As filed with the Securities and Exchange Commission on September 22, 1997
F:CS Registration No. 333-___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CSL LIGHTING MANUFACTURING, INC.
(Exact Name of Registrant as Specified in Its Charter)
---------------
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 7372 95-4463033
(State or Other Jurisdiction (Primary Standard Industrial (IRS Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
27615 Avenue Hopkins, Valencia, CA 91355
(805) 257-4155
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Executive Offices)
-----------
SYLVAN GERBER
Chairman of the Board
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)
-----------
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.
-----------
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
=========================================================================================================
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Each Class of Being Offering Price Aggregate Registration
Securities to be Registered Registered Per Share (1) Offering Price(1) Fee
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share,
issuable upon conversion of outstanding
Convertible Notes(2) 4,512,820 $0.375 $1,692,308 $512.82
- ---------------------------------------------------------------------------------------------------------
=========================================================================================================
Totals 4,512,820 $0.375 $1,692,308 $512.82
=========================================================================================================
</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 upon conversion or otherwise in respect of
the Convertible Notes.
-----------
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 September 22, 1997
PROSPECTUS
CSL LIGHTING MANUFACTURING, INC.
4,512,820 SHARES OF COMMON STOCK
This Prospectus relates to 4,512,820 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 may be
offered from time to time by and for the account of certain shareholders (the
"Selling Securityholders") of the Company. The Shares covered by this Prospectus
are issuable upon conversion of currently outstanding Convertible Notes of the
Company (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. The number of shares being offered hereby
that are issuable upon conversion of the Debentures, is presently
indeterminable. For the purposes of this Prospectus, the number of Shares
included with respect to the Debentures is based upon the conversion rate in
effect on the date of this Prospectus. However, the Registration Statement of
which this Prospectus is a part, covers such indeterminable number of Shares as
may become issuable upon exercise of the Debentures. 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 September 19, 1997 the last
sales price of the Shares on the NASDAQ Small Cap System was $0.375.
2
<PAGE>
-------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS" COMMENCING
ON PAGE 7.
-------------------------
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 ________, 1997
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.
3
<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. The Commission also maintains a Website
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding the Company. 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 forth 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, 1996, filed pursuant to
Section 13 of the Exchange Act, (2) the Company's Quarterly Reports on Form
10-QSB for the fiscal quarters ended June 30, 1997 and March 31, 1997, filed
pursuant to Section 13 of the Exchange Act,(3) the Company's Proxy Statement
dated January 31, 1997 for the 1996 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.
4
<PAGE>
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 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.
5
<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)..................... 4,512,820 shares.
Common Stock outstanding after this Offering(1).. 16,925,047 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 4,512,820 shares issuable upon conversion of outstanding
Debentures (at the conversion rate which would be applicable if the
Debentures were converted on September 19, 1997.
6
<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. At June 30, 1997, the Company had an accumulated deficit
of $10,068,000. The Company also experienced approximately $3.2 million and $1.1
million, of operating losses, respectively, during the year ended December 31,
1996 and the six months ended June 30, 1997. 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
$200,000 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. The recent convertible debt offerings have included "conversion at a
discount" features which have had an adverse affect on profit and loss. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation - Liquidity and Capital Resources" in the Form 10-KSB 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
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 assurance that the Company will be able to generate
sufficient revenues from its current or proposed business operations or raise
additional moneys necessary to achieve its expansion plan.
7
<PAGE>
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 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 effect
on the Company's business in the future.
Risk of Foreign Vendors. A significant portion of the products are
manufactured by foreign vendors. The Company believes that there are material
risks attendant to its dependence on foreign vendors associated with the
stability, both political and economic, of any particular country. Principal
among those risks are 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 international financial
transactions. To date the Company has not experienced any material impact as a
result of its reliance on foreign vendors, however, there is no assurance that
such factors will not have a material 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
8
<PAGE>
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 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 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 September 19, 1997, the Company's
officers and directors owned approximately 2,275,000 shares of Common Stock
representing approximately 18% of the Company's issued and outstanding Common
Stock and as a result they
9
<PAGE>
may 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 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 thirty-one million shares of capital stock of
which thirty 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
10
<PAGE>
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,
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 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 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 interests. Any such issuance of
Preferred Stock could prevent the holders of Common Stock from realizing a
premium on their shares.
Failure to Meet NASDAQ Small-Cap Market Listing Maintenance Standards;
Potential for Delisting. On August 25, 1997, the NASDAQ Stock Market announced
new listing maintenance requirements for the NASDAQ Small-Cap Market. One of the
standards necessary for continued listing on the NASDAQ Small-Cap Market is a
minimum bid price of $1.00. Since the current bid price for the Company's Common
Stock is below this maintenance level, the Company is subject to delisting
proceedings. However, no such proceedings have been instituted. The delisting of
the Company's Common Stock from the NASDAQ Small-Cap Market could have a
material adverse effect on the market for such 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
11
<PAGE>
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 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 proceeds from the sale of shares of
Common Stock offered hereby.
12
<PAGE>
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 on the National Association of Securities Dealers SmallCap
Market. The Company's stock is traded under the NASDAQ symbol "CSLX". At
September 1, 1997 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 1997 High Low
------------- ---- ---
First Quarter 1 3/8 15/16
Second Quarter 15/16 9/16
Third Quarter
(through 9/9/97) 19/32 3/8
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 3 1/6 1 1/16
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
13
<PAGE>
SUMMARY OF BUSINESS
The following is a brief summary of the Company's business. Reference is made
to the information contained in Item 1 of the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1996, and the financial
statements and notes contained therein, for a more thorough presentation of
the Company's business and financial condition. Such report
is incorporated herein by reference.
General
CSL Lighting Manufacturing, Inc., (d.b.a. Creative Systems Lighting) (the
"Company") designs, manufactures and markets mid to high-end lighting fixtures
for both commercial and residential applications on a worldwide basis.
The Company's core business consists of four 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 are 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 70% use "low voltage", which produce
a concentrated, long lasting light, while 30% are "line voltage," which produce
a slightly less concentrated but significantly less expensive light source.
The Company's core 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' operations include a presence in Asia, Europe, Africa and the
Middle East. The Company has successfully installed a new management team which
has implemented significant new internal accounting and financial controls and
has restructured the Company's product offerings to achieve maximum penetration
of its target markets, specifically the Specification and the Consumer Retail
Markets. The Company has refocused its product offerings into four specific
product categories resulting in a reduction in SKU's and the inventory necessary
to support these discontinued product lines. During 1996 and 1997, the Company
entered into a number of joint venture and cooperative agreements in Europe,
Asia, Africa and the Middle East in an effort to further its business plan.
Product Categories and New Product Offerings
The Company designs, manufactures and markets recessed down lighting,
accent linear lighting systems, surface system coordinates and low voltage track
systems. Approximately 70% of the Company's product offerings utilize halogen
lamps. These light fixtures, which are generally smaller in size, produce a
superior quality and intensity of light while not sacrificing
14
<PAGE>
style and detail for size. The balance of the Company's 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 that protrudes from the ceiling. 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 which it commenced the delivery of during
1996. 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. 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.
Surface System Coordinates. 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. The Company also
markets it surface system coordinates under tradename "Optica" and "Versailles."
Low Voltage Track Systems. The Company's "Micro Track" is a low voltage
halogen 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.
15
<PAGE>
Manufacturing, Assembly, Design and Tooling
All of the Company's products are designed and tooled by the Company and
are either manufactured directly by the Company or specifically on its behalf.
Approximately 50% of the Company's products are manufactured or assembled in the
United States either at its principal facility in Valencia, California or by
local subcontractors. The balance of the Company's products are manufactured
primarily in China, Taiwan and Europe. The Company assembles approximately 40%
of its lighting products at its Valencia location and the rest of its products
are assembled in the Far East. Additionally, much of the glass used in the
Company's lighting fixtures is made in Venice, Italy, and Vianne, France.
The Company owns all of the designs with respect to its line of products,
most of which were created by employees of the Company on a work-for-hire basis;
i.e., the design automatically becomes the property of the Company upon
creation. In addition, the Company also from time to time will retain outside
independent contractors to design lighting products. The Company owns such
designs and pays the independent designers on a consulting or royalty basis.
Competition
The lighting industry is intensely competitive with respect to price,
design, quality and reliability. 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 the Company's
competitors are well established, and have substantially greater financial,
managerial, technical, marketing and other resources than the Company. The
Company competes based upon price, quality and its brand-name recognition.
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.
16
<PAGE>
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 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 $10,000.
17
<PAGE>
SELLING SECURITYHOLDERS
The following table shows the names of the Selling Securityholders, the
Shares owned beneficially by each of them, as of September 19, 1997 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. None of the Selling Securityholders 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.
<TABLE>
<CAPTION>
Number of
Shares Percentage Percentage
Number of Beneficially Beneficially Beneficially
Shares Number of Owned After Owned Owned
Beneficially Shares that the Before the After the
Selling Securityholder Owned May Be Sold Offering Offering Offering
- ---------------------- ----- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
The Endeavour Capital
Fund S.A. 2,461,538 2,461,538 0 16.5% 0%
Sovereign Partners LP 2,051,282 2,051,282 0 14.2% 0%
</TABLE>
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 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 reports 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.
18
<PAGE>
================================================
Table of Contents
Page
----
Available Information....................... 4
Incorporation of Certain Documents
By Reference.............................. 4
Prospectus Summary.......................... 6
Risk Factors................................ 7
Use of Proceeds............................. 12
Market for the Registrant Common Stock and
Related Securityholder Matters............ 13
Summary of Business......................... 14
Plan of Distribution........................ 16
Selling Securityholders..................... 18
Transfer Agent.............................. 18
Reports to Shareholders..................... 18
Legal Matters............................... 18
Experts..................................... 18
================================================
================================================
4,512,820
SHARES OF COMMON STOCK
CSL LIGHTING
MANUFACTURING, INC.
-------------------
PROSPECTUS
-------------------
================================================
19
<PAGE>
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 $ 513
Printing expenses 2,000
Accounting fees and expenses 2,000
Legal fees and expenses 5,000
Miscellaneous expenses 487
Total $10,000
-------
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 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
20
<PAGE>
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.
(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,
21
<PAGE>
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 Securities Purchase Agreement, Convertible Note and
Registration Rights Agreement.*
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 (included on signature page)*
- ----------
* Filed herewith.
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
22
<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 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.
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.
23
<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 S-3 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Valencia, State of California on September 22, 1997.
CSL LIGHTING MANUFACTURING , INC.
By: /s/ Mark Allen
-------------------------------------
Mark Allen, Vice President
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed on September 22, 1997 by
the following persons in the capacities indicated and each of the undersigned
persons, in any capacity, hereby severally constitutes Mark Allen and Kenneth S.
Rose, and each of them singularly, his true and lawful attorney with full power
to them and each of them to sign for him and in his name and in the capacity
indicated below, this Registration Statement and any and all amendments thereto.
Signature Title
/s/ Sylvan Gerber Chairman of the Board and Director
- -----------------------------
Sylvan Gerber
/s/ Scott Searle President
- -----------------------------
Scott Searle
/s/ Mark Allen Vice President, Chief Operating
- ----------------------------- Officer, Acting Chief Accounting
Mark Allen Officer, Secretary and Director
/s/ Michael Smith Director
- -----------------------------
Michael Smith
24
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "Agreement"), dated as of August 1,
1997, is entered into by and between The Endeavour Capital Fund S.A.
("Purchaser") and CSL Lighting Manufacturing, Inc., (the "Company"). This is the
Agreement referred to as the "Purchase Agreement" in the Registration Rights
Agreement (as defined in Section 6(b) hereof).
The parties hereto agree as follows:
1. Purchase and Sale of Convertible Debentures. Upon the basis of
the representations and warranties, and subject to the terms and conditions, set
forth in this Agreement, the Company covenants and agrees to sell to the
Purchaser on the Closing Date, at a purchase price of $600,000 (the "Purchase
Price"), a convertible note in registered form in a principal amount of $600,000
and substantially in the form of Exhibit A hereto (the "Note"), such Note
convertible at the option of the holder thereof into a number of Note Shares
determined pursuant to Article 3 of the Note, according to the terms and
conditions set forth in the Note and upon the basis of the representations and
warranties, and subject to the terms and conditions set forth in this Agreement,
the Purchaser covenants and agrees to purchase from the Company on the Closing
Date the Note at the Purchase Price. All capitalized terms not otherwise defined
herein shall have the meanings attributed to them in the Note.
2. Closing. The closing of the purchase and sale of the Note
pursuant to Section 1 hereof shall take place on August 1, 1997 at the offices
of Morse, Zelnick, Rose & Lander LLP, located at 450 Park Avenue, Suite 902, New
York, New York 10022 or at such other date, time and place as the Purchaser and
the Company may agree upon in writing, or at such other time at which the Escrow
Agent shall have received all documents and instructions as it shall it its sole
judgment deem necessary and appropriate to consummate the transactions
contemplated hereby (such time and date for the closing, the "Closing Date").
The duly executed Note to be purchased by the Purchaser shall be delivered by,
or on behalf of, the Company at the closing against payment of the Purchase
Price therefor in immediately available funds by, or on behalf of, the Purchaser
to the attorney trust account of Morse, Zelnick, Rose & Lander, LLP, (the
"Escrow Agent") (Chase Manhattan Bank, Account No. 967086639, ABA Routing Number
021000021). The Escrow Agent shall receive from the Purchaser and the Company
written instructions of the Purchaser and the Company in substantially the form
of Exhibit B hereto (the "Closing Instructions"), instructing the Escrow Agent
with respect the closing and settlement procedures. Commencing on the second
business day after delivery to the Escrow Agent of the Purchase Price, the
Purchaser, if the Company is not ready, willing and able to consummate the
transaction in
-1-
<PAGE>
accordance with the terms of the Closing Instructions, may terminate the
proposed transaction by notice to the Company and the Escrow Agent, whereupon
the Escrow Agent shall redeliver the Purchase Price to the Purchaser as soon as
practicable in accordance with the written instructions of the Purchaser.
3. Representations, Warranties and Covenants of the Purchaser. The
Purchaser understands, and represents and warrants to, and agrees with, the
Company, that:
(a) The Note and the Note Shares have not been and, unless
registered under the Securities Act of 1933, as amended (the "Securities Act"),
in accordance with the Registration Rights Agreement (as defined in Section
6(b)), will not be registered under the Securities Act, or any other applicable
securities law, and, accordingly, may not be offered, sold, transferred,
pledged, hypothecated or otherwise disposed of ("Transferred") unless registered
under the Securities Act or Transferred in a transaction exempt from
registration under the Securities Act and any other applicable securities law;
(b) The Purchaser is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act (an "Accredited Investor"), and
is acquiring or will acquire the Note and the Note Shares for its own account.
The Purchaser has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of an investment
in the Note and the Note Shares. The Purchaser is aware that it may be required
to bear the economic risk of an investment in the Note for an indefinite period,
and it is able to bear such risk for an indefinite period;
(c) The Purchaser is acquiring or will acquire the Note and
the Note Shares for its own account for investment purposes and not with a view
to, or for offer or sale in connection with, any distribution thereof. The
Purchaser agrees to offer, sell or otherwise transfer the Note and the Note
Shares only (I) in accordance with the terms of this Agreement and the Note, as
applicable, and (ii) pursuant to registration under the Securities Act or an
exemption from registration under the Securities Act and any other applicable
securities law; and
(d) Without limiting the Purchaser's right to transfer the
Note Shares pursuant to the Registration Rights Agreement, the Purchaser
acknowledges that the Company and others will rely upon the truth and accuracy
of the foregoing acknowledgments, representations and agreements and further
agrees that if any of the acknowledgments, representations and agreements deemed
to have been made by the Purchaser by its acquisition of the Note and the Note
Shares are no longer accurate, it shall promptly notify the Company.
(e) The Company has furnished or made available to the
Purchaser a full and complete set of its most recent definitive proxy statement
in
-2-
<PAGE>
connection with its annual meeting of stockholders, its Annual Report on Form
10-KSB for its most recently completed fiscal year, its Form 10-QSB's for each
of its fiscal quarters since the end of its most recently completed fiscal year
and any Form 8-K's filed during its current fiscal year (collectively, the "SEC
Documents"), which the Company has filed pursuant to the Securities Exchange Act
of 1934, as amended.
4. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Purchaser that:
(a) The Company has been duly incorporated and is validly
existing as a corporation under the laws of Delaware.
(b) This Agreement and the Registration Rights Agreement (as
defined in Section 6(b)) have been duly authorized, executed and delivered by
the Company and constitute valid and binding agreements, enforceable in
accordance with their respective terms, and the Company has full corporate power
and authority necessary to enter into such agreements and to perform its
obligations thereunder.
(c) No consent, approval, authorization or order of any court,
governmental agency or body or arbitrator having jurisdiction over the Company
or any of its affiliates is required for execution of this Agreement or the
Registration Rights Agreement (as defined in Section 6(b)) and the performance
of its obligations under such agreements, including, without limitation, the
issuance and sale of the Note and the Note Shares (except for the registration
of the Note Shares under the Securities Act pursuant to the Registration Rights
Agreement as defined in Section 6(b)).
(d) Neither the sale of the Note pursuant to this Agreement,
nor the performance of its obligations under this Agreement, the Note or the
Registration Rights Agreement by the Company will:
(i) violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice or the lapse
of time or both would be reasonably likely to constitute a default) under (A)
the articles of incorporation or by-laws of the Company, (B) any decree,
judgment, order, law, treaty, rule, regulation or determination applicable to
the Company of any court, governmental agency or body, or arbitrator having
jurisdiction over the Company or over the properties or assets of the Company,
(C) the terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which the Company is a
party, by which the Company is bound, or to which any of the properties of the
Company is subject, or (D) the terms of any "lockup" or similar provision of any
underwriting or similar agreement to which the Company is a party; or
(ii) result in the creation or imposition of any lien,
claim or other encumbrance upon any of the assets of the Company.
-3-
<PAGE>
(e) The Note, when issued and delivered pursuant to this
Agreement, will have been duly authorized, executed, issued and delivered and
will constitute a legal, valid, binding and enforceable obligation of the
Company.
(f) The Note Shares, when issued, (i) will be free and clear
of any security interests, liens, claims or other encumbrances, (ii) will be
duly and validly authorized and issued, (iii) will be fully paid and
nonassessable, (iv) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of the
Company, and (v) will not subject the holders thereof to personal liability by
reason of being such holders.
(g) Except as set forth in the SEC Documents, there is no
pending or, to the best knowledge of the Company, threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or any of its affiliates that
would materially affect the results of operations of the Company or the
execution by the Company of, or the performance by the Company of its
obligations under, this Agreement, the Note or the Registration Rights
Agreement.
(h) The Company, any person representing the Company, and, to
the best knowledge of the Company, any other person selling or offering to sell
the Note or the Note Shares in connection with the transaction contemplated by
this Agreement, have not made, at any time, any oral communication in connection
with the offer or sale of the Note or the Note Shares which contained any untrue
statement of a material fact or omitted to state any material fact necessary in
order to make the statements, in the light of the circumstances under which they
were made, not misleading.
(i) Except as disclosed to the Purchaser or any of its
affiliates in writing, the Company is not in possession of any material
non-public information that, if publicly disclosed, would, or could reasonably
be expected to, have an effect on the price of the Company's common stock, par
value $.01 per share (the "Common Stock"), which is listed for trading on the
National Association of Securities Dealers Automated Quotations Small
Capitalization system ("NASDAQ").
(j) Assuming the accuracy of, and compliance with, the
representations, warranties and covenants of the Purchaser in this Agreement,
the sale of the Note and the Note Shares pursuant to this Agreement and the Note
has been made in accordance with the provisions and requirements of Section 4(2)
under the Securities Act ("Section 4(2)") and any applicable state law.
-4-
<PAGE>
(k) None of the Company, any affiliate of the Company, or any
person acting on behalf of the Company or any such affiliate has engaged, or
will engage, in any general solicitation or general advertising with respect to
the Note.
(l) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware and is
duly qualified as a foreign corporation in all jurisdictions in which the
failure to so qualify would have a material adverse effect on the Company and
its subsidiaries taken as a whole. The Company has registered its Common Stock
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the Common Stock is listed and trades on the Nasdaq Small
Cap Market. The Company has filed all materials required to be filed pursuant to
all reporting obligations under either Section 13(a) or 15(d) of the Exchange
Act for at least twelve (12) months immediately preceding the offer or sale of
the Notes, and has received no notice, either oral or written, with respect to
the continued eligibility for such listing. The Company has timely made all
filings required under the Exchange Act during the twelve month period preceding
the date hereof and is eligible to use Form S-3 to register the Note Shares.
(m) The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Notes as required by the United
States laws and the regulations or any domestic securities exchange or trading
market.
(n) Except as set forth in the SEC Documents, since January 1,
1997, there has been no material adverse development in the assets, liabilities,
business properties, operations, financial condition or results of operations of
the Company and its subsidiaries taken as a whole, except as disclosed in the
filings of the Company with the SEC.
(o) None of the filings of the Company with the SEC since
January 1, 1997 contained, at the time they were filed, any untrue statement of
a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company has since
January 1, 1996 timely filed all requisite forms, reports and exhibits thereto
with the SEC.
(p) Except as set forth in the SEC Documents, there is no
known fact to the Company or any subsidiary (other than general economic
conditions generally known to the public) that has not been disclosed in writing
to the Purchaser that (i) could reasonably be expected to have a material
adverse effect on the condition (financial or otherwise) or in the earnings,
business affairs, business prospects, properties or assets of the Company or any
subsidiary, or (ii) could reasonably be expected to materially and adversely
affect the ability of the Company or any subsidiary to perform its obligations
pursuant to this Agreement.
-5-
<PAGE>
5. Covenants of the Company. The Company covenants and agrees with
the Purchaser:
(a) to comply with all requirements of Section 4(2) with
respect to the sale of the Note and the Note Shares including but not limited to
the filing of a Form D with the Securities and Exchange Commission;
(b) to notify the Purchaser promptly if at any time during the
period beginning on the date of this Agreement and ending on the Closing Date
(i) any event shall have occurred as a result of which any oral communication
made by the Company, any person representing the Company, or, to the best
knowledge of the Company, by any other person in connection with the
transactions contemplated by this Agreement would include an untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, or (ii) there is any public disclosure of material
information regarding the Company or its financial condition or results of
operation;
(c) to cause the Note Shares to be, upon delivery, fully paid,
nonassessable, free of preemptive rights and free from all taxes, liens,
charges, security interests or other encumbrances;
(d) have at all times authorized and reserved for issuance,
free from preemptive rights, a sufficient number of shares of Common Stock to
yield a number of Note Shares sufficient to satisfy the conversion rights of the
Purchaser pursuant to the terms and conditions of the Note.
6. Conditions Precedent to the Purchaser's Obligations. The
obligations of the Purchaser hereunder are subject to the performance by the
Company of its obligations hereunder and to the satisfaction of the following
additional conditions precedent:
(a) The representations and warranties made by the Company in
this Agreement shall, unless waived by the Purchaser, be true and correct in all
material respects as of the date hereof and at the Closing Date, with the same
force and effect as if they had been made on and as of the Closing Date.
(b) The Company and the Purchaser shall have entered into a
Registration Rights Agreement (the "Registration Rights Agreement") in a form
satisfactory to the Purchaser.
(c) The Company will provide an opinion or opinions of counsel
confirming in substance the representations and warranties set out in paragraphs
(a), (b), (c), (d), (e), (f), (j) and (l) of Section 4.
-6-
<PAGE>
(d) None of the following shall have occurred: (i) any general
suspension of trading in, or limitation on prices listed for, the Common Stock
on the NASDAQ, (ii) a declaration of a banking moratorium or any suspension of
payments in respect to banks in the United States, (iii) a commencement of a
war, armed hostilities or other international or national calamity directly or
indirectly involving the United States, (iv) in the case of the foregoing
existing at the date of this Agreement, a material acceleration or worsening
thereof, (v) any limitation by the federal or state authorities on the extension
of credit by lending institutions that materially and adversely affects the
Purchaser.
7. Conditions Precedent to the Company's Obligations. The
obligations of the Company hereunder are subject to the performance by the
Purchaser of its obligations hereunder and to the satisfaction of the condition
precedent that the representations and warranties made by the Purchaser in this
Agreement shall, unless waived by the Company, be true and correct in all
material respects as of the date hereof and at the Closing Date, with the same
force and effect as if they had been made on and as of the Closing Date.
8. Transfer of Note Shares.
(a) Securities Act Legend. Each certificate evidencing the
Note, the Note Shares, and any certificates issued upon transfer or exchange of
the Note or the Note Shares shall be stamped or imprinted with a legend
substantially as follows:
THE SECURITIES REPRESENTED HEREBY HAVE 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.
(b) Securities Act Compliance. Each holder (a "Holder") of a
certificate evidencing the Note or the Note Shares which bears the restrictive
legend set forth in Section 8(a) above (the "Restricted Securities"), and who
proposes to Transfer (as defined in Section 3(a) of this Agreement) any
Restricted Securities, shall give written notice to the Company of such Holder's
intention to effect such Transfer. Each such notice shall describe the manner
and circumstances of the proposed sale or other disposition in sufficient detail
and may be accompanied by an opinion of legal counsel to the Holder. Promptly
upon receipt of such notice, the Company shall present a copy thereof (together
with any accompanying opinion of legal counsel to the Holder) to its legal
counsel, and the following provisions shall apply:
-7-
<PAGE>
(i) If, in the opinion of legal counsel to such Holder,
satisfactory in form and substance to the Company and its legal counsel, or if
such notice was not accompanied by an opinion of legal counsel to the Holder,
then, if, in the opinion of legal counsel to the Company, the proposed sale or
other disposition may be effected without registering the Restricted Securities
involved under the Securities Act or under state securities laws, such Holder
shall be entitled to Transfer such Restricted Securities in accordance with the
terms of the notice delivered to the Company. The Company will advise the
Holder, within five (5) business days after submission of such notice, whether
such Holder is entitled to so Transfer the Restricted Securities. If the Holder
is entitled to so Transfer, he shall submit the stock certificate or
certificates evidencing the Restricted Securities to be Transferred to the
Company in proper form for Transfer and accompanied by appropriate instruments
of Transfer. Restricted Securities thus Transferred (and each of the
certificates evidencing any untransferred balance of the Note Shares not so
transferred) shall bear the restrictive legend set forth in Section 8(a),
unless, in the opinion of both such legal counsel (or legal counsel to the
Company if the Holder did not present an opinion of its legal counsel), such
legend is not required by the applicable provisions of the Securities Act or
state securities laws; and
(ii) If in the reasonable opinion of either of such
legal counsel (or legal counsel to the Company if the Holder did not present an
opinion of its legal counsel), the proposed Transfer cannot be effected without
registering the Note Shares involved under the Securities Act or state
securities laws, such Holder shall not offer to Transfer or Transfer such
Restricted Securities unless and until such Restricted Securities have been
registered under the Securities Act or state securities laws for such purpose or
an exemption from such registration becomes available pursuant to Section
8(b)(i) above. The Company has obligated itself to register the Note Shares
pursuant to the terms of the Registration Rights Agreement, a copy of which is
attached hereto and made a part hereof.
9. Fees and Expenses. Each of the Purchaser and the Company agrees
to pay its own expenses incident to the performance of its obligations
hereunder, including, but not limited to, the fees, expenses and disbursements
of such party's counsel.
10. Survival of the Representations, Warranties, etc. The respective
agreements, representations, warranties, indemnities and other statements made
by or on behalf of the Company and the Purchaser, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation made by or on behalf of the other party to this Agreement or any
officer, director or employee of, or person controlling or under common control
with, such party and will survive delivery of any payment for the Note and the
Note Shares.
-8-
<PAGE>
11. Notices. All notices, requests and other communications
hereunder must be in writing and delivered to the parties at the following
addresses or facsimile numbers:
If to the Purchaser, to: The Endeavour Capital Fund S.A.
14/14 Divrei Chaim Street
Jerusalem, 94479 Israel
Attention: Mr. Shmuli Margulies
Telecopy: 011-972-2-4443
If to the Company, to: CSL Lighting Manufacturing, Inc.
27615 Avenue Hopkins
Valencia, California 91355-3493
Attention: President
Telecopy: (805) 294-9078
with a copy to: Morse, Zelnick, Rose & Lander, LLP
450 Park Avenue
New York, N.Y. 10021
Telecopy: (212) 838-9190
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered pursuant to this Section). Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other parties hereto.
12. Third Party Beneficiary. Any permitted transferee of any part of
the principal amount of the Note or the Note Shares shall be a third party
beneficiary of the Company's obligations under this Agreement, the Note and the
Registration Rights Agreement. Such person shall have all the rights of a third
party beneficiary with respect to the enforcement against the Company of any
provision of this Agreement, the Note and the Registration Rights Agreement.
-9-
<PAGE>
13. Miscellaneous.
(a) This Agreement may be executed in one or more counterparts
and it is not necessary that signatures of all parties appear on the same
counterpart, but such counterparts together shall constitute but one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.
(b) This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their respective successors and permitted
assigns.
(c) This agreement 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 Agreement, each of the Company and the Purchaser 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 Company agrees that final
judgment against it in any legal action or proceeding arising out of or relating
to this Agreement or the 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 shall be conclusive evidence thereof and the
amount of its indebtedness, or by such other means provided by law.
(d) The headings of the sections of this document have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.
(e) The provisions of this Agreement are severable, and if any
clause or provision shall be held invalid, illegal or unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability shall
affect in that jurisdiction only such clause or provision, or part thereof, and
shall not in any manner affect such clause or provision in any other
jurisdiction or any other clause or provision of this Agreement in any
jurisdiction.
(f) This Agreement, including the schedules and exhibits
hereto, constitutes the sole and entire agreement of the parties with respect to
the subject matter hereof.
14. Time of Essence. Time shall be of the essence in this Agreement.
-10-
<PAGE>
15. Escrow Agent. The Escrow Agent shall not be liable for any
action taken or omitted by it in good faith and its liability hereunder shall be
limited to liability for gross negligence or willful misconduct on its part. The
Issuer and the Purchaser agree to save harmless, indemnify and defend the Escrow
Agent for, from and against any loss, damage, liability, judgment, cost and
expense whatsoever, by reason of, or on account of, any misrepresentation made
to it or its status or activities as Escrow Agent under this Agreement except
for any loss, damage, liability, judgment, cost or expense resulting from gross
negligence or willful misconduct on the part of the Escrow Agent.
The Escrow Agent shall not be responsible for any failure or inability of
any of the parties to perform or comply with the provisions of this Agreement,
or the agreements delivered in connection herewith.
In the performance of its duties hereunder, the Escrow Agent shall be
entitled to rely in good faith upon any document (including facsimile
transmitted copies of documents), instrument or signature believed by it in good
faith to be genuine and to be signed by any party hereto or an authorized
officer or agent thereof, and shall not be required to investigate the truth or
accuracy of any statement contained in any such document or instrument. The
Escrow Agent may assume in good faith that any person purporting to give any
notice in accordance with the provisions hereof has been duly authorized to do
so.
Each party hereto acknowledges that (a) the Escrow Agent is not acting as
legal counsel to such party in any manner or respect in connection with the
transactions contemplated by this Agreement, and (b) the Escrow Agent is serving
as an accommodation to the parties hereto. Each party further acknowledges that
the Escrow Agent has acted, and acts, as legal counsel in certain matter to the
Company. Each party hereto waives all claims in the nature of conflict of
interest against the Escrow Agent and further agrees that in the event of any
dispute which arises hereunder, or otherwise between a party and the Company,
the Escrow Agent shall be free to represent the Company.
It is understood and further agreed that the Escrow Agent shall:
(a) be under no duty to enforce payment of any subscription that is to be
paid to and held by it hereunder;
(b) promptly notify the Purchaser and the Issuer of any discrepancy
between the amounts set forth on any statement delivered by the Purchaser and/or
the Issuer and the sum or sums delivered to it therewith;
-11-
<PAGE>
(c) be under no duty to accept funds, checks, drafts or instruments for
the payment of money from anyone other than the Issuer or the Purchaser, or to
give any receipt therefor except to the Issuer or the Purchaser, with a copy in
each case to the Issuer;
(d) be protected in acting upon any notice, request, certificate,
approval, consent or other paper reasonably believed by it to be genuine and to
be signed by the proper party or parties (including, but not limited to, copies
of documents transmitted by facsimile);
(e) be permitted to consult with counsel of its choice, and shall not be
liable for any action taken, suffered, or omitted by it in accordance with the
advice of such counsel; provided, however, that nothing in this subsection (e),
nor any action taken by the Escrow Agent, or suffered or omitted by it in
accordance with the advice of any counsel, shall relieve the Escrow Agent from
liability for any claims that are occasioned by its gross negligence or willful
misconduct;
(f) not be bound by any modification, amendment, termination,
cancellation, or recission of this Agreement, unless the same shall be in
writing and signed by it;
(g) be entitled to refrain from taking any action other than to keep all
property held in escrow if it (i) shall be uncertain concerning its duties or
rights hereunder, or (ii) shall have received claims or demands from any party,
or (iii) shall have received instructions from the Purchaser and/or the Issuer
which, in the Escrow Agent's opinion, are in conflict with any of the provisions
of this Agreement, until it shall have received a final judgment by a court of
competent jurisdiction;
(h) have no liability for following the instructions herein or expressly
provided for herein, or the written instructions given by the Purchaser and/or
the Issuer; and
(i) have the right, at any time, to resign hereunder by giving written
notice of its resignation to all other parties hereto at least three (3)
business days prior to the date specified for such resignation to take effect,
and upon the effective date of such resignation all cash and other payments and
all other property then held by the Escrow Agent hereunder shall be delivered by
it to such person as may be designated in writing by the other parties executing
this Agreement, whereupon the Escrow Agent's obligations hereunder shall cease
and terminate. If no such person has been designated by such date, all
obligations of the Escrow Agent hereunder shall, nevertheless, cease and
terminate. The Escrow Agent's sole responsibility thereafter shall be to keep
safely all property then held by it and to deliver the same to a person
designated by the other parties executing this Agreement or in accordance with
the directions of a final order or judgment of a court of competent
jurisdiction.
-12-
<PAGE>
16. Shorting Position. The Purchaser has no existing short position with
respect to the Common Stock and agrees not to enter into any short sales or
other hedging transactions with respect to the Common Stock at any time during
the first sixty (60) days after the closing of this Agreement. Purchaser further
agrees that, at all times after the execution of this Agreement by the Purchaser
and prior to conversion of all principal amount of the Debentures acquired by
Purchaser, it will keep its purchase of the Debentures confidential, except as
required by law and except as necessary in the ordinary course of Purchaser's
business.
17. Delivery of Stock. The Company will permit the Purchaser to exercise
its right to convert the Note by telecopying an executed and completed Notice of
Conversion to the Company and delivering within three business days thereafter,
the original Notice of Conversion and Note by express courier. Each date on
which a Notice of Conversion is telecopied to and received by the Company (at
the telecopy number provided for in Paragraph 11 hereof) in accordance with the
provisions hereof shall be deemed a Conversion Date. The Company will transmit
the certificates representing the Note Shares and the newly issued Note
representing the amount of the Note which remains unconverted to the Purchaser
via express courier within three business days after receipt by the Company of
the original Notice of Conversion and the Note.
18. Liquidated Damages for Failure to Deliver. The Company understands
that a delay beyond the deadline for delivery, specified in Paragraph 17, could
result in economic loss to the Purchaser. As compensation to the Purchaser for
such loss, the Company agrees to pay late payments to the Purchaser for the late
issuance of shares issuable at conversion in accordance with the following
schedule (where No. Business Days Late is defined as the number of business days
beyond three business days after receipt by the Company of the original Notice
of Conversion and the Note:
Late Payment for Each $100,000 of
Equity Debenture Principal Amount
No. Business Days Late Being Converted
---------------------- ---------------------------------
1 $50.00
2 $100.00
3 $150.00
4 $200.00
5 $250.00
6 $300.00
7 $350.00
8 $400.00
9 $450.00
10 $500.00
>10 $500.00 + $100.00 for each Business
Day Late Beyond 10 Days
-13-
<PAGE>
The Company shall make any payments incurred under this Section in
immediately available funds upon demand. Nothing herein shall limit a
Purchaser's right to pursue actual damages for the Company's failure to issue
and deliver Note Shares to the Purchaser. Furthermore, in addition to any other
remedy which may be available to the Purchaser, in the event that the Company
fails for any reason to effect delivery of Note Shares within five business days
after the Delivery Date, the Purchaser will be entitled to revoke the relevant
Notice of Conversion by delivering a notice to such effect to the Company
whereupon the Company and the Purchaser shall each be restored to their
respective positions immediately prior to such Notice of Conversion.
20. Non-delivery of the Note Shares. If, within ten (10) business days of
the date after receipt by the Company of the original Conversion Notice and the
original Note the Company shall fail to (i) issue the Note Shares, and (ii)
deliver to the Purchaser the Note Shares, for any reason other than failure by
the Purchaser to comply with its obligations hereunder, then the Company shall:
(a) hold the Purchaser harmless against any loss, claim or damage
arising from or as a result of such failure by the Company (including, without
limitation, any such loss, claim or damage resulting from an obligation to
resell the Note Shares); and
(b) reimburse the Purchaser for all of its out-of-pocket expenses
reasonably incurred, including fees and disbursements of its counsel, incurred
by the Purchaser in connection with this Agreement and the transactions
contemplated herein; provided however, that the Company shall then be have
further liability to the Purchaser except as provided for in this Section 20.
21. Right of First Refusal. For a period of twelve (12) months following
the Closing, the Purchaser shall have a five (5) day right of first refusal to
purchase any debt or equity securities (excluding sales to employees and any
security sold to a strategic investor in the Company) of the Company which the
Company intends to offer in a private placement transaction.
[Balance of Page Intentionally Blank]
-14-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer(s) of each party hereto as of the date
first above written.
CSL Lighting Manufacturing, Inc.
/s/ Mark Allen
------------------------------------
Name: Mark Allen
Title: Chief Operating Officer
The Endeavour Capital Fund S.A.
------------------------------------
Name:
Title:
-15-
<PAGE>
EXHIBIT A
CONVERTIBLE NOTE
-16-
<PAGE>
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 August 31, 1999
August 1, 1997 $600,000.00
No. G - 1
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 August 31, 1999 the principal amount of $600,000 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 and to pay interest on the principal sum outstanding semi-annually, in
arrears, on the last business day of each such semi-annual period after the date
hereof, commencing January 31, 1998 or, if earlier, on each Conversion Date (as
hereinafter defined), until the principal hereof is paid in full or has been
converted, at the rate of 8% per annum (the "Note Interest Rate"), subject to
Section 6.3 hereto, computed on the basis of the actual number of days elapsed
in a 365-day year. Accrual of interest shall commence on the date hereof until
payment in full of the principal sum has been made or duly provided for. All
accrued and unpaid interest shall bear interest at the same rate from and after
the due date of the interest payment until so paid. The interest so payable,
less any amounts required by law to be deducted or withheld, will be paid
semi-annually in arrears in cash or, if earlier, on each Conversion Date in
shares of Common Stock in accordance with conversion procedures described
hereinafter, to the person in whose name this Note (or one or more predecessor
Notes) is registered on the records of the Company regarding registration and
transfers of the Notes on the Conversion Date. This Note is one of a series of
notes issued in the aggregate principal amount of $1.3 million.
-1-
<PAGE>
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. l(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.
(d) "Closing Date" shall mean August 1, 1997.
(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 a Conversion
Notice is delivered 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.
(1) "Event of Default" shall have the meaning set forth in Section
6.1.
-2-
<PAGE>
(m) "Holder" shall mean The Endeavour Capital Fund S.A., 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.
(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 August 1, 1997, between the Issuer and the Holder.
-3-
<PAGE>
(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
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.
(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 $10,000.00 or
an integral multiple of $10,000.00 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
-4-
<PAGE>
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 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, but only with respect to that portion
of this Note for which the Company has not been provided with a Conversion
Notice. The price to redeem the Note (the "Redemption Price") shall be equal to
110% of the total sum that the Holder would have received had the amount of the
Note being redeemed been converted into Note Shares on the date of redemption
and sold at the closing bid price on such date.
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 5 nor more than 15 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
-5-
<PAGE>
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 date
fixed for redemption.
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.
ARTICLE 3
CONVERSION OF NOTE
SECTION 3.1 Conversion; Conversion Price. At the option of the Holder, at
any time from the ninetieth (90) 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 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 Share (calculated as to each conversion to
the nearest 1/lOOth of a Note Share), at the conversion price the ("Conversion
Price") equal to seventy-five percent (75%) (the "Conversion Ratio") of the
average closing bid price of the Common Stock on the five Trading Days
immediately preceding the relevant Conversion Date (the "Valuation Period"),
(but in no event shall such amount be in excess of 125% of the average closing
bid price of the Common Stock on the five Trading Days immediately preceding the
issuance date of this Note). Notwithstanding the foregoing, no more than fifty
(50%) of the original principal amount of this Note shall be convertible on or
before the one hundred twentieth (120th) day following issuance.
Notwithstanding anything to the contrary contained herein, in no event
shall the Holder be entitled to convert this Note into any Note Shares when the
result of such conversion would entitle the Holder to receive that number of
shares of the Issuer's Common Stock of which the sum of (xx) the number of
shares of Common Stock
-6-
<PAGE>
beneficially owned by the Holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of this Note) and (yy) the number of shares of Common Stock
issuable upon conversion of this Note, would result in beneficial ownership by
the Holder and its affiliates of more than 4.9% of the outstanding shares of
Common Stock. For the purposes of this provision, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13 D and G thereunder, except as otherwise
provided in clause (xx) of this provision.
SECTION 3.2 Exercise of Conversion Privilege. The Purchaser may exercise
its right to convert this Note, either in whole or in part, by telecopying an
executed and completed Conversion Notice in the form attached hereto as Annex I
(the "Conversion Notice") to the Company and delivering within three business
days thereafter, the original Conversion Notice and this Note by express courier
to the Issuer. Each date on which a Conversion Notice is telecopied to and
received by the Company (at the telecopy number provided for in Paragraph 11 of
the Purchase Agreement) in accordance with the provisions hereof shall be deemed
a Conversion Date. The Issuer shall convert the Note and issue the Note Shares
effective as of the Conversion Date. 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 original Conversion
Notice and the surrender of this Note as aforesaid, but in any event no more
than three (3) Business Days after the Issuer's receipt of such original
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 3.4), 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
-7-
<PAGE>
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 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
-8-
<PAGE>
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.
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 Coast Business Credit (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.
-9-
<PAGE>
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, according to the
terms hereof,(a) pay or cause to be paid the principal of, or interest on, this
Note and (B) issue Note Shares upon conversion. .
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 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 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;
-10-
<PAGE>
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.
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 issuance of Note Shares due upon conversion;
(b) 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 five (5) calendar days; or
(c) failure in the performance or observance of Section 5.5 of this
Note and the continuance of such default for a period of thirty (30) calendar
days; or
(d) 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
(e) 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 30 calendar days; or
-11-
<PAGE>
(f) 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
(g) any principal or other indebtedness of the Issuer or any
Subsidiary, over than-the Senior Debt, exceeding $500,000 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) on or after the date hereof, 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 $500,000; or
(j) it becomes unlawful for the Issuer to perform or comply with its
obligations under this Note or the Registration Rights Agreement.
-12-
<PAGE>
SECTION 6.2 Remedy Upon Non-Registration. In the event that an Event of
Default occurs pursuant to Section 6.1(f) hereof, then, provided the Holder is
not a U.S. Person as that term is defined under Regulation S of the Act, the
Holder may, at its option, convert the principal amount and accrued interest
under this Note into shares of Common Stock in accordance with the terms of this
Note. In such event, the shares of Common Stock shall be issued pursuant to
Regulation S and shall be transferable in accordance with the provisions of
Regulation S as set forth below. Upon the conversion of any Note pursuant to
this provision, the Company shall instruct its transfer agent to issue in the
name of the holder, or such non-U.S. Person as the Holder designates, a
certificate or certificates representing the shares issuable upon such
conversion. The certificates issued shall either be without legend, or may
contain a self-liquidating legend at the end of the restricted period under
Regulation S (the "Restricted Period"). The Company warrants that the only
restriction it will impose in the certificate(s) with its transfer agent will be
to monitor the Restricted Period and that the shares will otherwise be freely
transferable on the books and records of the Company. Nothing in this Section
6.2 shall affect in any way the Holder's, or the Holder's nominee's, obligation
and agreements to comply with all applicable securities laws upon resale of the
Common Stock.
SECTION 6.3 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 6.4 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 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 6.5 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.
-13-
<PAGE>
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 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.
-14-
<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: /s/ Mark Allen
-------------------------------------
Name: Mark Allen
Title: Chief Operating Officer
Attest
By: /s/ Kenneth S. Rose
-----------------------------
Name: Kenneth S. Rose
Title: Assistant Secretary
[Corporate Seal]
-15-
<PAGE>
ANNEX I TO THE NOTE
[FORM OF CONVERSION NOTICE]
TO _____________________:
The undersigned owner of the Convertible Note, dated August 1, 1997,
issued by CSL Lighting Manufacturing, Inc. (the "Note") hereby irrevocably
exercises the option to convert $______________ of the principal amount of the
Note [and accrued and unpaid interest thereon] into Common Shares, par value
$.01, of CSL Lighting Manufacturing, Inc. (the "Note Shares"), in accordance
with the terms of the Note. The undersigned directs that the Note Shares
issuable and certificates therefor (to the extent that certificates evidencing
Common Shares are then being issued by CSL Lighting Manufacturing, Inc.
deliverable upon the conversion, together with any check in payment for
fractional Note Shares, be issued in the name of and delivered, if appropriate,
to the undersigned unless a different name has been indicated below
Dated:
Signature
Fill in for registration of Note Shares:
Please print name and address
(including zip code number)
-16-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of August 1,
1997 by and among CSL Lighting Manufacturing, Inc. a Delaware corporation, with
headquarters located at 27615 Avenue Hopkins, Valencia, CA 91355-3493 (the
"Company"), and the undersigned parties (together with affiliates, the "Initial
Investors").
WHEREAS:
A. In connection with the Securities Purchase Agreement of even date
herewith by and between the Company and the Initial Investors (the "Securities
Purchase Agreement"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investors
Convertible Notes (the "Notes") that are convertible into shares (the
"Conversion Shares") of the Company's common stock (the "Common Stock"), upon
the terms and subject to the limitations and conditions set forth in the Notes;
and
B. To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investors hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investors" means the Initial Investors and any transferees or
assignees who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance
-1-
<PAGE>
with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any successor
rule providing for offering securities on a continuous basis ("Rule 415"), and
the declaration or ordering of effectiveness of such Registration Statement by
the United States Securities and Exchange Commission (the "SEC").
(iii) "Registrable Securities" means the Conversion Shares issued or
issuable and any shares of capital stock issued or issuable as a dividend on or
in exchange for or otherwise with respect to any of the foregoing.
(iv) "Registration Statement" means a registration statement of the
Company under the 1933 Act.
(b) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
(a) Mandatory Registration. The Company shall on or before September
1, 1997 file with the SEC a Registration Statement on Form S-3 (or, if Form S-3
is not then available, on such form of Registration Statement as is then
available to effect a registration of the Registrable Securities, subject to the
consent of the Initial Investors (as determined pursuant to Section l0) hereof),
which consent will not be unreasonably withheld) covering the resale of the
Registrable Securities, which Registration Statement, to the extent allowable
under the 1933 Act and the Rules promulgated thereunder (including Rule 416),
shall state that such Registration Statement also covers such indeterminate
number of additional shares of Common Stock as may become issuable upon
conversion of the Note (i) to prevent dilution resulting from stock splits,
stock dividends or similar transactions or (ii) by reason of changes in the
Conversion Rate in accordance with the terms thereof. The Company shall use its
best efforts to cause such registration to become and remain effective
(including the taking of such steps as are necessary to obtain the removal of
any stop orders); provided, that the Investors shall furnish the Company with
such appropriate information in connection therewith as the Company shall
reasonably request in writing. The Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided to (and subject to the approval of) the Initial Investors and
its counsel prior to its filing or other submission.
(b) Liquidated Damages. The Company shall use its best efforts to
obtain effectiveness of the Registration Statement as soon as practicable. If
(i) the Registration Statement(s) covering the Registrable Securities required
to be filed by the Company pursuant to Section 2(a) hereof is not declared
effective by the SEC on or before October 29, 1997 (other than by reason of any
act or failure to act in a timely manner by the Investors or Investors'
counsel), or if, after the Registration Statement has been declared effective by
the SEC, sales cannot be made pursuant to the
-2-
<PAGE>
Registration Statement (by reason of stop order, or the Company's failure to
update the Registration Statement), or (ii) the Common Stock is not listed or
included for quotation on the NASDAQ National Market System (the "NASDAQ-NMS"),
NASDAQ Small Cap, the New York Stock Exchange (the "NYSE") or the American Stock
Exchange (the "AMEX"), then the Company will make payments to the Investors in
such amounts and at such times as shall be determined pursuant to this Section
2(b) as partial relief for the damages to the Investors by reason of any such
delay in or reduction of their ability to sell the Registrable Securities (which
remedy shall not be exclusive of any other remedies available at law or in
equity). The Company shall pay to each holder of Registrable Securities an
amount equal to the aggregate "Purchase Price" (as defined below) of the Notes
held by such Investors (including, without limitation, Notes that have been
converted into Conversion Shares then held by such Investors) (the "Aggregate
Share Price") multiplied by two hundredths (.02) times the sum of: (i) the
number of months (prorated for partial months) after the end of such 90-day
period and prior to the date the Registration Statement is declared effective by
the SEC, provided, however, that there shall be excluded from such period any
delays which are solely attributable to changes required by the Investors in the
Registration Statement with respect to information relating to the Investors,
including, without limitation, changes to the plan of distribution, or to the
failure of the Investors to conduct their review of the registration statement
pursuant to Section 2(a) above in a reasonably prompt manner; (ii) the number of
months (prorated for partial months) that sales cannot be made pursuant to the
Registration Statement after the Registration Statement has been declared
effective; and (iii) the number of months (prorated for partial months) that the
Common Stock is not listed or included for quotation on the NASDAQ-NMS, NASDAQ
Small Cap, NYSE or AMEX after the Registration Statement has been declared
effective. (For example, if the Registration Statement becomes effective one (1)
month after the end of such 60-day period, the Company would pay $20,000 for
each $1,000,000 of Aggregate Share Price and would continue to pay $20,000 for
each $1,000,000 of Aggregate Share Price until the Registration Statement
becomes effective.) Such amounts shall be paid in cash or, at each Investor's
option (but subject to the limitations contained in Section 3.1 of the Note),
may be convertible into Common Stock at the "Conversion Price" (as defined in
the Note). Any shares of Common Stock issued upon conversion of such amounts
shall be Registrable Securities. If the Investor desires to convert the amounts
due hereunder into Registrable Securities it shall so notify the Company in
writing within two (2) business days of the date on which such amounts are first
payable in cash and such amounts shall be so convertible (pursuant to the
mechanics set forth in the Note), beginning on the last day upon which the cash
amount would otherwise be due in accordance with the following sentence.
Payments of cash pursuant hereto shall be made within ten (10) days after the
end of each period that gives rise to such obligation, provided that, if any
such period extends for more than thirty (30) days, interim payments shall
be-made for each such thirty (30) day period. The term "Purchase Price" means
the purchase price paid by the Investors for the Note. Upon agreement of both
the Purchaser and the Company, any liquidated damages due under the provisions
of this subparagraph may be paid in shares of
-3-
<PAGE>
Common Stock, registered as if such stock were Note Shares, and valued at the
Conversion Price, as such term is defined in Section 3.1 of the Note.
(c) Piggy-Back Registrations. If at any time prior to the expiration
of the Registration Period (as hereinafter defined) the Company shall file with
the SEC a Registration Statement relating to (i) a firm underwritten offering
for its own account or the account of others under the 1933 Act of any of its
equity securities or (ii) any other offering for its own account or the account
of others under the 1933 Act of any of its equity securities (other than on Form
S-4 or Form S-8 or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans) at a time when the Registration Statement contemplated by Section
l(a) hereof is not effective, the Company shall send to each Investor who is
entitled to registration rights under this Section 2(c) written notice of such
determination and, if within fifteen (15) days after the effective date of such
notice, such Investor shall so request in writing, the Company shall include in
such Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit. Any exclusion of
Registrable Securities shall be made pro rata among the Investors seeking to
include Registrable Securities, in proportion to the number of Registrable
Securities sought to be included by such Investors; provided, however, that the
Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are not entitled
to inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and provided,
further, however, that, after giving effect to the immediately preceding
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such securities in the
Registration Statement other than holders of securities entitled to inclusion of
their securities in such Registration Statement by reason of demand registration
rights. No right to registration of Registrable Securities under this Section
2(c) shall be construed to limit any registration required under Section 2(a)
hereof. If an offering in connection with which an Investor is entitled to
registration under this Section 2(c) is an underwritten offering, then each
Investor whose Registrable Securities are included in such Registration
Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten
offering.
-4-
<PAGE>
(d) Eligibility for Form S-3. The Company represents and warrants
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Initial Investors and any other Investor of the Registrable
Securities and the Company shall file all reports required to be filed by the
Company with the SEC in a timely manner so as to maintain such eligibility for
the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
(a) The Company shall on or before September 1, 1997 prepare and
file promptly with SEC, a Registration Statement with respect to the number of
Registrable Securities provided in Section 2(a), and thereafter use its best
efforts to cause such Registration Statement relating to Registrable Securities
to become effective as soon as possible after such filing, and keep the
Registration Statement effective pursuant to Rule 415 at all times until such
date as is the earlier of (i) the date on which all of the Registrable
Securities have been sold and (ii) the date on which the Registrable Securities
(in the opinion of counsel to the Initial Investors) may be immediately sold
without registration (the "Registration Period"), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein and all documents incorporated by reference therein) shall not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein not
misleading. The Company shall furnish to the Investor copies of reasonably
complete drafts of all such documents proposed to be filed (including exhibits,
if any), and any such Investor shall have the opportunity to object, within two
(2) business days, to any information pertaining solely to such Investor that is
contained therein and the company will make the corrections reasonably requested
by such Investor with respect to such information prior to filing any such
Registration Statement or amendment.
(b) The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement until such time
as all of such Registrable Securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof as set
forth in the Registration Statement. In the event the number of shares available
under a Registration Statement filed pursuant to this Agreement is insufficient
to cover all of the Registrable Securities issued or issuable upon - conversion
of the Preferred Stock, the Company shall amend the Registration Statement, or
file a new Registration Statement (on the short form available therefore, if
applicable), or both, so as to cover all of the Registrable Securities, in each
case, as
-5-
<PAGE>
soon as practicable, but in any event within thirty (30) days after the
necessity therefor arises (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to rely). The
Company shall use its best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof.
(c) The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in Section 2(a), each letter written by or on behalf of the Company to the
SEC or the staff of the SEC, and each material item of correspondence from the
SEC or the staff of the SEC, in each case relating to such Registration
Statement (other than any portion thereof which contains information for which
the Company has sought confidential treatment), and (ii) such number of copies
of a prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor.
(d) The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as the Investors who hold a majority in interest of the Registrable
Securities being offered reasonably request, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject itself
to general taxation in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any undertakings that
cause the Company undue expense or burden, or (e) make any change in its charter
or bylaws, which in each case the Board of Directors of the Company determines
to be contrary to the best interests of the Company and its stockholders.
(e) As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of the happening of any event, of which
the Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make
-6-
<PAGE>
the statements therein not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request.
(f) The Company shall use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of a Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest possible moment and to notify each Investor who holds
Registrable Securities being sold (or, in the event of an underwritten offering,
the managing underwriters) of the issuance of such order and the resolution
thereof.
(g) The Company shall permit a single firm of counsel designated by
the Initial Investors to review the Registration Statement and all amendments
and supplements thereto a reasonable period of time prior to their filing with
the SEC, and not file any document in a form to which such counsel reasonably
objects. Any period of review shall be added to the time in which registration
is required to be filed and effective, as appropriate.
(h) The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 1933 Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
(i) The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Initial Investors, and (iv) one firm of
attorneys retained by all such underwriters (collectively, the "Inspectors") all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "Records"), as shall be reasonably
deemed necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential
-7-
<PAGE>
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements (in form and substance
satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(i). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. Nothing herein shall be deemed to limit
the Investor's ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations.
(j) The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to- prevent disclosure of, or to obtain a protective order
for, such information.
(k) The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by the Registration Statement to be listed on
the NYSE or the AMEX or another national securities exchange and on each
additional national securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure the designation and quotation, of all the Registrable Securities
covered by the Registration Statement on the NASDAQ-NMS or, if not eligible for
the NASDAQ-NMS on the NASDAQ Small Cap and, without limiting the generality of
the foregoing, to arrange for or maintain at least two market makers to register
with the National Association of Securities Dealers, Inc. ("NASD") as such with
respect to such Registrable Securities.
(1) The Company shall provide a transfer agent and registrar, which
may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
(m) The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any
-8-
<PAGE>
restrictive legends) representing Registrable Securities to be offered pursuant
to the Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the managing underwriter or
underwriters, if any, or the Investors may reasonably request and-registered in
such names as the managing underwriter or underwriters, if any, or the Investors
may request.
(n) The Company shall use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable each holder thereof to consummate disposition of Registrable
Securities.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.
(b) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(e) or 3(f) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
(d) No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities
-9-
<PAGE>
on the basis provided in any underwriting arrangements in usual and customary
form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, the
fees and disbursements of counsel for the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities, and
(ii) the directors, officers, partners, employees, agents and each person who
control any Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act"), if any, (each, an
"Indemnified Person"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "Claims") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations"). Subject to the restrictions set forth in
Section 6(c) with respect to the number of legal counsel, the Company shall
reimburse the Investors and each such underwriter or controlling person,
promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by
-10-
<PAGE>
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld; and (iii) with respect to any preliminary prospectus,
shall not inure to the benefit of any Indemnified Person if the untrue statement
or omission of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or supplemented,
if such corrected prospectus was timely made available by the Company pursuant
to Section 3(c) hereof, and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving rise to a
Violation and such Indemnified Person, notwithstanding such advice, used it.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, each person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act, and any
other stockholder selling securities pursuant to the Registration Statement or
any of its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and subject to Section 6(c) such Investor will-reimburse any legal or
other expenses (promptly as such expenses are incurred and are due and payable)
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Agreement (including this Section 6(b) and
Section 7) for only that amount as does not exceed the net proceeds to such
Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of
-11-
<PAGE>
such Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
(c) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal counsel
for the Indemnified Persons or the Indemnified Parties, as applicable, and such
legal counsel shall be selected by Investors holding a majority-in-interest of
the Registrable Securities included in the Registration Statement to which the
Claim relates (with the approval of the Initial Investor if it holds Registrable
Securities included in such Registration Statement), if the Investors are
entitled to indemnification hereunder, or the Company, if the Company is
entitled to indemnification hereunder, as applicable. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is actually prejudiced in its
ability to defend such action. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for
-12-
<PAGE>
indemnification under the fault standards set forth in Section 6, (ii) no seller
of Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 1 l(f) of the 1933 Act) shall be entitled to contribution
from any seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any indemnification or
other obligations under this Agreement) by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investors to sell securities of the Company
to the public without registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to have the Company register Registrable Securities pursuant to
this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of Registrable Securities if (i) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the
-13-
<PAGE>
Company to be bound by all of the provisions contained herein, (v) such transfer
shall have been made in accordance with the applicable requirements of the
Securities Purchase Agreement, and (vi) such transferee shall be an "accredited
investor" as that term defined in Rule 501 of Regulation D promulgated under the
1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with written consent of the Company, and Investors who
hold at least seventy-five (75%) percent of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by telephone line facsimile transmission or other means)
or sent by certified mail, return receipt requested, properly addressed and with
proper postage pre-paid,
(i) if to the Company:
CSL Lighting Manufacturing, Inc.
27615 Avenue Hopkins,
Valencia, CA 91355-3493
Attention: President
with copy to:
Morse, Zelnick, Rose & Lander, LLP
450 Park Avenue, Suite 902
New York, N.Y. 10022
Attn.: Kenneth S. Rose, Esq.
if to the Initial Investors as set forth below their signatures appended hereto,
or at such other address as each such party furnishes by notice given in
accordance with this
-14-
<PAGE>
Section 11(b), and shall be effective, when personally delivered, upon receipt
and, when so sent by certified mail, four days after deposit with the United
States Postal Service.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof
(d) This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof. The parties hereto hereby submit to the exclusive
jurisdiction of the United States Federal Courts located in New York County, New
York with respect to any dispute arising under this Agreement or the
transactions contemplated hereby.
(e) This Agreement and the Securities Purchase Agreement (including
all schedules and exhibits thereto) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the Securities
Purchase Agreement supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(h) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
-15-
<PAGE>
(i) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(j) All consents and other determinations to be made by the
Investors pursuant to this Agreement shall be made by the Investors holding a
majority of the Registrable Securities (determined as if all Notes then
outstanding had been converted into Registrable Securities).
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
CSL Lighting Manufacturing, Inc.
By: /s/ Mark Allen
-------------------------------
Name: Mark Allen
Its: Chief Operating Officer
INITIAL INVESTORS
Sovereign Partners LP
By:
-------------------------------
Name:
-----------------------------
Its:
------------------------------
Morse, Zelnick, Rose & Lander LLP
September 22, 1997
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
4,512,820 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 Notes, duly and
validly authorized for issuance, fully 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
Morse, Zelnick, Rose & Lander, LLP
KSR/lmf
Arthur Andersen LLP
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 March 19, 1997
included in CSL Lighting Manufacturing, Inc.'s Form 10-KSB for the year ended
December 31, 1996 and to all references to our Firm included in this
registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Los Angeles, California
September 16, 1997
