As filed with the Securities and Exchange Commission on November 21, 1996
Registration No. 333-14773
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
Amendment No 1 to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CSL LIGHTING MANUFACTURING, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware 7372 95-4463033
(State or Other (Primary Standard (IRS Employer
Jurisdiction Industrial Identification
of Incorporation Classification Number)
or Organization) Code Number)
27615 Avenue Hopkins, Valencia, CA 91355
(805) 257-4155
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Executive Offices)
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SYLVAN GERBER
Chairman and Chief Executive Officer
CSL Lighting Manufacturing, Inc.
27615 Avenue Hopkins, Valencia, CA 91355
(805) 257-4155
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code of Agent for Service)
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with a copy to:
KENNETH S. ROSE, ESQ.
Morse, Zelnick, Rose & Lander, LLP
450 Park Avenue
New York, New York 10022
(212) 838-5030
(212) 838-9190 (FAX)
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462 (b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================================================================================================
Title of Each Class of Amount Being Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered Offering Price Aggregate Registration
Per Share (1) Offering Price (1) Fee (3)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 per share, 924,519 $1.625 $1,502,343 $455.26
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock issuable upon conversion of
outstanding Debentures and Convertible Notes(2) 1,666,976 $1.625 $2,708,836 $820.86
- ----------------------------------------------------------------------------------------------------------------------------
Totals 2,591,495 $4,211,179 $1,276.12
============================================================================================================================
</TABLE>
(1) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457 under the Securities Act.
(2) Pursuant to Rule 416 of the Securities Act, there are also being
registered hereby such additional indeterminate number of shares of Common
Stock as may become issuable pursuant to the anti-dilution and conversion
price provisions of the Debentures and Convertible Notes.
(3) A fee of $1,609.68 was paid upon the initial filing of this Registration
Statement.
----------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 21, 1996
PROSPECTUS
CSL LIGHTING MANUFACTURING, INC.
2,591,495 SHARES OF COMMON STOCK
This Prospectus relates to 2,591,495 shares (the "Shares") of common
stock, $0.01 par value per share, (the "Common Stock") of CSL Lighting
Manufacturing , Inc., a Delaware corporation (the "Company"), which are held by
certain shareholders (the "Selling Securityholders") of the Company and which
are issuable upon conversion of currently outstanding Convertible Subordinated
Debentures and Convertible Notes of the Company (collectively, the
"Debentures").
The Shares offered by this Prospectus may be sold from time to time by the
Selling Securityholders, provided a current registration statement with respect
to such securities is then in effect. Of the 2,591,495 Shares being offered
hereby by the Selling Securityholders, 924,519 Shares are currently outstanding,
and 1,666,976 shares are issuable upon conversion of the Debentures, assuming
the conversion rate on the date of this Prospectus. See "Description of
Securities" and "Plan of Distribution."
The distribution of the Shares offered hereby by the Selling
Securityholders may be effected in one or more transactions that may take place
on the over-the-counter market, including ordinary broker's transactions,
privately-negotiated transactions or through sales to one or more dealers for
resale of such securities as principals, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or negotiated
prices. Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the Selling Securityholders.
The Selling Securityholders and intermediaries through whom such
securities are sold may be deemed "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act") with respect to the
securities offered, and any profits realized or commissions received may be
deemed underwriting compensation.
The Company will not receive any of the proceeds from the sale of the
securities by the Selling Securityholders. Expenses of this offering, other than
fees and expenses of counsel to the Selling Securityholders, will be paid by the
Company. See "Plan of Distribution."
The Shares are traded over-the-counter and are quoted through the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") on the
Small Cap Market System under the symbols "CSLX". On November 21, 1996 the last
sales price of the Shares on the NASDAQ Small Cap System was $1.625.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" COMMENCING ON PAGE 7."
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<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is November ___, 1996
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY ANY OTHER PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY THE SHARES TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION MAY NOT LAWFULLY BE MADE.
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<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational and reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission by the Company may be
inspected and copied at the public reference facilities maintained by the
Commission at its principal offices at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and 7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of these materials can also be obtained at prescribed rates from the
Public Reference Section of the Commission at its principal offices in
Washington, D.C., set forth above. Additional information with respect to this
offering may be provided in the future by means of supplements or "stickers" to
the Prospectus.
The Company has filed a Registration Statement on Form S-3 (including all
amendments and supplements thereto, the "Registration Statement") with the
Commission under the Securities Act with respect to the Shares offered hereby.
This Prospectus, which forms a part of the Registration Statement, does not
contain all of the information set fourth in the Registration Statement and the
Exhibits filed therewith, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. Statements contained herein
concerning the provisions of such documents are not necessarily complete and, in
each instance, reference is made to the Registration Statement or to the copy of
such document filed as an Exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference. Copies of the Registration Statement and the Exhibits thereto
can be obtained upon payment of a fee prescribed by the Commission or may be
inspected free of charge at the public reference facilities and regional offices
referred to above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference: (1) the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1995, filed pursuant to
Section 13 of the Exchange Act, (2) the Company's Quarterly Report on Form
10-QSB for the fiscal quarters ended March 31, 1996, June 30, 1996 and September
30, 1996 filed pursuant to Section 13 of the Exchange Act, (3) the Company's
Proxy Statement dated November 3, 1995 for the 1995 Annual Meeting of
Stockholders of the Company filed pursuant to Section 14 of the Exchange Act,
and (4) the description of the Company's Shares contained in its Registration
Statement on Form SB-2 filed with the Commission on March 1, 1994 (File No.
33-72678).
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Shares, shall be deemed to be incorporated by
reference herein and to be part hereof from the respective dates of the filing
of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus and the Registration Statement of which it is a
part to the extent that a statement contained herein
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<PAGE>
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus or the
Registration Statement of which it is a part.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or
verbal request of such person, a copy of any or all of the documents
incorporated herein by reference, other than exhibits to such documents.
Requests should be addressed to: Secretary, CSL Lighting Manufacturing, Inc.,
27615 Avenue Hopkins, Valencia, California 91355-3493; telephone number (805)
257-4155.
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<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information appearing elsewhere in this Prospectus and incorporated
herein by reference. Except as otherwise specified, all information in this
Prospectus assumes no conversion of the Debentures. Investors should carefully
consider the information set forth under "Risk Factors" prior to making an
investment in the Common Stock offered hereby.
THE COMPANY
The Company was organized pursuant to the laws of the State of Delaware on
November 16, 1993. Its executive offices are located 27615 Avenue Hopkins,
Valencia, California 91355 and its telephone number is (805) 257-4155.
THE OFFERING
Securities offered hereby(1)..... 2,591,495 shares.
Common Stock outstanding
after this Offering(1)........... 8,671,923 shares
NASDAQ Symbol.................... CSLX
Use of Proceeds.................. None of the proceeds from the sale of Common
Stock offered hereby will be received by the
Company.
Risk Factors..................... An investment in the Securities offered
hereby is speculative and involves a high
degree of risk. This Prospectus contains
forward-looking information which involves
risk and uncertainties. The Company's actual
results could differ materially from those
anticipated by such forward-looking
information as a result of various factors,
including those discussed under "Risk
Factors" in this Prospectus. See "Risk
Factors."
- ----------
(1) Includes 1,666,976 shares issuable upon conversion of outstanding
Debentures (at the conversion rate which would be applicable if the
Debentures were converted on November 20, 1996).
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<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby is speculative and
involves a high degree of risk. In addition to the other information contained
in this Prospectus and incorporated herein by reference, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing the Common Stock offered hereby. Prospective
investors should be in a position to risk the loss of their entire investment.
This Prospectus contains forward-looking information as a result of various
factors, including those set forth in the following risk factors and elsewhere
in this Prospectus.
Operating Losses. The Company experienced $718,000 of operating losses
during the first nine months of 1996. These losses were generated primarily from
lower than expected dollar sales on all product lines, higher selling
expenditures as a percentage of sales due to less dollar volume, and
expenditures relating to the start up of overseas offices. No assurance can be
given that the Company will not continue to incur operating losses.
Limited Liquidity; Operating Losses. On October 15, 1996 the Company
successfully negotiated a new two year line of credit agreement and a three year
equipment term loan with a finance company. This line of credit and term loan
replaced the Company's debt facility with Bank of America The terms of the
Company's new line of credit call for a maximum dollar borrowing of $4,000,000
based on 80% of the Company's eligible accounts receivable and 40% of the
Company's eligible inventory (capped at $1,000,000). The term debt is capped at
$100,000 or 80% of the forced liquidation value of the Company's eligible
equipment. The interest rate for the line of credit and term debt is prime plus
2.75% and prime plus 3%, respectively. The Company believes that its current
borrowing capacity on its new line of credit is approximately $2 million.
Additional Financing Requirements. To date the Company has met its capital
and operating requirements through public sales of equity and through
borrowings. See "Management's Discussion and Analysis of Financial Condition and
Results of Operation - Liquidity and Capital Resources." in the Forms 10-KSB and
10-QSB incorporated herein. The Company's continued operations will depend upon
revenues, if any, from operations and the availability of equity or debt
financing. The Company has no commitments for additional financing. Further,
there can be no assurance that the Company will be able to generate levels of
revenues and cash flows sufficient to fund operations or that the Company will
be able to obtain additional financing on satisfactory terms, if at all, to
achieve profitable operations.
Expansion into New Markets; Need for Additional Financing. The Company
believes that a significant portion of its continued growth and profitability is
dependent upon its ability to successfully market and ship new products for the
energy efficient and Consumer Retail lighting markets domestically and overseas.
The exploitation of these new markets will require working capital in excess of
that which the Company has available. There can be no
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<PAGE>
assurance that the Company will be able to generate sufficient revenues from its
current or proposed business operations or raise additional monies necessary to
achieve its expansion plan.
No Certainty of New Markets or Market Acceptance of New Product Lines. The
Company has recently expanded operations worldwide, revamped its product
offerings and introduced new products for sale to the Specification and the
Consumer Retail lighting markets. Although the Company believes that its
products have been initially accepted by the Specification and the Consumer
Retail lighting markets, there can be no assurance that the Company will be able
to successfully manufacture and sell products for either or both of these
markets in sufficient quantities or at acceptable price levels to operate
profitably.
Highly Competitive Industry. The lighting industry is intensely
competitive with respect to pace, design, quality and reliability. The majority
of the Company's competitors are substantially larger in size and have
substantially greater financial, managerial, technical, marketing and other
resources than the Company.
Risk of International Operations. The Company believes that there are
material risks attendant to its international expansion associated with the
stability, both political and economic, of any particular country. Principal
among those risks are the nationalization or privatization of any industry with
which the Company does business in that such changes tend to impact the time
period in which contractual commitments may be honored; currency crises with
attendant exchange rate turbulence; and sudden changes in interest rates which
generally effect the ability of customers to finance their purchases. To date
the Company has not experienced any material adverse impact as a result of
recent political and economic changes or currency fluctuations internationally,
however, there is no assurance that such factors will not have a material
adverse effect on the Company's business in the future.
Dependence on Third Party Manufacturer's Sales Agencies and Distributors.
The Company is primarily dependent on independent manufacturer's sales agencies
and independent lighting and electrical distributors in selling the Company's
products to retail and commercial end users. Although no single manufacturer's
sales agency or distributor, or affiliated group of manufacturers sales agencies
or distributors, account for more than 5% of the Company's sales, the Company is
required to sustain relationships with approximately 100 manufacturer's sales
agencies worldwide, none of whom are exclusive to the Company and any of whom
could terminate their relationship with the Company at any time. In addition,
manufacturer's sales agencies and distributors typically represent and
distribute competing products. In the event the Company were to lose a
substantial number of its independent distributors or manufacturer's sales
agencies, it could have a material adverse effect on the Company if the Company
were unable to find suitable, experienced replacements. The Company's ability to
expand its operations will depend in significant part on its ability to attract
and retain relationships with qualified manufacturers sales agencies and
independent distributors experienced in the sale of lighting products. There is
no assurance that the Company will be able to engage and retain qualified
manufacturer's sales agencies and independent distributors capable of
successfully marketing the Company's products.
Dependence Upon Key Personnel. The success of the Company's business is
largely dependent upon the active participation of Sylvan Gerber, its Chief
Executive Officer and Chairman of the Board, Scott Searle, its President and
Mark Allen, its Chief Operating
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Officer. In the event the services of either Messrs. Gerber, Searle or Allen
were lost for any reason whatsoever, the Company's business operations would be
adversely affected.
Intellectual Property Rights. All of the Company's products and their
design, as well as the design of the tooling used in the manufacturing of the
Company's products, are proprietary to the Company. Further, the Company has
sought to establish certain proprietary rights with respect to the marks under
which its products and product lines are marketed. Consequently, the business of
the Company is dependent, to a certain extent, on the Company's ability to
establish and protect its intellectual property rights with respect to its
products, designs and trademarks and tradenames under which it does business.
The Company's failure or inability to establish appropriate copyrights,
trademarks and patents or to adequately protect any of its intellectual property
rights may have a material adverse effect on the Company.
Product Obsolescence. The lighting industry has experienced the
introduction of numerous new products in recent years, particularly in the
fields of energy efficient and decorative lighting. As a consequence, the demand
for lighting products is affected by both energy conservation concerns and
changing consumer preferences. Accordingly, there can be no assurance that any
or all of the Company's product lines will be accepted by consumers, or if
accepted, that they will not become obsolete or out of style. In the event that
the marketplace does not accept a significant portion of the Company's products,
the Company's sales could be adversely affected.
Underwriter's Laboratories and Other Testing Laboratories Listing.
Substantially all of the Company's products are approved by Underwriter's
Laboratories Inc. ("UL"), Electrical Testing Laboratories ("ETL"), or the
Canadian Standards Association ("CSA"). These organizations test a wide variety
of consumer and commercial products for compliance with United States and
Canadian recognized safety standards. In the United States, the laws of certain
states prohibit the sale of products that have not obtained and maintained a UL
or ETL listing. Even in those states where the Company is not required by law to
obtain UL or ETL listing, if it is unable to obtain and maintain such UL or ETL
listing on an ongoing basis, its ability to market and sell its products may be
adversely affected.
Product Liability. The manufacture and sale of the Company's products
subjects the Company to the risk of product liability claims. The costs of
defending or settling such claims could have a material adverse effect on the
Company, even if the Company ultimately were to prevail. Although the Company
presently has an aggregate of $12 million in product liability insurance, there
can be no assurance that such insurance can be maintained at an acceptable cost
to the Company or that any damages assessed against the Company will not exceed
its coverage.
Control by Principal Stockholders. At November 20, 1996, the Company's
officers and directors owned approximately 2,275,000 shares of Common Stock
representing approximately 34% of the Company's issued and outstanding Common
Stock and as a result they will be able to elect all of the Company's directors,
and generally control the affairs of the Company.
Potential Environmental Risks. The Company's operations are subject to
federal, state and local regulatory requirements relating to environmental
protection. Although
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management believes that the Company's operations are in material compliance
with applicable environmental laws and regulations, there can be no assurance
that currently unknown matters, new laws and regulations or stricter
interpretations of existing laws and regulations will not materially affect the
Company's future business or operations.
Issuance of Preferred Stock Barriers to Takeover. The Board of Directors
may issue one or more series of Preferred Stock without any action on the part
of the stockholders of the Company, the existence and/or terms of which may
adversely affect the rights of holders of Common Stock. Further, the issuance of
Preferred Stock may be used as an "anti-takeover" device without further action
on the part of the stockholders. Issuance of Preferred Stock, which may be
accomplished through a public offering or a private placement to parties
favorable to current management, may dilute the voting power of holders of
Common Stock (such as by issuing Preferred Stock with super voting rights) and
may render more difficult the removal of current management, even if such
removal may be in the stockholders' best interest.
Absence of Dividends. The Company does not expect to pay cash or stock
dividends on its Common Stock in the foreseeable future. To the extent, the
Company has earnings in the future, it intends to retain such earnings in the
business operations of the Company.
Limitation on Director Liability. As permitted by the Delaware General
Corporation Law ("DGCL"), the Company's Certificate of Incorporation limits the
liability of directors to the Company or its shareholders for monetary damages
for breach of a director's fiduciary duty, except for liability in four specific
instances. These are for (i) any breach of the director's duty of loyalty to the
Company or its shareholders, (ii) acts or omissions not in good faith or which
involve intentional misconduct or knowing violations of law, (iii) unlawful
payments of dividends or unlawful stock purchases or redemption's as provided in
Section 174 of the Delaware General Corporation Law, or (iv) any transaction
from which the director derived an improper personal benefit. As a result of the
Company's charter provision and the DGCL, shareholders may have more limited
rights to recover against directors for breach of fiduciary duty.
Delaware Anti-Takeover Statute; Issuance of Preferred Stock; Barriers to
Takeover. The Company is a Delaware corporation and is subject to the
prohibitions imposed by Section 203 of the DGCL, which is generally viewed as an
anti-takeover statute. In general, this statute prohibits the Company, from
entering into certain business combinations without the approval of its Board of
Directors and, as such, could prohibit or delay mergers or other attempted
takeovers or changes in control with respect to the Company. Such provisions may
discourage attempts to acquire the Company. In addition, the Company's
authorized capital consists of eleven million shares of capital stock of which
ten million shares are designated as Common Stock and one million shares are
designated as Preferred Stock. No class other than the Common Stock is currently
designated and there is no current plan to designate or issue any such
securities. The Board of Directors, without any action by the Company's
shareholders, is authorized to designate and issue shares in such classes or
series (including classes or series of Preferred Stock) as it deems appropriate
and to establish the rights, preferences and privileges of such shares,
including dividends, liquidation and voting rights. The rights of holders of
Preferred Stock and other classes of Common Stock that may be issued or may be
superior to the rights granted to the holders of the existing classes of Common
Stock. Further, the ability of the Board of Directors to designate and issue
such
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<PAGE>
undesignated shares could impede or deter an unsolicited tender offer or
takeover proposal regarding the Company and the issuance of additional shares
having preferential rights could adversely affect the voting power and other
rights of holders of Common Stock. Issuance of Preferred Stock, which may be
accomplished though a public offering or a private placement to parties
favorable to current management, may dilute the voting power of holders of
Common Stock (such as by issuing Preferred Stock with super voting rights) and
may render more difficult the removal of current management, even if such
removal may be in the stockholders' best interests. Any such issuance of
Preferred Stock could prevent the holders of Common Stock from realizing a
premium on their shares.
"Penny Stock" Regulations May Impose Certain Restrictions on Marketability
of Securities. The Commission has adopted regulations which generally define
"penny stock" to be any equity security that has a market price (as defined) of
less than $5.00 per share, subject to certain exceptions. If the Securities
offered hereby are removed from listing on NASDAQ at any time following the
Effective Date, the Securities may become subject to rules that impose
additional sales practice requirements on broker-dealers who sell such
Securities to persons other than established customers and accredited investors
(generally, those persons with assets in excess of $1,000,000 or annual income
exceeding $200,000, or $300,000 together with their spouse). For transactions
covered by these rules, the broker-dealer must make a special suitability
determination for the purchase of the Securities and have received the
purchaser's written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the transaction, of a risk disclosure
document mandated by the Commission relating to the penny stock market. The
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market-maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the "penny stock" rules may
restrict the ability of broker-dealers to sell the Securities and may affect the
ability of purchasers in this offering to sell the Securities in the secondary
market.
Risks Associated with Forward-Looking Statements Included in this
Prospectus. This Prospectus contains certain forward-looking statements
regarding the plans and objectives of management for future operations. The
forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. The Company's plans and
objectives are based, in part, on assumptions involving the continued expansion
of business. Assumptions relating to the foregoing involve judgments with
respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company. Although the Company believes that its assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the forward-looking
statements included in this Prospectus will prove to be accurate. In light of
the significant uncertainties inherent in the forward-looking statements
included herein particularly in view of the Company's early stage operations,
the inclusion of such information should not be regarded as
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a representation by the Company or any other person that the objectives and
plans of the Company will be achieved.
USE OF PROCEEDS
The Company will not receive any proceed from the sale of shares of Common
Stock offered hereby.
MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
The following table sets forth, for the periods indicated, the high and
low closing prices in the over-the-counter market for the common stock of the
Company, as reported by the National Association of Securities Dealers National
Market System. The Company's stock is traded under the NASDAQ symbol "CSLX". At
November 20, 1996 the Company had approximately 2,000 holders of its common
stock. The over-the-counter market quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
Calendar 1996 High Low
------------- ---- ---
First Quarter 2 1 1/8
Second Quarter 3 7/8 1 7/8
Third Quarter 4 2 1/2
Fourth Quarter
(through 11/20/96) 3 1/6 1 5/8
Calendar 1995 High Low
------------- ---- ---
First Quarter 2 1/2 3/4
Second Quarter 1 1/2 1
Third Quarter 2 1/2 1 1/8
Fourth Quarter 2 3/16 1
Calendar 1994 High Low
------------- ---- ---
First Quarter 5 7/8 4 7/8
Second Quarter 5 1/2 3 7/8
Third Quarter 4 9/16 3 7/8
Fourth Quarter 4 3/8 2 1/8
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SUMMARY OF BUSINESS AND RECENT DEVELOPMENTS
General
CSL Lighting Manufacturing, Inc., ("the Company") designs, manufactures
and markets mid to high-end lighting fixtures for both commercial and
residential applications on a world-wide basis.
The Company's business consists of five specific product categories
including recessed down lighting, accent linear lighting systems, surface system
coordinates, low voltage track systems and specification grade outdoor lighting.
Approximately 70% of the Company's products utilize halogen light sources, which
are smaller, longer lasting and more energy efficient light sources in
comparison to traditional incandescent light sources. The balance of the
Company's core product lines primarily use compact fluorescent, and incandescent
lamp sources. Of the halogen light sources, approximately 80% use "low voltage,"
which produce a concentrated, long lasting light, while 20% are "line voltage,"
which produce a slightly less concentrated but significantly less expensive
light source.
The Company's products are specified for use in new construction and in
the renovation of commercial and residential properties by architects,
engineers, interior designers and lighting designers (the "Specification
Market"). The Company's products are also sold directly to electrical
distributors, builders and to retail customers through lighting showrooms,
retail specialty stores and Home Centers (the "Consumer Retail Market"). The
Company believes that historically, approximately 70% of the Company's sales
have been made to the Specification Market and 30% to the Consumer Retail
Market.
The Company's strategy is to exploit new markets for its product offerings
and maximize the efficiencies of its manufacturing and distribution network on a
world-wide basis. In furtherance of this strategy, during 1996, the Company
expanded its operations to include a presence in Asia, Southeast Asia, Europe
and Africa. Further, during 1996, the Company has pursued joint ventures and
strategic relationships in an effort to further its business plan.
Specific recent developments include:
o In July 1996, the Company opened two new offices in Singapore and in
Dong Guan City, China to support the Company's manufacturing, marketing
and sales efforts in those regions. The Dong Guan City office supports the
Company's efforts in the South China region. The Singapore office supports
the Company's business in Singapore, Thailand, Malaysia and Indonesia.
Both offices include architectural and design facilities.
o In August 1996, the Company opened an architectural lighting
application and design facility in Shanghai, China. The facility, which
has been approved by the Chinese government, provides manufacturing,
marketing and sales functions to support the Company's business
development efforts in mainland China. The Company is presently shipping
product into mainland China. Additionally, the Company has entered into a
cooperative and agency agreement with Xin Hua Electronic Co. Ltd. ("Xin
Hua") to design, manufacture and distribute energy
13
<PAGE>
efficient lighting products in North America, Europe and Asia. Pursuant to
this agreement CSL is Xin Hua's agent in North America, Europe and South
East Asia and Xin Hua is CSL's agent in mainland China. The two Company's
have jointly developed new energy efficient products which are being
offered, along with existing CSL products, in China under the trade name
"CSL Asia". The Company expects to introduce energy efficient products
worldwide incorporating Xin Hua's electronic ballast technology beginning
in the fourth quarter of 1996.
o In September 1996, the Company entered a joint venture with General
Technics, S.A. to establish a manufacturing, design and showroom facility
in Casablanca, Morocco. This facility will initially support product
offerings in Africa, Europe and the Middle East. The company will market
its products under the trade name "Creative Systems Lighting/ MOROCCO".
Product Categories and New Product Offerings:
The Company designs, manufactures and markets five specific product categories
including recessed down lighting, accent linear lighting systems, surface system
coordinates, low voltage track systems and specification grade outdoor lighting.
Approximately 70% of the Company's product offerings utilize halogen lamps.
These light fixtures, which are generally smaller in size, nevertheless produce
a superior quality and intensity of light while not sacrificing style and detail
for size. The balance of the Company's core product line products primarily use
compact fluorescent and incandescent lamp sources. The Company markets its
lighting products under a variety of proprietary trade names directly and
indirectly to commercial and residential end users for installation in private
residences, office buildings, hotels, restaurants, stores and other public and
private facilities. The Company believes that it has established a market niche
offering performance engineered and task oriented products. The Company believes
that historically, approximately 70% of the Company's sales have been made to
the Specification Market and 30% to the Consumer Retail Market.
Recessed Down Lighting. The Company's most successful product offering has
been its high end low voltage halogen recessed down lighting, "Jewel Light",
featuring a complete line of die cast trims. A trim is that portion of the light
fixture which remains visible following installation. As the market evolved and
expanded in this product category, a substantial market for lesser quality
(stamped versus die cast trims) with reduced price points developed. In January
1996, the Company introduced its Echo 21 line of low voltage halogen recessed
down lighting with appropriate price points. Echo 21 specifically addresses the
budget oriented market and complements the Company's higher quality and
successful "Jewel Light" line.
Accent Linear Lighting Systems. This product category is dominated by the
Company's Invizilite product. The Invizilite product is a continuous, flexible
light source hidden from view to provide an upward or downward lighting or
"wash" part of a wall with light. Invizilite can be manufactured to use low
voltage halogen, incandescent or xenon bulbs. Traditionally, Invizilite has been
exclusively marketed to the Architectural and Specification market place. In
1996, the Company introduced its third version of Invizilite, "Invizilite 3".
Invizilite 3 utilizes xenon lamps allowing for longer strip lengths between
transformers and increased lamp life. Additionally, the Company offers its
Invizilite product line for lighting showrooms and the Home Center markets in
the form of a user friendly kit.
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<PAGE>
Surface System Coordinates. In 1996, the Company introduced a systems
approach to surface lighting for suspension pendant applications, surface, wall
and ceiling mounted units. Surface system coordinates is a series of light
module holders with a variety of glass shapes, sizes, colors and lamp sources.
Low Voltage Track Systems. The Company's "Micro Track" is a low voltage
track system. Micro Track's special construction allows its companion
miniaturized track heads and fixtures to be moved along the track in both
horizontal and vertical configurations.
Specification Grade Outdoor Lighting. This is a new product category for
the Company which is marketed and distributed to the Architectural,
Specification, Lighting Showroom, and Electrical Distributor market places. The
Company acquired this product line through a joint venture with a large European
manufacturer and distributor of outdoor lighting product, SIMES, and has
exclusive rights to the product in the United States. The Company is also
collaborating with SIMES to distribute certain CSL products in the European
marketplace.
Competition
The lighting industry is intensely competitive with respect to price,
design, quality and reliability in general. Among its competitors are numerous
international, national and regional manufacturers some of which have equivalent
products including Cooper Industries, Inc., Genlyte Group, Juno Lighting, Inc.,
Hubbell, Inc., Thomas Industries and Lithonia. The majority of which are well
established, and have substantially greater financial, managerial, technical,
marketing and other resources than the Company.
ADDITIONAL RECENT DEVELOPMENTS
Changes In Management And Board Of Directors
In April 1996, Mr. Dhananjay Wadekar was elected to fill a vacancy on the
Company's Board of Directors. Mr. Wadekar is a co-founder of DynaGen, Inc., a
publicly traded bio-technology company, and has served as as Chairman of the
Board, Executive Vice President and a Director since November 1991. Mr. Wadekar
was, from 1985 to January 1989, the Chairman and Chief Executive Officer of
Holometrix, Inc., a publicly traded, thermal instrumentation company which he
founded. Mr. Wadekar was a director of Holometrix, Inc. from 1985 until November
1994.
In September 1996, Gilbert Sperry tendered his resignation as an Officer
and Director of the Company in order to pursue other opportunities. Mr. Sperry
had been an Officer and Director of the Company since its inception. In
conjunction with his resignation, the Company entered into a severance agreement
with Mr. Sperry pursuant to which (a) the Company agreed to pay Mr. Sperry the
sum of $55,000 in full satisfaction of all obligations to Mr. Sperry of any
nature; and (b) exchanged general releases.
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<PAGE>
Recent Capital Raising Transactions
Bank Credit Facility
On October 15, 1996 the Company entered into a new two year line of credit
agreement and a three year equipment term loan with a finance company. This line
of credit and term loan replaced the Company's debt facility with Bank of
America The terms of the Company's new line of credit call for a maximum dollar
borrowing of $4,000,000 based on 80% of the Company's eligible accounts
receivable and 40% of the Company's eligible inventory (capped at $1,000,000).
The term debt is capped at $100,000 or 80% of the forced liquidation value of
the Company's eligible equipment. The interest rate for the line of credit and
term debt is prime plus 2.75% and prime plus 3%, respectively. The Company
believes that its current borrowing capacity on its new line of credit is
approximately $2 million.
Sale of Equity
On October 15, 1996, the Company sold 329,000 shares of its Common Stock
for aggregate gross proceeds of $549,430 ($1.67 per share) to certain non-U.S.
residents in a transaction exempt from the registration requirements of Act. The
purchasers of such shares have agreed with the Company not to sell, transfer or
otherwise dispose of such shares for a period of at least sixty days following
issuance.
During the second quarter of 1996, the Company raised an aggregate of
$2,095,000 through the private placement of convertible notes. The Company will
allocate approximately $655,000 to paid in capital related to the issuance of
these notes.
On October 23, 1996 the Company consummated two financings. The proceeds
of such financings, together with the proceeds from the Company's new credit
facility, were used to repay the Company's debt obligations to The Bank of
America. In furtherance of such transactions, the Company issued (a) $750,000
principal amount of 7% Convertible Notes due October 24, 1999, convertible into
shares of Company Common Stock commencing sixty days after issuance at a
conversion rate equal to the lesser of $2.875 or 80% of the average closing bid
price of the Company's Common Stock on the five trading days preceding
conversion, and (b) $600,000 principal amount of 8% Convertible Debentures due
October 31, 1998, convertible into shares of Company Common Stock commencing
sixty days after issuance at a conversion rate equal to the lesser of $2.00 or
75% of the average closing bid price of the Company's Common Stock on the five
trading days preceding conversion.
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from this Offering. The Shares
may be offered by the Selling Shareholders from time to time in transactions in
the over-the-counter market, in negotiated transactions, or a combination of
such methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices relating to prevailing market prices
or at negotiated prices. The Selling Shareholders may effect such transactions
by selling the Shares to or through broker/dealers, and such broker/dealers may
receive compensation in the form of discounts, concessions or commissions from
the Selling Shareholders and/or the purchasers of the Shares for whom such
broker/dealers may act as agents or to whom they sell as principals, or both
(which compensation as to a particular broker/dealer might be in excess of
customary commissions). The Selling Shareholders and any underwriters, dealers
or agents that may participate in the distribution of the Shares may be deemed
to be "underwriters" under the Securities Act and any profit on the sale of the
Shares by them and any discounts, commissions or concessions received by any
such underwriters, dealers or agents might be deemed to be underwriting
discounts and commissions under the Securities Act.
At the time a particular offer of the Shares is made, to the extent
required, a Prospectus Supplement will be distributed which will set forth the
number of Shares being offered, the names of the Selling Shareholders, and the
terms of the offering, including the name or names of any underwriters, dealers
or agents, the purchase price paid; by any underwriter for Shares purchased from
the Selling Shareholders, any discounts, commissions or other items constituting
compensation received from the Selling Shareholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers, and the
proposed selling price to the public.
In order to comply with the applicable securities laws of certain states,
if any, the Shares will be offered or sold through registered or licensed
brokers or dealers in those states. In addition, in certain states the Shares
may not be offered or sold unless they have been registered
16
<PAGE>
or qualified for sale in such states or an exemption from such registration or
qualification requirement is available and such offering or sale is in
compliance therewith.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of securities may not simultaneously engage in market
making activities with respect to such securities for a period of two business
days prior to the commencement of such distribution. In addition and without
limiting the foregoing, the Selling Shareholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including, without limitation, Rules 10b-2, 10b-5, 10b-6 and 10b-7, in
connection with transactions in the Shares during the effectiveness of the
Registration Statement of which this Prospectus is a part. All of the foregoing
may affect the marketability of the Shares.
The Company will pay all of the expenses, including, but not limited to,
fees and expenses of compliance with state securities or "blue sky" laws,
incident to the registration of the Shares other than underwriting discounts and
selling commissions, and fees or expenses, if any, of counsel or other advisors
retained by the Selling Shareholders. The expenses payable by the Company are
estimated to be $36,000.
SELLING SECURITYHOLDERS
The following table shows the names of the Selling Shareholders, the
Shares owned beneficially by each of them, as of November 20, 1996, the number
of Shares that may be offered by each of them pursuant to this Prospectus and
the number of Shares and percentage of outstanding Shares to be owned by each of
them after the completion of this Offering, assuming all of the Shares being
offered are sold. Except for Michael Smith who is a director of the Company,
none of the Selling Shareholders were an officer or director of the Company or,
to the knowledge of the Company, had any material relationship with the Company
within the past three years.
17
<PAGE>
<TABLE>
<CAPTION>
Percentage Percentage
Number of Number of Shares Beneficially Beneficially
Shares Number of Beneficially Owned Owned
Beneficially Shares that Owned After the Before the After the
Selling Shareholder Owned May Be Sold Offering Offering Offering
- ------------------- ----- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Avarian Partners 70,423(1) 70,423 0 1.1% *
J'Art 100,000(2) 50,000 50,000 1.6% *
Julius Baer Securities** 834,534(3) 834,534 0 12.7% *
Robert Calman 50,000(4) 25,000 25,000 * *
David Caplan 300,000(5) 150,000 150,000 4.8% 2.1%
Robert M. Colkitt 94,519(6) 94,519 0 1.5% *
Coutts & Co AG** 387,857(7) 387,857 0 6.0% *
Patrick Grady 100,000(8) 50,000 50,000 1.6% *
S. David Harris and
Nancy Harris, JT 31,506(9) 31,506 0 * *
Industrie and Handelsbank** 456,810(10) 456,810 0 7.0% *
Spencer Lehman 100,000(11) 50,000 50,000 1.6% *
Wilbur Marsh 50,000(12) 25,000 25,000 * *
William Masucci 100,000(13) 50,000 50,000 1.6% *
John McAuliffe 100,000(14) 50,000 50,000 1.6% *
Helmut Meister 50,000(15) 25,000 25,000 * *
Reed Slatkin 70,423(16) 70,423 0 1.1% *
Mike Smith 150,000(17) 75,000 75,000 2.4% 1.0%
Susan Ulf 50,000(18) 25,000 25,000 * *
Mitchell Weisner Trust 70,423(19) 70,423 0 1.1% *
</TABLE>
- ----------
* Less than one-percent.
** This Selling Shareholder is acting as agent for certain non-U.S. residents.
(1) Includes 70,423 shares issuable upon conversion of an outstanding
Debenture, assuming the conversion rate as of the date of this Prospectus.
(2) Includes 50,000 shares issuable upon exercise of an outstanding Common
Stock Purchase Warrant, exercisable at $2.00 per share.
(3) Includes 517,143 shares issuable upon conversion of an outstanding
Debenture, assuming the conversion rate as of the date of this Prospectus.
(4) Includes 25,000 shares issuable upon exercise of an outstanding Common
Stock Purchase Warrant, exercisable at $2.00 per share.
(5) Includes 150,000 shares issuable upon exercise of an outstanding Common
Stock Purchase Warrant, exercisable at $2.00 per share.
(6) Includes 70,423 shares issuable upon conversion of an outstanding
Debenture, assuming the conversion rate as of the date of this Prospectus.
(7) Includes 387,857 shares issueable upon conversion of an outstanding
Debenture, assuming the conversion rate as of the date of this prospectus.
(8) Includes 50,000 shares issuable upon exercise of an outstanding Common
Stock Purchase Warrant, exercisable at $2.00 per share.
(9) Includes 23,474 shares issuable upon conversion of an outstanding
Debenture, assuming the conversion rate as of the date of this Prospectus.
(10) Includes 456,810 shares issuable upon conversion of an outstanding
Debenture, assuming the conversion of an outstanding Debenture, assuming
the conversion rate as of the date of this Prospectus.
(11) Includes 50,000 shares issuable upon exercise of an outstanding Common
Stock Purchase Warrant, exercisable at $2.00 per share.
(12) Includes 25,000 shares issuable upon exercise of an outstanding Common
Stock Purchase Warrant, exercisable at $2.00 per share.
(13) Includes 50,000 shares issuable upon exercise of an outstanding Common
Stock Purchase Warrant, exercisable at $2.00 per share.
(14) Includes 50,000 shares issuable upon exercise of an outstanding Common
Stock Purchase Warrant, exercisable at $2.00 per share.
(15) Includes 25,000 shares issuable upon exercise of an outstanding Common
Stock Purchase Warrant, exercisable at $2.00 per share.
(16) Includes 70,423 shares issuable upon conversion of an outstanding
Debenture, assuming the conversion rate as of the date of this Prospectus.
(17) Includes (i) 75,000 shares issuable upon exercise of outstanding Common
Stock Purchase Warrants, exercisable at $2.00 per share, including 25,000
held by Mr. Smith as custodian for his minor nieces; and (ii) 25,000
shares held by Mr. Smith as custodian for the same minors. Mr. Smith
disclaims beneficial ownership of the shares held for the benefit of his
nieces.
(18) Includes 25,000 shares issuable upon exercise of an outstanding Common
Stock Purchase Warrant, exercisable at $2.00 per share.
(19) Includes 70,423 shares issuable upon conversion of an outstanding
Debenture, assuming the conversion rate as of the date of this Prospectus.
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<PAGE>
TRANSFER AGENT
The Transfer Agent and Registrar for the Shares is American Stock Transfer
Company, 40 Wall Street, 46th Floor, New York, New York 10005.
REPORTS TO SHAREHOLDERS
The Company distributes annual reports to its shareholders, including
financial statements examined and reported on by independent auditors, and will
provide such other reports as management may deem necessary or appropriate to
keep shareholders informed of the Company's operations.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for the
Company by Morse, Zelnick, Rose & Lander, LLP, 450 Park Avenue, New York, New
York 10022-2605.
EXPERTS
The audited financial statements incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports. Reference is made to
said report which includes an explanatory paragraph that describes the Company's
recurring losses from operations and retained deficit that raise substantial
doubt about the Company's ability to continue as a going concern discussed in
Note 1 to the financial statements.
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<PAGE>
================================================================================
No Underwriter, salesman or other person has been authorized to give any
information or to make any representations not contained in this Prospectus in
connection with the offer made hereby. If given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer of any securities other
than the securities to which it relates or an offer to any person in any
jurisdiction in which such an offer would be unlawful. Any material modification
of the offering will be accomplished by means of an amendment to the
registration statement.
Table of Contents
Page
----
Prospectus Summary................................................ 6
The Company....................................................... 6
The Offering ..................................................... 6
Risk Factors...................................................... 7
Use of Proceeds................................................... 12
Market for the Registrant's Common Stock and Related
Security Holder Matters ........................................ 12
Summary of Business and Recent Developments ...................... 13
Additional Recent Developments ................................... 15
Plan of Distribution.............................................. 16
Selling Securityholders........................................... 17
Transfer Agent ................................................... 19
Reports of Shareholders .......................................... 19
Legal Matters..................................................... 19
Experts........................................................... 19
================================================================================
<PAGE>
================================================================================
2,591,495 Shares of Common Stock
CSL LIGHTING MANUFACTURING, INC.
PROSPECTUS
November __, 1996
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Expenses in connection with the issuance and distribution of the shares of
Common Stock being registered hereunder other than underwriting commissions and
expenses, are estimated below.
SEC Registration fee $1,610.00
Printing expenses 2,500.00
Accounting fees and expenses 10,000.00
Legal fees and expenses 20,000.00
Miscellaneous expenses 1,890.00
Total 36,000.00
- ----------
* estimated
The Selling Securityholders will not pay any of the foregoing expenses in
connection with the Offering.
Item 15. Indemnification of Directors and Officers
Sections 145 of the Delaware General Corporation Law grants to the Company
the power to indemnify the officers and directors of the Company, under certain
circumstances and subject to certain conditions and limitations as stated
therein, against all expenses and liabilities incurred by or imposed upon them
as a result of suits brought against them as such officers and directors if they
act in good faith and in a manner they reasonably believe to be in or not
opposed to the best interests of the Company and, with respect to any criminal
action or proceeding, have no reasonable cause to believe their conduct was
unlawful.
The Company's certificate of incorporation provides as follows:
"NINTH: A director of the corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the derived an improper personal
benefit.
TENTH: (a) Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer,
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation
II-1
<PAGE>
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights that said law permitted the
Corporation to provide prior to such amendment), against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs, executors and
administrator; provided, however, that except as provided in paragraph (b)
hereof, the Corporation shall indemnify and such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this Section shall be
a contract right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the General Corporation Law requires,
the payment of such expenses incurred by a director or officer (in his or her
capacity as a director or officer and not in any other capacity in which service
was or is rendered by such person while a director or officer, including,
without limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Section or otherwise. The
Corporation may, by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of
this Section is not paid in full by the Corporation within thirty days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the General Corporation Law for the Corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Nether the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard or conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
(c) Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section shall not be exclusively of any other
right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, by-law, agreement, vote of
stockholder or disinterested directors or otherwise.
II-2
<PAGE>
(d) Insurance. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the General Corporation Law."
Reference is made to the form of the Underwriting Agreement, filed as
Exhibit 1.1 hereto, which contains provisions for indemnification of the
Company, its directors, officers, and any controlling persons, by the
Underwriter against certain liabilities for information furnished by the
Underwriter.
Item 27. Exhibits
(a) Exhibits:
Exhibit
No. Description Page
- ------- ----------- ----
4.1 Form of Debenture.
4.2 Form of Convertible Note.
5.1 Opinion of Morse, Zelnick, Rose & Lander, LLP.
23.1 Consent of Arthur Andersen, LLP.
23.2 Consent of Morse, Zelnick, Rose & Lander, LLP
(included in Exhibit 5.1).
24. Power of Attorney*
- ----------
* Previously filed.
Item 28. Certain Undertakings
A. The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement; and
II-3
<PAGE>
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) To provide to the Underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the Underwriters to permit prompt delivery to each
purchaser.
(5) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(6) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating t the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
B. Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant of expenses incurred or paid by
a director, officer of controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Valencia, State of California on November 21, 1996.
CSL LIGHTING MANUFACTURING, INC.
By: /s/Sylvan Gerber
------------------------------
Sylvan Gerber
Chairman and Chief
Executive Officer
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed on November 21, 1996 by
the following persons in the capacities indicated.
Signature Title
--------- -----
/s/ Sylvan Gerber Chairman and Chief Executive
- --------------------------------- Officer and Director
Sylvan Gerber
/s/ Scott Searle* President
- ---------------------------------
Scott Searle
/s/ Mark Allen Vice President, Chief Operating Officer,
- --------------------------------- Acting Principal Accounting Officer and
Mark Allen Secretary
/s/Bert Finmark* Director
- ---------------------------------
Bert Finmark
/s/ Michael Smith* Director
- ---------------------------------
Michael Smith
/s/ Dhananjay Wadakar* Director
- ---------------------------------
Dhananjay Wadaker
*By: /s/ Mark Allen
- ---------------------------------
Mark Allen, Attorney in fact
II-5
THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT
BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR
(ii) RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE ISSUER TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN
CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE
STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY NOTE ISSUED IN
EXCHANGE FOR THIS NOTE.
CSL LIGHTING MANUFACTURING, INC.
7% CONVERTIBLE SUBORDINATED DEBENTURE
DUE MARCH 31, 2001
No. ZZ-__ $____________
CSL LIGHTING MANUFACTURING, INC., a Delaware corporation (the "Company"), for
value received, hereby promises to pay to __________________, or registered
assigns (the "Payee" or "Holder") on March 31, 2001 (the "Maturity Date") at the
offices of the Company, 27615 Avenue Hopkins, Valencia, California 91355, the
principal amount of ______________ ($________) Dollars, which shall be payable
in cash or by check. Interest on the principal amount of this Debenture shall be
paid at the rate of seven percent (7%) per annum accrued through the Maturity
Date, payable in cash or by check on the Maturity Date.
This Debenture is issued pursuant to a Subscription Agreement dated
_______________, 1996, between the Company and the Payee (the "Subscription
Agreement"), a copy of which agreement is available for inspection at the
Company's principal office. Notwithstanding any provision to the contrary
contained herein, this Debenture is subject and entitled to certain terms,
conditions, covenants and agreements contained in the Subscription Agreement.
Any transferee or transferees of the Debenture, by their acceptance hereof,
assume the obligations of the Payee in the Subscription Agreement with respect
to the conditions and procedures for transfer of the Debenture. Reference to the
Subscription Agreement shall in no way impair the absolute and unconditional
obligation of the Company to pay both principal and interest hereon as provided
herein.
A. Prepayment
The principal amount of this Debenture may be prepaid by the Company,
in whole or in part, without penalty, at any time on ten (10) days prior written
notice to Payee.
-1-
<PAGE>
B. Covenants of Company
A. The Company covenants and agrees that, so long as this Debenture
shall be outstanding, it will:
(i) Promptly pay and discharge all lawful taxes, assessments, and
governmental charges or levies imposed upon the Company or upon its income and
profits, or upon any of its property, before the same shall become in default,
as well as all lawful claims for labor, materials and supplies which, if unpaid,
might become a lien or charge upon such properties or any part thereof:
provided, however, that the Company shall not be required to pay and discharge
any such tax, assessment, charge, levy or claim so long as the validity thereof
shall be contested in good faith by appropriate proceedings and the Company
shall set aside on its books adequate reserves with respect to any such tax,
assessment, charge, levy or claim so contested;
(ii) Do or cause to be done all things reasonably necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises and comply with all laws applicable to the Company, except where the
failure to comply would not have a material adverse effect on the Company;
(iii) At all times reasonably maintain, preserve, protect and
keep its property used or useful in the conduct of its business in good repair,
working order and condition, and from time to time make all needful and proper
repairs, renewals, replacements, betterments and improvements thereto as shall
be reasonably required in the conduct of its business;
(iv) To the extent necessary for the operation of its business,
keep adequately insured by all financially sound reputable insurers, all
property of a character usually insured by similar corporations and carry such
other insurance as is usually carried by similar corporations; and
(v) At all times keep true and correct books, records and
accounts.
This Debenture is subject to the following additional provisions:
1. The Debentures are usable in denominations of Twenty Five Thousand
Dollars ($25,000 U.S.) and integral multiples thereof. The Debentures are
exchangeable for an equal aggregate principal amount of Debentures of different
authorized denominations, as requested by the Holders surrending the same. No
service charge will be made for such registration of transfer or exchange.
2. The Company shall be entitled to withhold from all payments of principal
of, and interest on, this Debenture any amounts required to be withheld under
the applicable provisions of the United States income tax laws or other
applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment representations of
the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"). Prior to due
presentment for transfer of this Debenture, the Company and any agent of the
Company may treat the person in whose name this Debenture is duly registered on
the Company's Debenture Register as the owner hereof
-2-
<PAGE>
for the purpose of receiving payment as herein provided and for all other
purposes, whether or not this Debenture be overdue, and neither the Company nor
any such agent shall be affected by notice to the contrary.
4. The Holder of this Debenture is entitled, at its option, at any time
commencing ninety (90) days after issuance and until maturity hereof (or earlier
prepayment by the Company), to convert the principal amount of this Debenture or
any portion of the principal amount hereof which is at least Twenty-Five
Thousand ($25,000), or if at the time of such election to convert, the aggregate
principal amount of all Debentures registered to the Holder is less then
Twenty-Five Thousand Dollars ($25,000), then the whole amount thereof, into
Shares of Common Stock of the Company at a conversion price for each share of
Common Stock equal to eighty percent (80%) of the Market Price of the Company's
Common Stock; provided that no more than one-third of the principal amount of
this Debenture may be converted during any thirty (30) day period. For purposes
of this Section 4, the Market Price shall be the average closing bid price of
the Common Stock on the ten (10) trading days preceding the conversion date, as
reported by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), or the closing bid price in the over-the counter market or,
in the event the Common Stock is listed on a stock exchange, the fair market
value per Share shall be the average closing price on the exchange, as reported
to the Wall Street Journal. Such conversion shall be effectuated by surrendering
the Debentures to be converted (with a copy, by facsimile or courier, to the
Company) to the Company with the form of conversion notice attached hereto as
Exhibit A, executed by the Holder of this Debenture evidencing such Holder's
intention to convert this Debenture or a specified portion (as above provided)
hereof, and accompanied, if required by the Company, by proper assignment hereof
in blank. The Company shall use its best efforts to have the Shares of Common
Stock issued and delivered to the Holder thereof within seven business days of
the receipt of the conversion form and Debenture(s). If this Debenture is
converted into Shares of Common Stock of the Company pursuant to this Section 4
within twelve months from the receipt of proceeds, then all unpaid interest
accrued or accruing form the date of issuance to the date of conversion shall be
waived by the Holder. If, however, this Debenture is converted into Shares of
Common Stock of the Company pursuant to this Section 4 after twelve months from
the receipt of proceeds, then the amount of accrued but unpaid interest shall be
subject to conversion. No fractions of shares or scrip representing fractions of
shares will be issued on conversion, but the number of shares usable shall be
rounded to the nearest whole share. The date on which notice of conversion is
given shall be deemed to be the date on which the Holder has delivered this
Debenture, with the conversion notice duly executed, to the Company, or, if
earlier, the date set forth in such notice of conversion if this Debenture is
received by the Company within five business days thereafter. Notwithstanding
anything to the contrary contained in this provision, the Holder may, commencing
on the tenth (10th) business day following issuance of this Debenture, elect by
notice to the Company to convert up to one-third of the principal amount of this
Debenture on the ninetieth day following issuance at the Market Price determined
as of the date of such notice.
5. No provision of this Debenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of, and
interest on, this Debenture at the time, place and rate, and in the coin or
currency, herein prescribed. This Debenture and all other Debentures now or
hereafter issued of similar terms are direct obligations of the Company. This
Debenture ranks equally and ratably with all other Debentures now or hereafter
issued under the terms set forth herein.
6. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company
-3-
<PAGE>
or any successor corporation, whether by virtue of any constitution, statute or
rule of law, or by the enforcement of any assessment or penalty or otherwise,
all such liability being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and released.
7. The Holder of this Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Shares of Common Stock usable
upon exercise thereof except under circumstances which will not result in a
violation of the Act or any applicable state Blue Sky law or similar laws
relating to the sale of securities.
C. Events of Default
1. This Debenture shall become and be due and payable upon written
demand made by the holder hereof if one or more of the following events, herein
called events of default, shall happen and be continuing:
(i) Default in the payment of the principal and accrued interest
on this Debenture when and as the same shall become due and payable, whether by
acceleration or otherwise;
(ii) Default in the due observance or performance of any material
covenant, condition or agreement on the part of the Company to be observed or
performed pursuant to the terms hereof and such default shall continue uncured
for thirty (30) days after written notice thereof, specifying such default,
shall have been given to the Company by the holder of the Debenture;
(iii) Application for, or consent to, the appointment of a
receiver, trustee or liquidator of the Company or of its property;
(iv) Admission in writing of the Company's inability to pay its
debts as they mature;
(v) General assignment by the Company for the benefit of
creditors;
(vi) Filing by the Company of a voluntary petition in bankruptcy
or a petition or an answer seeking reorganization, or an arrangement with
creditors;
(vii) Entering against the Company of a court order approving a
petition filed against it under the Federal bankruptcy laws, which order shall
not have been vacated or set aside or otherwise terminated within sixty (60)
days;
(viii) A material breach of the Company's representations
contained in the Subscription Agreement;
(ix) The sale by the Company of substantially all of its assets;
(x) The merger by the Company with or into another corporation,
other than for purposes of changing domicile, where the Company is not the
surviving corporation.
-4-
<PAGE>
2. The Company agrees that notice of the occurrence of any event of
default will be promptly given to the holder at his or her registered address by
certified mail.
3. In case any one or more of the events of default specified above
shall happen and be continuing, the holder of this Debenture may proceed to
protect and enforce his rights by suit in the specific performance of any
covenant or agreement contained in this Debenture or in aid of the exercise of
any power granted in this Debenture or may proceed to enforce the payment of
this Debenture or to enforce any other legal or equitable rights as such holder.
D. Miscellaneous
1. This Debenture has been issued by the Company pursuant to
authorization of the Board of Directors of the Company which provides for an
aggregate of up to $1,000,000 in face amount of identical Debentures to be
issued.
2. The Company may consider and treat the person in whose name this
Debenture shall be registered as the absolute owner thereof for all purposes
whatsoever (whether or not this Debenture shall be overdue) and the Company
shall not be affected by any notice to the contrary. The registered owner of
this Debenture shall have the right to transfer it by assignment (subject to the
limitations on transfer contained in the Subscription Agreement) and the
transferee thereof shall, upon his registration as owner of this Debenture,
become vested with all the powers and rights of the transferor. Registration of
any new owner shall take place upon presentation of this Debenture to the
Company at its offices, 27615 Avenue Hopkins, Valencia, California 91355,
together with a duly authenticated assignment. In case of transfer by operation
of law, the transferee agrees to notify the Company of such transfer and of his
address, and to submit appropriate evidence regarding the transfer so that this
Debenture may be registered in the name of the transferee. This Debenture is
transferable only on the books of the Company by the holder hereof, in person or
by attorney, on the surrender hereof, duly endorsed. Communications sent to any
registered owner shall be effective as against all holders or transferees of the
Debenture not registered at the time of sending the communication.
3. Payment of principal and interest shall be made to the registered
owner of this Debenture upon presentation of this Debenture upon or after
maturity.
4. This Debenture shall be construed and enforced in accordance with
the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Debenture to be signed in
its name by the undersigned.
Dated: _______________, 1996
CSL LIGHTING MANUFACTURING, INC.
By: _________________________________
Mark Allen, Chief Operating Officer
-5-
THE NOTE REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS
OF ANY STATE; AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH, OR PURSUANT TO AN
EXEMPTION FROM, THE REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
---------------
CONVERTIBLE NOTE
Due November ___, 1997
_________________, 1996 $______________
No. __
CSL Lighting Manufacturing, Inc., a Delaware corporation (hereinafter
called the "Issuer"), for value received, hereby promises to pay to the Holder
(as defined below) on November ___, 1997 the principal amount of $_______ in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for public and private debts, at the principal office of
the Issuer, plus, all interest that shall have accrued at a rate of 12% per
annum (the "Note Interest Rate"), subject to Section 6.3 hereof, starting on the
first anniversary of this Note (computed on the basis of a 360-day year) at said
office, in like coin or currency, on the outstanding portion of said principal
amount.
ARTICLE 1
DEFINITIONS
SECTION 1.1 Definitions. The terms defined in this Article whenever used in
this Note shall have the respective meanings hereinafter specified.
(a) "Additional Capital Shares" shall have the meaning set forth in Section
3.1(c).
(b) "Business Day" shall mean a day other than Saturday, Sunday or any day
on which banks located in the state of New York are authorized or obligated to
close.
(c) "Capital Shares" shall mean the Common Shares and any other shares of
any other class of common stock, whether now or hereafter authorized, which have
the right to participate in the distribution of earnings and assets of the
Issuer.
<PAGE>
(d) "Closing Date" shall mean _______, 19__.
(e) "Common Shares" shall mean shares of the common stock, par value $.01,
of the Issuer.
(f) "Conversion Date" shall mean any day on which all or some part of the
principal amount of this Note is converted into Note Shares in accordance with
the terms of this Note, provided that a Conversion Date must be a Business Day.
(g) "Conversion Notice" shall have the meaning set forth in Section 3.2.
(h) "Conversion Price" shall have the meaning set forth in Section 3.1.
(i) "Conversion Ratio" shall have the meaning set forth in Section 3.1.
(j) "Current Market Price" per Common Share on any date herein specified
shall be deemed to be the last trade price on such day on the National
Association of Securities Dealers Automated Quotations Small Capitalization
system ("NASDAQ").
(k) "Default Interest Rate" shall be equal to the Note Interest Rate plus
6% per annum.
(l) "Event of Default" shall have the meaning set forth in Section 6.1.
(m) "Holder" shall mean ______________________, acting in its capacity as
agent for certain non-U.S. persons or any Person to which this Note is
subsequently transferred in accordance with the terms provided herein.
(n) "Issuer" shall mean CSL Lighting Manufacturing, Inc., a Delaware
corporation, and any successor corporation by merger, consolidation, sale or
exchange of all or substantially all of the Issuer's assets, or otherwise.
(o) "Market Disruption Event" shall mean any event that results in a
material suspension or limitation of trading of Common Shares on the NASDAQ (or,
if the Common Shares are not listed for trading on the NASDAQ, the principal
trading market for the Common Shares as determined by the Holder in its
reasonable discretion).
(p) "Maximum Rate" shall have the meaning set forth in Section 6.3.
(q) "Note" shall mean this Convertible Note or such other Convertible Note
or Notes exchanged therefor as provided in Section 2.1.
A-2
<PAGE>
(r) "Notes" shall mean the Convertible Note issued pursuant to the Purchase
Agreement and such other Convertible Note or Notes exchanged therefor as
provided in Section 2.1.
(s) "Note Shares," when used with reference to the securities issuable upon
conversion of this Note, shall mean all Common Shares now or hereafter
Outstanding and securities of any other class into which the Note Shares shall
hereafter have been changed, whether now or hereafter created.
(t) "Outstanding" when used with reference to Common Shares or Capital
Shares (collectively, "Shares"), shall mean, at any date as of which the number
of such Shares is to be determined, all issued and outstanding Shares, and shall
include all such Shares issuable in respect of outstanding scrip or any
certificates representing fractional interests in such Shares; provided,
however, that "Outstanding" shall not mean any such Shares then directly or
indirectly owned or held by or for the account of the Issuer or any Subsidiary.
(u) "Person" shall mean an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
(v) "Purchase Agreement" means the Securities Purchase Agreement, dated
_______, 19__, between the Issuer and ____________________________, acting its
capacity as agent for certain non-U.S. persons.
(w) "Redemption Price" shall have the meaning set forth in Section 2.4.
(x) "Registration Rights Agreement" shall have the meaning set forth in
Section 6(b) of the Purchase Agreement. This is the Note referred to as the
Second Note in the Registration Rights Agreement.
(y) "SEC" shall mean the United States Securities and Exchange Commission.
(z) "Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the SEC thereunder, all as in effect at the time.
(aa) "Senior Debt" shall have the meaning set forth in Section 4.2.
(bb) "Senior Lender" shall have the meaning set forth in Section 4.2.
(cc) "Subsidiary" shall mean any entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are owned
directly or indirectly by the Issuer.
(dd) "Subordinated Debt" shall have the meaning set forth in Section 4.2.
A-3
<PAGE>
(ee) "Trading Day" shall mean any day on which trades of securities listed
thereon are reported by the NASDAQ (or, if the Common Shares are not listed for
trading on the NASDAQ, the principal trading market for the Common Shares) and
on which no Market Disruption Event has occurred.
(ff) "Valuation Event" shall have the meaning set forth in Section 3.1.
(gg) "Valuation Period" shall have the meaning set forth in Section 3.1.
All references to "cash" or "$" herein shall mean currency of the United States
of America.
ARTICLE 2
EXCHANGES AND TRANSFER; REDEMPTION
SECTION 2.1 Exchange and Registration of Transfer of Notes. The Holder may,
at its option, surrender this Note at the office of the Issuer and receive in
exchange therefor a Note or Notes, each in the denomination of $1,000.00 or an
integral multiple of $1,000.00 in excess thereof, dated as of the date of this
Note, and, subject to Section 4.1, payable to such Person, or order, as may be
designated by such Holder. The aggregate principal amount of such Note or Notes
exchanged in accordance with this Section 2.1 shall equal the aggregate unpaid
principal amount of this Note as of the date of such surrender; provided,
however, that upon such exchange there shall be filed with the Issuer the name
and address for all purposes hereof of the Holder or Holders of the Note or
Notes delivered in such exchange. This Note, when presented for registration of
transfer or for exchange, conversion or payment, shall (if so required by the
Issuer) be duly endorsed by, or be accompanied by a written instrument of
transfer in form reasonably satisfactory to the Issuer duly executed by, the
Holder or its attorney duly authorized in writing.
SECTION 2.2 Loss, Theft, Destruction of Note. Upon receipt of evidence
satisfactory to the Issuer of the loss, theft, destruction or mutilation of this
Note and, in the case of any such loss, theft or destruction, upon receipt of
indemnity or security reasonably satisfactory to the Issuer, or, in the case of
any such mutilation, upon surrender and cancellation of this Note, the Issuer
will make and deliver, in lieu of such lost, stolen, destroyed or mutilated
Note, a new Note of like tenor and unpaid principal amount dated as of the date
hereof. This Note shall be held and owned upon the express condition that the
provisions of this Section 2.2 are exclusive with respect to the replacement of
a mutilated, destroyed, lost or stolen Note and shall preclude any and all other
rights and remedies notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without their surrender.
SECTION 2.3 Who Deemed Absolute Owner. The Issuer may deem the person in
whose name this Note shall be registered upon the registry books of the Issuer
to be, and may treat it as, the absolute owner of this Note (whether or not this
Note shall be overdue) for the purpose of receiving payment of or on account of
the principal of this Note, for the conversion
A-4
<PAGE>
of this Note and for all other purposes, and the Issuer shall not be affected by
any notice to the contrary. All such payments and such conversion shall be valid
and effectual to satisfy and discharge the liability upon this Note to the
extent of the sum or sums so paid or the conversion so made.
SECTION 2.4 Optional Redemption by the Issuer. The Issuer at its election,
upon notice given as provided in Section 2.5, may redeem this Note in whole or
in part at any time and from time to time. If this Note is so redeemed before
September 1, 1996, the Issuer shall pay to the Holder a redemption price of 104%
of the aggregate principal amount outstanding so to be redeemed (the "Redemption
Price"). The Redemption Price shall be increased by 1% on the first day of each
calendar month thereafter until this Note is converted or redeemed in full or
repaid in full at maturity.
SECTION 2.5 Notice of Redemptions; Right to Convert in Lieu of Accepting
Redemptions. In the case of redemption of this Note, notice thereof shall be
given in writing to the Holder not fewer than 30 nor more than 60 days prior to
the date fixed for such redemption, which notice shall specify the date fixed
for such redemption and make reference to this Section 2.5 pursuant to which
such redemption is to be made. Such notice of redemption and all other notices
to be given to the Holder shall be given by registered mail at its designated
address.
Upon notice of any redemption being given as provided in this Section 2.5,
the Holder shall have the right to exercise, either in whole or in part, the
conversion privilege pursuant to Article 3 hereof until 5:00 P.M. on the
twenty-ninth day next following the day of receipt of a notice of redemption
hereunder, except if such twenty-ninth day is not a Business Day, then on the
Business Day immediately there following; in such conversion event, the notice
of redemption shall become void and have no further force and effect.
Notwithstanding anything to the contrary in the previous sentence, to the extent
that the Holder does not choose to exercise the conversion privilege pursuant to
Article 3 hereof by such time, the Issuer may then redeem the unconverted and
unredeemed portion of this Note and the Redemption Price shall become due and
payable to the Holder, at the office of the Issuer on the date specified in such
notice.
SECTION 2.6 Surrender of Notes; Notation Thereon. Upon any redemption of a
portion of the principal amount of this Note pursuant to this Article 2, the
Holder at its option may require the Issuer to make and deliver, at the expense
of the Issuer (other than for transfer taxes, if any), upon surrender of this
Note, a new Note payable to such person or persons, or order, as may be
designated by the Holder for the principal amount of this Note then remaining
unredeemed, dated as of the date to which interest has been paid on the
unredeemed principal amount of this Note (or, if no interest has been paid
hereon, then dated as of the date of this Note), or may present this Note to the
Issuer for notation hereon of the payment of the portion of the principal amount
so redeemed. The Issuer may, as a condition of payment of all or any of the
principal of or interest on this Note, require the Holder to present this Note
for notation of such payment and, if this Note be paid in full, require the
surrender hereof.
A-5
<PAGE>
ARTICLE 3
CONVERSION OF NOTE
SECTION 3.1 Conversion; Conversion Price. At the option of the Holder, at
any time from the ninety first (91st) day following the date of issuance of this
Note until this Note is paid in full, this Note may be converted, either in
whole or in part in a minimum amount of $100,000 plus increments of $10,000 or,
if the outstanding principal amount of this Note is less than $100,000, the
entire amount of this Note, up to the principal amount hereof (or in case some
portion of this Note shall have been called for redemption prior to such date,
then at the portion that is not so called), together with accrued and unpaid
interest thereon to the relevant Conversion Date, into Note Shares (calculated
as to each conversion to the nearest 1/100th of a Note Share), at the conversion
price (the "Conversion Price") equal to seventy-five percent (75%) (the
"Conversion Ratio") of the average bid price on the five Trading Days
immediately preceding the relevant Conversion Date (the "Valuation Period") plus
1,000 shares of Common Stock for each $10,000 principal amount of this Note
converted; provided, however, that if a Valuation Event occurs during any
Valuation Period, a new Valuation Period shall begin on the Trading Day
immediately after the occurrence of such Valuation Event and end on the
Conversion Date; provided, further, however, that if a Valuation Event occurs on
the fifth day of a Valuation Period then the Conversion Price shall be the
closing price on such day; provided, further, however, that the Holder may, in
its sole discretion, postpone such Conversion Date to a Trading Day which is no
more than five Trading Days after the occurrence of the latest Valuation Event.
For the purposes of this Section 3.1, a "Valuation Event" shall mean an event in
which the Issuer at any time during a Valuation Period takes any of the
following actions:
(a) subdivides or combines its Common Shares;
(b) pays a dividend in its Capital Shares or makes any other
distribution of its Capital Shares;
(c) issues any additional Capital Shares (the "Additional Capital
Shares"), otherwise than as provided in the foregoing Sections 3.1(a) and 3.1(b)
above, at a price per share less, or for other consideration lower, than the
Current Market Price in effect immediately prior to such issuance, or without
consideration;
(d) issues any warrants, options or other rights to subscribe for or
purchase any Additional Capital Shares and the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the Current Market
Price in effect at the hereunder immediately prior to such issuance;
(e) issues any securities convertible into or exchangeable for Capital
Shares and the consideration per share for which Additional Capital Shares may
at any time thereafter be issuable pursuant to the terms of such convertible or
exchangeable securities shall be less than the Current Market Price in effect
immediately prior to such issuance;
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(f) makes a distribution of its assets or evidences of indebtedness to
the holders of its Capital Shares as a dividend in liquidation or by way of
return of capital or other than as a dividend payable out of earnings or surplus
legally available for dividends under applicable law or any distribution to such
holders made in respect of the sale of all or substantially all of the Issuer's
assets (other than under the circumstances provided for in the foregoing
Sections 3.1(a) through 3.1(e)), provided, in each case, that such distribution
described in this Section 3.1(f) does not constitute an Event of Default
hereunder; or
(g) takes any action affecting the number of Outstanding Capital
Shares, other than an action described in any of the foregoing Sections 3.1(a)
through 3.1(f) hereof, inclusive, which in the opinion of the Issuer's Board of
Directors, determined in good faith, would have a materially adverse effect upon
the rights of the Holder at the time of a conversion of this Note.
SECTION 3.2 Exercise of Conversion Privilege. In order to exercise the
conversion privilege, either in whole or in part, the Holder shall surrender
this Note to the Issuer during usual business hours at its principal office and
shall give written notice to the Issuer in the form attached hereto in Annex I
(the "Conversion Notice") at said office that the Holder elects to convert this
Note. The Issuer shall convert the Note and issue the Note Shares effective as
of the time requested by the Holder in the Conversion Notice so long as such
time is after the date on which the Conversion Notice is given. The Conversion
Notice shall also state the name or names (with address) of the persons who are
to become the holders of the Note Shares in connection with such conversion.
Upon surrender for conversion, this Note shall be accompanied by a proper
assignment hereof to the Issuer or in blank. As promptly as practicable after
the receipt of such Conversion Notice and the surrender of this Note as
aforesaid, but in any event no more than 5 Business Days after the Issuer's
receipt of such Conversion Notice and surrender of this Note, the Issuer shall
(i) issue the Note Shares issuable upon such conversion in accordance with the
provisions of this Article 3, and (ii) deliver to the Holder (X) a certificate
or certificate(s) representing the number of Note Shares to which the Holder is
entitled by virtue of such conversion, and (Y) cash, as provided in Section 3.3,
in respect of any fraction of a Share issuable upon such conversion. Such
conversion shall be deemed to have been effected at the time at which the
Conversion Notice indicates so long as this Note shall have been surrendered as
aforesaid at such time, and at such time the rights of the Holder as holder of
this Note shall cease and the person and persons in whose name or names the Note
Shares shall be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the Note Shares represented thereby. The
Conversion Notice shall constitute a contract between the Holder and the Issuer,
whereby the Holder shall be deemed to subscribe for the number of Note Shares
which it will be entitled to receive upon such conversion and, in payment and
satisfaction of such subscription (and for any cash adjustment to which it is
entitled pursuant to Section 3.3), to surrender this Note and to release the
Issuer from all liability thereon.
SECTION 3.3 Fractional Shares. No fractional Note Shares or scrip
representing fractional Note Shares shall be issued upon conversion of this
Note. Instead of any fractional Note Shares which would otherwise be issuable
upon conversion of this Note, the Issuer shall pay a cash adjustment in respect
of such fraction in an amount equal to the same fraction of the greater of the
Current Market Price per Common Share at the close of business on the Business
Day
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which next precedes the day of conversion or the Conversion Price in effect at
the time of conversion. No payment or adjustment shall be made upon any
conversion on account of any distribution on the Note Shares issued upon such
conversion but the Holder surrendering this Note for conversion shall be
entitled to receive in cash, upon any conversion, the amount of any interest
accrued and unpaid to the date of such conversion on the then outstanding
principal amount thereof.
SECTION 3.4 Reclassification, Consolidation, Merger or Mandatory Share
Exchange. At any time while this Note remains outstanding and unexpired, in case
of any reclassification or change of Outstanding Common Shares issuable upon
conversion of this Note (other than a change in par value, or from par value to
no par value per share, or from no par value per share to par value or as a
result of a subdivision or combination of outstanding securities issuable upon
conversion of this Note) or in case of any consolidation, merger or mandatory
share exchange of the Issuer with or into another corporation (other than a
merger or mandatory share exchange with another corporation in which the Issuer
is a continuing corporation and which does not result in any reclassification or
change, other than a change in par value, or from par value to no par value per
share, or from no par value per share to par value, or as a result of a
subdivision or combination of Outstanding Common Shares upon conversion of this
Note), or in the case of any sale or transfer to another corporation of the
property of the Issuer as an entirety or substantially as an entirety, the
Issuer, or such successor or purchasing corporation, as the case may be, shall,
without payment of any additional consideration therefore, execute a new Note
providing that the Holder shall have the right to convert such new Note (upon
terms and conditions not less favorable to the Holder than those then applicable
to this Note) and to receive upon such exercise, in lieu of each Common Share
theretofore issuable upon conversion of this Note, the kind and amount of shares
of stock, other securities, money or property receivable upon such
reclassification, change, consolidation, merger, mandatory share exchange, sale
or transfer by the holder of one Common Share issuable upon conversion of this
Note had this Note been converted immediately prior to such reclassification,
change, consolidation, merger, mandatory share exchange or sale or transfer. The
provisions of this Section 3.4 shall similarly apply to successive
reclassifications, changes, consolidations, mergers, mandatory share exchanges
and sales and transfers.
SECTION 3.5 Adjustments to Conversion Ratio. For so long as this Note is
outstanding, if the Issuer (i) issues and sells pursuant to an exemption from
registration under the Securities Act (A) Common Shares at a purchase price
representing a percentage of the Current Market Price of the Common Shares on
the date of issuance thereof that is lower than 75%, (B) warrants or options
with a strike price representing a percentage of the Current Market Price of the
Common Shares on the date of issuance of the warrants or options that is lower
than 75%, or (C) convertible or exchangeable securities with a right to exchange
at lower than 75% of the Current Market Price of the Common Shares on the date
of issuance or conversion, as applicable, of such convertible or exchangeable
securities; and (ii) grants the right to the purchaser(s) thereof to demand that
the Issuer register under the Securities Act such Common Shares issued or the
Common Shares for which such warrants or options may be exercised or such
convertible or exchangeable securities may be converted or exchanged, then the
Conversion Ratio shall be reduced to equal the lowest of any such lower
percentages.
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ARTICLE 4
STATUS; RESTRICTIONS ON TRANSFER
SECTION 4.1 Status of Note. Subject to Section 4.2 below, this Note is a
direct, general and unconditional obligation of the Issuer ranking pari passu
with all other unsecured senior indebtedness of the Issuer, and constitutes a
valid and legally binding obligation of the Issuer, enforceable in accordance
with its terms subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other similar laws of general applicability relating to or
affecting creditors' rights and to general principals of equity.
SECTION 4.2 Subordination of Note. The payment of principal, interest, fees
and other sums arising pursuant this Note (the "Subordinated Debt") is expressly
subordinated, in the manner hereinafter set forth, in right of payment to the
prior payment and satisfaction in full of the Senior Debt. As used herein,
"Senior Debt" means the principal, interest, fees and other sums currently
payable to the Bank of America (the "Senior Lender") and any future
restructuring of such indebtedness (including any restructurings where a new
lender is substituted for the Senior Lender), but not including any additional
borrowings from the Senior Lender (or any substitute Senior Lender) made after
the date of this Agreement. So long as any part of the Senior Debt shall be due
to the Senior Lender (or any substitute Senior Lender) and unpaid, no payment of
any Subordinated Debt (whether in respect of principal, interest, fees, charges
or otherwise) shall be made at any time by the Company or received by the
Holder, without the prior written consent of the Senior Lender (or any
substitute Senior Lender). Notwithstanding the foregoing, however, the Company
may convert this Note pursuant to Article 3 hereof or redeem this Note pursuant
to Article 2 hereof.
SECTION 4.3 Restrictions on Transfer. This Note, and any Note Shares issued
according to the terms hereof, have not been and will not be registered under
the United States Securities Act. This Note and any Note Shares may not be
offered or sold, directly or indirectly, except pursuant to registration under
the Act, an available exemption therefrom, or pursuant to Regulation S.
ARTICLE 5
COVENANTS
The Issuer covenants and agrees that so long as this Note shall be
outstanding:
SECTION 5.1 Payment of Note. The Issuer will punctually pay or cause to be
paid the principal of, or interest on, this Note according to the terms hereof.
SECTION 5.2 Notice of Default. If any one or more events occur which
constitute or which, with the giving of notice or the lapse of time or both,
would constitute an Event of
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Default or if the Holder shall demand payment or take any other action permitted
upon the occurrence of any such Event of Default, the Issuer will forthwith give
notice to the Holder, specifying the nature and status of the Event of Default
or other event or of such demand or action, as the case may be.
SECTION 5.3 Sufficient Number of Authorized Common Shares. (i) So long as
the Current Market Price of the Common Shares is greater than or equal to 90% of
the Current Market Price on the date hereof, the Issuer shall at all times have
authorized and reserved for issuance, free from preemptive rights, a sufficient
number of Common Shares to yield a number of Note Shares sufficient to satisfy
the conversion rights of the Purchaser pursuant to the terms and conditions
hereof; and
(ii) at any time when the Current Market Price of the Common
Shares is less than 90% of such Current Market Price on the date hereof, the
Issuer shall continue to reserve the number of shares of Common Stock required
by clause (i) above and in addition to use its best efforts (including, without
limitation, by authorizing increases in its capital) to have at all times
authorized and reserved for issuance, free from preemptive rights, a sufficient
number of Common Shares which will yield a number of Note Shares sufficient to
satisfy the conversion rights of the Purchaser pursuant to the terms and
conditions hereof and required by the drop in the market price of the Common
Stock below 90% of such market price on the date hereof.
SECTION 5.4 Insurance. The Issuer will carry and maintain in full force and
effect at all times with insurers the Issuer reasonably believes to be
financially sound and reputable such insurance in such amounts as is customary
in the respective industries of the Issuer and such subsidiaries.
SECTION 5.5 Payment of Obligations. The Issuer will pay and discharge at or
before maturity, all its respective material obligations and liabilities,
including, without limitation, tax liabilities, except where the same may be
contested in good faith by appropriate proceedings, and will maintain in
accordance with generally accepted accounting principles, appropriate reserves
for the accrual of any of the same;
SECTION 5.6 Compliance with Laws. The Issuer will comply in all material
respects with all applicable laws, ordinances, rules, regulations, and
requirements of governmental authorities except where the necessity of
compliance therewith is contested in good faith by appropriate proceedings.
SECTION 5.7 Inspection of Property, Books and Records. The Issuer will keep
proper books of record and account in which full, true and correct entries shall
be made of all dealings and transactions in relation to its business and
activities and will permit representatives of the Holder at the Holder's expense
to visit and inspect any of its respective properties, to examine and make
abstracts from any of its respective books and records and to discuss its
respective affairs, finances and accounts with its respective officers,
employees and independent public accountants, all at such reasonable times and
as often as may reasonably be desired.
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ARTICLE 6
REMEDIES
SECTION 6.1 Events of Default. "Event of Default" wherever used herein
means any one of the following events:
(a) default in the due and punctual payment of the principal of,
interest on, or any other amount owing in respect of, this Note when and as the
same shall become due and payable, and continuance of such default for a period
of thirty (30) calendar days; or
(b) default in the performance or observance of Section 5.5 of this
Note and the continuance of such default for a period of fifteen (15) calendar
days; or
(c) default in the performance or observance of any covenant or
agreement of the Issuer in this Note (other than a covenant or agreement a
default in the performance of which is specifically provided for elsewhere in
this Section), and the continuance of such default for a period of thirty (30)
calendar days after there has been given to the Issuer by a Holder a written
notice specifying such default and requiring it to be remedied; or
(d) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Issuer or any Subsidiary a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Issuer under the Bankruptcy
Code or any other applicable Federal or state law, or appointing a receiver,
liquidator, assignee, trustee or sequestrator (or other similar official) of the
Issuer or of any substantial part of its property, or ordering the winding-up or
liquidation of its affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 90 calendar days; or
(e) the institution by the Issuer or any Subsidiary of proceedings to
be adjudicated a bankrupt or insolvent, or the consent by it to the institution
of bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under the Federal
Bankruptcy Code or any other applicable Federal or state law, or the consent by
it to the filing of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee or sequestrator (or other similar official) of the
Issuer or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due, or the taking of
corporate action by the Issuer in furtherance of any such action; or
(f) the Issuer shall fail to issue and deliver the Note Shares within
5 Business Days of its receipt of the Note and the Conversion Notice in
accordance with Section 3.2; or
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(g) any principal of other indebtedness of the Issuer or any
Subsidiary, other than the Senior Debt, exceeding $1,000,000 is not repaid on
its original maturity date or becomes due and payable by reason of default
before its original maturity date; or
(h) (i) the Issuer or any Subsidiary is unable to pay its debts as
they fall due, stops, suspends, or threatens in writing to stop or suspend
payment of all or any material part of its debts (other than debts contested in
good faith by appropriate proceedings), begins negotiations or takes any
proceeding or other step with a view to readjustment, rescheduling or deferral
of all of its indebtedness (or any material part thereof) that it will or might
otherwise be unable to pay when due or seeks the appointment of a statutory
manager or proposes in writing or makes a general assignment or an arrangement
or composition with or for the benefit of its creditors or any group or class
thereof or files a petition for suspension of payments or other relief of
debtors of for bankruptcy or is declared bankrupt or a moratorium or statutory
management is agreed or declared in respect of or affecting all or any material
part of the indebtedness of the Issuer or any of its wholly owned subsidiaries,
or (ii) the Issuer ceases or threatens in writing to cease to carry on all or
any material part of the business carried on by the Issuer and its Subsidiaries
taken as a whole and as a result of such cessation or threat of cessation, the
Issuer will not be able to perform or comply with its payment obligations under
this Note; or
(i) a final judgment or final judgments for the payment of money shall
have been entered by any court or courts of competent jurisdiction against the
Issuer and remains undischarged for a period (during which execution shall be
effectively stayed) of 30 days, provided that the aggregate amount of all such
judgments at any time outstanding (to the extent not paid or to be paid, as
evidenced by a written communication to that effect from the applicable insurer,
by insurance) exceeds $3,000,000; or
(j) it becomes unlawful for the Issuer to perform or comply with its
obligations under this Note or the Registration Rights Agreement.
SECTION 6.2 Acceleration of Maturity; Rescission and Annulment. If an Event
of Default occurs and is continuing, then and in every such case any Holder may
declare the principal of this Note to be due and payable immediately, by a
notice in writing to the Issuer, and upon any such declaration the principal of
this Note shall become immediately due and payable.
SECTION 6.3 Default Interest Rate. (a) If any portion of the principal of
or interest on the Note shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise) such principal of and interest on the
Note which is due and owing but not paid shall, without limiting the Holder's
rights under this Note or under the Purchase Agreement, bear interest at the
Default Interest Rate until paid in full.
(b) Notwithstanding anything herein or in the Purchase Agreement
to the contrary, if at any time the applicable interest rate as provided for
herein shall exceed the maximum lawful rate which may be contracted for,
charged, taken or received by the Lender in
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accordance with applicable laws of the State of New York (the "Maximum Rate"),
the rate of interest applicable to the Note shall be limited to the Maximum
Rate.
SECTION 6.4 Remedies Not Waived. No course of dealing between the Issuer
and the Holder or any delay in exercising any rights hereunder shall operate as
a waiver by the Holder.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1 Register. (a) The Issuer shall keep at its principal office a
register in which the Issuer shall provide for the registration of this Note.
Upon any transfer of this Note in accordance with Article 2 and 4 hereof, the
Issuer shall register such transfer on the Note register.
(b) The Issuer may deem the person in whose name this Note shall be
registered upon the registry books of the Issuer to be, and may treat it as, the
absolute owner of this Note (whether or not this Note shall be overdue) for the
purpose of receiving payment of interest on or principal of this Note, for the
conversion of this Note and for all other purposes, and the Issuer shall not be
affected by any notice to the contrary. All such payments and such conversions
shall be valid and effective to satisfy and discharge the liability upon this
Note to the extent of the sum or sums so paid or the conversion or conversions
so made.
SECTION 7.2 Withholding. To the extent required by applicable law, the
Issuer may withhold amounts for or on account of any taxes imposed or levied by
or on behalf of any taxing authority in the United States having jurisdiction
over the Issuer from any payments made pursuant to this Note.
SECTION 7.3 Governing Law. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO
CONFLICTS OF LAWS PRINCIPLES). WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDINGS
RELATING TO THIS NOTE, THE ISSUER IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES
DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK AND
HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT
ANY SUCH SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SUBJECT TO APPLICABLE LAW, THE ISSUER AGREES THAT FINAL JUDGMENT AGAINST IT IN
ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION WITHIN OR OUTSIDE THE
UNITED STATES BY SUIT ON THE JUDGMENT, A CERTIFIED COPY OF WHICH JUDGMENT
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SHALL BE CONCLUSIVE EVIDENCE THEREOF AND THE AMOUNT OF ITS INDEBTEDNESS, OR BY
SUCH OTHER MEANS PROVIDED BY LAW.
SECTION 7.4 Headings. The headings of the Articles and Sections of this
Note are inserted for convenience only and do not constitute a part of this
Note.
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<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed by
its duly authorized officer under its corporate seal, attested by its duly
authorized officer, on the date of this Note.
CSL LIGHTING MANUFACTURING, INC.
By:_________________________________
Name:
Title:
Attest
By:_________________________________
Name:
Title:
[Corporate Seal]
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(212) 838-5030
November 20, 1996
CSL Lighting Manufacturing, Inc
27615 Avenue Hopkins
Valencia, California 91355
Re: Registration Statement on Form S-3
Dear Sirs:
We have acted as counsel to CSL Lighting Manufacturing, Inc., a Delaware
corporation (the "Company") in connection with the preparation of a Registration
Statement on Form S-3 (the "Registration Statement") filed with the Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "Act"), to register the offering by certain selling stockholders of
2,591,495 shares of Common Stock.
In this regard, we have reviewed the Certificate of Incorporation of the
Company, as amended, resolutions adopted by the Company's Board of Directors,
the Registration Statement and such other reports, documents, statutes and
decisions as we have deemed relevant in rendering this opinion. Based upon the
foregoing, we are of the opinion that:
Each share of Common Stock included in the Registration Statement has
been, or will be when issued as contemplated by the Convertible Debentures or
Convertible Notes (including payment as provided for therein), duly and validly
authorized for issuance, fu1ly paid and non-assessable.
We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement. In giving this opinion, we do not hereby admit that we
are acting within the category of persons whose consent is required under
Section 7 of the Act or the rules and regulations of the SEC thereunder.
Very truly yours,
/s/ Morse, Zelnick, Rose & Lander, LLP
KSR/lmf
ARTHUR
ANDERSEN
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated April 8, 1996
included in CSL Lighting Manufacturing, Inc's Form 10-KSB for each of the two
years in the period ended December 31, 1995 and to all references to our Firm
included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Los Angeles, California
November 21, 1996
