (in U.S. dollars) by the Grantee of the option price
for the "B" Option Shares purchased shall be made on or before the exercise date
specified in the notice of exercise in cash, or, with the prior written consent
of the Committee, in whole or in part through the surrender of previously
acquired shares of Stock at their fair market value on the exercise date.
(c) On the exercise date specified in the Grantee's notice or as soon
thereafter as is practicable, the Company shall cause to be delivered to the
Grantee, a certificate or certificates for the "B" Option Shares then being
purchased (out of theretofore unissued Stock or Treasury Stock, as the Company
may elect) upon full payment for such "B" Option Shares. The obligation of the
Company to deliver Stock shall, however, be subject to the condition that if at
any time the Committee shall determine in its discretion that the listing,
registration or qualification of the "B" Option or the "B" Option Shares upon
any securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the "B" Option or the issuance or purchase
of Stock thereunder, the "B" Option may not be exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the
Committee.
(d) If the Grantee fails to pay for any of the "B" Option Shares
specified in such notice or fails to accept delivery thereof, the Grantee's
right to purchase such "B" Option Shares may be terminated by the Company. The
date specified in the Grantee's notice as the date of exercise shall be deemed
the date of exercise of the "B" Option, provided that payment in full for the
"B" Option Shares to be purchased upon such exercise shall have been received by
such date.
9. No Rights of Shareholders.
Neither the Grantee nor any personal representative shall be, or shall
have any of the rights and privileges of, a shareholder of the Company with
respect to any shares of Stock purchasable or issuable upon the exercise of the
"B" Option, in whole or in part, prior to the date of exercise of the "B"
Option.
10. Non-Transferability of Option.
During the Grantee's lifetime, the "B" Option hereunder shall be
exercisable only by the Grantee or any guardian or legal representative of the
Grantee, and the "B" Option shall not be
<PAGE> 206
transferable except, in case of the death of the Grantee, by will or the laws of
descent and distribution, nor shall the "B" Option be subject to attachment,
execution or other similar process. In the event of (a) any attempt by the
Grantee to assign, alienate, sell, pledge, hypothecate or otherwise dispose of
the "B" Option, except as provided for herein, or (b) the levy of any
installment, execution or similar process upon the rights or interest hereby
conferred, the Company may terminate the "B" Option by notice to the Grantee and
it shall thereupon become null and void.
11. Employment Not Affected.
Neither the granting of the "B" Option nor its exercise shall not be
construed as granting to the Grantee any right with respect to continuance of
employment of the Employer. Except as may otherwise be limited by a written
agreement between the Employer and the Grantee, the right of the Employer to
terminate at will the Grantee's employment with it at any time (whether
specifically reserved by the Company, as the Employer or on behalf of the
Employer (whichever the case may be), and acknowledged by the Grantee.
12. Amendment of "B" Option.
The "B" Option may be amended by the Committee at any time (i) if the
Committee determines, in its sole discretion, that amendment is necessary or
advisable in the light of any addition to or change in the Internal Revenue Code
of 1986 or in the regulations issued thereunder, or any federal or state
securities law or other law or regulation, which change occurs after the Date of
Grant and by its terms applies to the "B" Option; or (ii) other than in the
circumstances described in clause (i), with the consent of the Grantee.
13. Notice.
Any notice to the Company provided for in this instrument shall be
addressed to it in care of its Secretary at its executive offices at 2307 East
Aurora Road, Suite 1, Twinsburg, Ohio 44087, or such other address as the
Company shall specify by written notice to the Grantee, and any notice to the
Grantee shall be addressed to the Grantee at the current address shown on the
payroll records of the Employer. Any notice shall be deemed to be duly given if
and when properly addressed and posted by registered or certified mail, postage
prepaid.
14. Incorporation of Plan by Reference.
The "B" Option is granted pursuant to the terms of the Plan, the terms
of which are incorporated herein by reference, and the "B" Option shall in all
respects be interpreted in accordance with the Plan. The Committee shall
interpret and construe the Plan and this instrument, and its interpretations and
determinations shall be conclusive and binding on the parties hereto and any
other person claiming an interest hereunder, with respect to any issue arising
hereunder or thereunder.
<PAGE> 207
15. Governing Law.
The validity, construction, interpretation and effect of this
instrument shall exclusively be governed by and determined in accordance with
the law of the State of Ohio, except to the extent preempted by federal law,
which shall to the extent govern.
IN WITNESS WHEREOF, the Company has caused its duly authorized officers
to execute and attest this grant of an "B" Option, and the Grantee has placed
his or her signature hereon, effective as of the Date of Grant.
ADVANCED LIGHTING TECHNOLOGIES, INC.
By:_______________________________
ACCEPTED AND AGREED TO:
By:_______________________________
Grantee
<PAGE> 208
ANNEX E
-------
AMENDMENT TO THE AMENDED AND RESTATED ADVANCED LIGHTING TECHNOLOGIES, INC. 1998
INCENTIVE AWARD PLAN
RESOLVED, that the following amendment to the Amended and Restated
Advanced Lighting Technologies, Inc. 1998 Incentive Award Plan is hereby
approved and ratified:
Section 4(a)(i) of the Amended and Restated Advanced Lighting
Technologies, Inc. 1998 Incentive Award Plan is amended to replace the
phrase "1,500,000 Shares" with the phrase "2,250,000 Shares." The
Amended and Restated Advanced Lighting Technologies, Inc. 1998
Incentive Award Plan shall otherwise remain in full force and effect.
Such amendment shall, and does hereby, amend such Amended and Restated Advanced
Lighting Technologies, Inc. 1998 Incentive Award Plan effective on the date of
the adoption of this resolution by the shareholders of Advanced Lighting
Technologies, Inc.
<PAGE> 209
ADVANCED LIGHTING TECHNOLOGIES, INC.
32000 Aurora Road
Solon, Ohio 44139
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Wayne R. Hellman and Louis S. Fisi as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to vote as designated on the reverse, all the shares of Common Stock
Advanced Lighting Technologies, Inc. held of record by the undersigned on
December 30, 1999, at the annual meeting of shareholders to be held on Thursday,
February 17, 2000 at 10:00 am (EST) at KSK Color Lab (Conference Room), 32300
Aurora Rd., Solon, Ohio, 44139 or any adjournment thereof.
PLEASE VOTE, SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED
ENVELOPE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER AND, IN THE DISCRETION OF THE PROXIES, ON ANY OTHER
BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR ALL NOMINEES FOR DIRECTOR AND FOR PROPOSALS 2, 3,
4 AND 5.
(TO BE SIGNED ON REVERSE SIDE)
<PAGE> 210
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
ADVANCED LIGHTING TECHNOLOGIES, INC.
February 17, 2000
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
A [ X ] Please mark your
votes as in the
example.
<TABLE>
<CAPTION>
FOR all nominees WITHHOLD
listed at right AUTHORITY
(except as marked to to vote for all
the contrary below) nominees listed at right
<S> <C> <C> <C>
1. Election of [ ] [ ] NOMINEES:
Directors: Susumu Harada
John R. Buerkle
A Gordon Tunstall
John E. Breen
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE
LIST AT RIGHT.)
2. TO APPROVE ISSUANCE OF CERTAIN SHARES WHICH MAY BE ISSUED TO THE
GENERAL ELECTRIC COMPANY ("GE") IN THE FUTURE UNDER CIRCUMSTANCES
DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT. THE ISSUANCE OF SUCH
SHARES TO GE COULD RESULT IN GE HAVING A MAJORITY OF THE VOTING POWER
OF THE COMPANY.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. TO APPROVE AN AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED
ARTICLES OF INCORPORATION TO "OPT OUT" OF THE APPLICATION OF
OHIO CONTROL SHARE ACQUISITION ACT TO ACQUISITIONS OF COMPANY
EQUITY SECURITIES.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. TO APPROVE AN AMENDMENT TO THE COMPANY'S 1998 INCENTIVE AWARD PLAN TO
INCREASE THE NUMBER OF SHARES AVAILABLE FOR GRANT FROM 1,500,000 TO
2,250,000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. TO RATIFY THE APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT
AUDITORS OF THE COMPANY.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
PLEASE VOTE, SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE.
<TABLE>
<S> <C> <C>
Signature___________________________________ Signature, if held jointly__________________________DATE______________________, 2000
NOTE: Please sign exactly as names appear hereon. When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign full
corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized
officer.
</TABLE>
