<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 21, 1998
REGISTRATION NO. 333-49287
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
SLI, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
OKLAHOMA 3679 73-1412000
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer Identification
Classification Code Number) Number)
</TABLE>
------------------
500 CHAPMAN STREET
CANTON, MA 02021
TELEPHONE: (781) 828-2948
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
------------------
FRANK M. WARD, CHIEF EXECUTIVE OFFICER
SLI, INC.
500 CHAPMAN STREET
CANTON, MA 02021
TELEPHONE: (781) 828-2948
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
------------------
THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
WILLIAM J. SCHIFINO, ESQ. VINCENT PAGANO, JR., ESQ.
SCHIFINO & FLEISCHER, P. A. SIMPSON THACHER & BARTLETT
ONE TAMPA CITY CENTER, SUITE 2700 425 LEXINGTON AVENUE
TAMPA, FLORIDA 33602 NEW YORK, NEW YORK 10017
(813) 223-1535 (212) 455-2000
</TABLE>
------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this 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, check the following box. [ ]
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 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 this Form is a post-effective amendment filed pursuant to Rue 462(d)
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,
please check the following box. [ ]
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DUE 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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED MAY 21, 1998
10,875,000 Shares
SLI, INC.
(formerly "Chicago Miniature Lamp, Inc.")
Common Stock
($.01 par value)
Chicago Miniature Lamp, Inc. LOGO
------------------
Of the 10,875,000 shares of common stock, par value $.01 per share (the "Common
Stock"), offered hereby (the "Offering"), 8,250,000 shares are being sold by
SLI, Inc. (the "Company") and 2,625,000 shares are being sold by the Selling
Shareholders named herein under "Principal and Selling Shareholders." The
Company will not receive any of the proceeds from the shares sold by the Selling
Shareholders. On May 18, 1998, the reported last sale price of the Common Stock
on The New York Stock Exchange was $36.4375 per share.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN
INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" BEGINNING ON PAGE 7 HEREIN.
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.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS
PRICE TO DISCOUNTS AND PROCEEDS TO TO SELLING
PUBLIC COMMISSIONS COMPANY(1) SHAREHOLDERS
---------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Per Share............................................ $ $ $ $
Total (2)............................................ $ $ $ $
</TABLE>
(1) Before deduction of expenses payable by the Company estimated at $800,000.
(2) The Company and Selling Shareholders have granted the Underwriters an
option, exercisable for 30 days from the date of this Prospectus, to
purchase a maximum of 1,237,500 additional shares of Common Stock from the
Company and an aggregate of 393,750 additional outstanding shares from the
Selling Shareholders to cover over-allotments of shares. If the option is
exercised in full, the total Price to Public will be $ ,
Underwriting Discounts and Commissions will be $ , Proceeds to
Company will be $ and Proceeds to Selling Shareholders will be
$ .
The shares of Common Stock are offered by the several Underwriters when, as
and if delivered to and accepted by the Underwriters and subject to their right
to reject orders in whole or in part. It is expected that the shares of Common
Stock will be ready for delivery on or about , 1998, against payment
in immediately available funds.
CREDIT SUISSE FIRST BOSTON
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
SALOMON SMITH BARNEY
MCDONALD & COMPANY
SECURITIES, INC.
Prospectus dated , 1998.
<PAGE> 3
[PHOTOS]
[DESCRIPTION OF COMPANY'S PRODUCTS.]
[DESCRIPTION OF PRODUCT APPLICATIONS.]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS, PENALTY BIDS AND PASSIVE MARKET MAKING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
The trademark Sylvania is owned by Osram-Sylvania, Inc. in the United
States, Canada, Mexico and Puerto Rico and by the Company in all other
jurisdictions where the name is registered. This Prospectus also contains
reference to other trademarks which are not owned by the Company.
i
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and historical and pro forma
financial statements and notes thereto included elsewhere in this Prospectus. As
used in this Prospectus, unless the context indicates otherwise, the terms the
"Company" and "SLI" refer to SLI, Inc. and its consolidated subsidiaries. In
January 1998, the Company changed its fiscal year-end from the Sunday nearest to
December 1 of each year to the Sunday nearest to December 31. Unless otherwise
indicated, information in this Prospectus gives effect to a three-for-two stock
split in the form of a dividend paid on March 6, 1998, and assumes no exercise
of the Underwriters' over-allotment option.
THE COMPANY
The Company believes that it is one of the six largest full-line lighting
companies in the world and one of only three major international producers
offering lamps, fixtures and ballasts. Primarily through its acquisition-based
growth strategy, the Company has developed from a specialized U.S. manufacturer
and supplier of neon lamps and miniature lighting products into one of the
world's largest vertically integrated manufacturers and suppliers of lighting
systems to the industrial, commercial and consumer markets. The Company has
completed 16 acquisitions since 1992 as part of its growth strategy, with its
two most significant acquisitions being consummated in the year ended November
30, 1997 ("Fiscal 1997"). In January 1997, the Company significantly expanded
its operations with the acquisition of Valmont Electric, Inc. ("Power Lighting
Products" or "PLP"), a manufacturer and supplier of lighting ballasts, and in
September 1997, the Company completed the purchase of Sylvania Lighting
International, B.V. ("SLI, B.V."), the third largest lighting company in Europe
and a major global lighting company, which sells a variety of products in its
principal markets under recognized brand names, including Sylvania.
Primarily as a result of the Company's acquisition strategy, net sales
increased from $57.4 million for the year ended December 3, 1995 to $330.0
million for Fiscal 1997. In addition, operating income increased from $12.2
million to $27.4 million over the same period. On a pro forma basis after giving
effect to the PLP and SLI, B.V. acquisitions, the Company's net sales and
operating income would have been $755.4 million and $40.9 million, respectively,
for Fiscal 1997. In addition, for Fiscal 1997, on a pro forma basis after giving
effect to the PLP and SLI, B.V. acquisitions, approximately 81% and 79% of the
Company's net sales and operating income, respectively, would have been derived
from operations outside the United States. The Company's net sales increased
from $46.2 million for the three months ended April 6, 1997 to $192.4 million
for the three months ended April 5, 1998 and operating income increased from
$7.0 million to $14.4 million over the same period.
With the addition of SLI, B.V., the Company is able to offer a complete
range of lighting products throughout the world. The Company's product
categories include lamps, fixtures, miniature lighting assemblies and ballasts.
The lamp products produced by the Company include incandescent, fluorescent,
compact fluorescent, high intensity discharge ("HID"), halogen, and special and
miniature lamps. The Company's commercial and industrial fixture lines consist
primarily of fluorescent ceiling mounted fixtures; its accent and decorative
fixture lines range from simple downlights and spotlights to high performance
lighting fixtures for art galleries and museums. Miniature lighting assemblies
manufactured by the Company are used in various product applications, including
automobile message centers, and aviation and telecommunications status arrays.
Magnetic and electronic ballasts designed and manufactured by the Company supply
power to start and operate fluorescent and HID lamps and signage products (neon
displays).
The Company's strategy is to operate as a vertically integrated
manufacturer providing "one stop" lighting solutions for its customers' lighting
requirements by offering both discrete lighting components and value-added
integrated products. Through its acquisition of SLI, B.V., as well as several
niche businesses, the Company is able to offer its global customers extensive
design, engineering and manufacturing capabilities, while at the same time
providing local, responsive service. At November 30, 1997, the Company had 26
manufacturing facilities, as well as sales offices and distribution facilities,
in more than 30 countries. The Company's customers include wholesalers, original
equipment manufacturers ("OEMs"), retailers, architects, designers and
contractors.
1
<PAGE> 5
The Company is incorporated under the laws of the State of Oklahoma. Its
executive offices are located at 500 Chapman Street, Canton, Massachusetts,
02021, and its telephone number is (781) 828-2948.
GROWTH STRATEGY
The Company believes that it is well positioned to continue its growth
internally and through acquisitions. Management believes that its industry
knowledge, experience consummating and integrating acquisitions and its access
to capital will facilitate the Company's external growth through future
acquisitions both domestically and internationally. Internal growth is expected
to be driven by (i) increasing sales to existing and new customers, (ii)
introducing new technologies and (iii) continuing to diversify geographic
operations.
Pursue Complementary Acquisitions. The Company plans to continue to use
strategic acquisitions and alliances to effect its vertical and horizontal
integration strategies. Acquisitions are selected based upon their potential to
(i) augment the Company's technology, engineering and design capabilities, (ii)
broaden the Company's product offering, (iii) provide additional manufacturing
facilities, (iv) access global markets, and/or (v) effect cost reduction
opportunities and other operational synergies. For example, the acquisition of
SLI, B.V., a large user of ballasts with no ballast manufacturing capability, is
expected to produce synergistic effects for the Company and its Power Lighting
Products subsidiary, a major producer of ballasts. The Company believes that its
extensive knowledge of the lighting industry, combined with its experience in
consummating numerous acquisitions and its access to capital, provides an
important competitive advantage in identifying domestic and international
acquisition opportunities and integrating the acquired operations into the
Company. Further, because of the fragmented nature of many sectors of the
lighting industry, the Company believes that there are many opportunities
available for future acquisitions.
Increase Sales to Existing and New Customers. The Company focuses on
expanding its markets by designing, developing and marketing "one stop" lighting
solutions, a strategy through which the Company seeks to capitalize on
cross-selling opportunities between customers of existing and acquired
businesses. The Company seeks to use its global distribution networks and
recognized brand names, including Sylvania (outside the United States, Canada,
Mexico and Puerto Rico) and Alba, to help sell and market the Company's domestic
products overseas. Moreover, the Company's international operations have broad
product lines of consumer and industrial lamps and fixtures which the Company
plans to market domestically. In addition, the Company plans to aggressively
market complementary products such as ballasts which can be offered with linear
and compact fluorescent and HID lighting products manufactured by SLI, B.V.
Introduce New Lighting Technologies. Through the introduction of new
lighting technologies, the Company has been able to participate in the high
growth and high margin segment of the lighting market. Further, because lighting
products and the related manufacturing technology are becoming increasingly
sophisticated, the Company has sought to enhance its technological capabilities
in order to fulfill its customers' outsourcing and "just-in-time" requirements
and adjust to shifts in demand. Through the acquisition of various niche
businesses operating within the lighting industry, the Company's technological
expertise has expanded, thus enabling it to manufacture more sophisticated
products. As a result of its technical know-how, the Company believes that it
can expand its business by developing new products and entering new niche
markets in which it can be one of a few leading suppliers. For example, the
Company is currently exploring opportunities for the development and integration
of fiber optic products for the automotive, aviation and consumer markets.
Diversify Geographic Operations. An important element of the Company's
growth strategy is to continue to establish manufacturing operations in areas of
high customer density or where manufacturing efficiencies can be realized. The
Company's operations are currently located in the Americas, Europe, Australia
and, to a lesser extent, Asia. The Company intends to continue to selectively
expand its operations internationally to better serve its existing customers and
to develop new customers.
2
<PAGE> 6
OPERATING STRATEGY
The Company's operating strategy is designed to enhance the Company's
international position as a leading designer, manufacturer and supplier of
lighting products, while at the same time increasing profitability through (i)
continued vertical integration and automation, (ii) improved operating
efficiencies and (iii) continued focus on responsiveness and product quality.
Continue Vertical Integration and Automation. The Company intends to
continue to vertically integrate its operations by broadening the range of
components which it manufactures and uses in its lighting products. The
Company's ability to manufacture a wide array of components facilitates the
production of more complex, value-added lighting products, which generally have
higher average selling prices per unit and higher margins than discrete lighting
components. The Company intends to further increase its manufacturing
capabilities and continue to expand the automation at its facilities in order to
increase production and reduce production costs.
Improve Operating Efficiencies. The Company has realized cost savings in
connection with the integration of its acquired businesses. Cost reduction
initiatives have included the consolidation of certain administrative functions,
vertical integration with existing operations and leveraging of combined
purchasing power. Certain of these recently acquired businesses have been
operating at significantly lower margins than the Company's base business,
resulting in temporary contraction of consolidated margins. Management believes
that the recent acquisition of SLI, B.V., with its extensive geographical and
physical infrastructure of manufacturing, sales and distribution facilities,
provides a significant opportunity to improve operating efficiencies.
Focus on Responsiveness and Quality. The Company's ability to conceive,
design and engineer new products in a short period of time is a significant
competitive advantage. Management has developed "Competency Centers" within its
manufacturing facilities to optimize the expertise of the Company's design,
engineering, manufacturing and technical sales support teams. In addition, the
Company has developed technology to monitor and control its production
performance. As a result of various quality initiatives, the Company has
achieved a preferred supplier designation for its miniature lighting products
from several of its OEM customers, including Q-1 certification from Ford Motor
Company and a Quality Excellence award from Chrysler Corp. In addition, certain
of the Company's facilities have received QS-9000, ISO 9001 and Euro-Net ISO
9000 and 9001 certifications. Such certifications in many instances are a
pre-requisite for contractual orders, particularly with large industrial users
of the Company's products.
3
<PAGE> 7
SUMMARY OF ACQUISITIONS
The following table sets forth the acquisitions which have been consummated
by the Company since October 1992 and prior to November 30, 1997:
<TABLE>
<CAPTION>
BUSINESS TYPE OF OPERATION
-------- -----------------
<S> <C>
1992
Chicago Miniature Lamp, Inc............ Supplier of miniature lighting components
1993
Glolite Sales, Ltd..................... Manufacturer of miniature neon and incandescent
bulb and string lighting products
1994
Industrial Devices, Inc................ Designer and manufacturer of miniature lighting
products
1995
Plastomer, Inc......................... Manufacturer and supplier of miniature lighting
assemblies and bulb sockets
Fredon Industrial Development, Inc..... Manufacturer of machine tools and dies
STT Holdings Limited................... Designer and engineer of lamp-making equipment
Electro Fiberoptics, Inc............... Manufacturer of fiber optic lighting products
Phoenix Lighting (U.K.) Limited........ Manufacturer of halogen and specialty lamps
1996
W. Albrecht GmbH u. Co. KG............. Manufacturer of miniature lighting products
1997
Gustav Bruckner GmbH................... Designer, engineer, and manufacturer of automated
lamp-making equipment
Valmont Electric, Inc.................. Manufacturer of magnetic and electronic ballasts
Sylvania Lighting International,
B.V.................................. Designer and manufacturer of integrated lighting
systems including lamps and fixtures
Solium, Inc............................ Designer and manufacturer of electronic ballasts
</TABLE>
4
<PAGE> 8
THE OFFERING
<TABLE>
<S> <C>
Common Stock being offered by the Company............. 8,250,000 shares
Common Stock being offered by the Selling
Shareholders........................................ 2,625,000 shares
-----------
Total....................................... 10,875,000 shares
===========
Common Stock to be outstanding after the
Offering(a)......................................... 37,301,362 shares
Use of proceeds....................................... To repay certain outstanding indebtedness and
for general corporate purposes, including
possible future acquisitions.
Dividend policy....................................... The Company does not intend to pay dividends
in the foreseeable future as it intends to
retain any earnings for the operation and
expansion of its business. See "Dividend
Policy."
NYSE symbol........................................... SLI
</TABLE>
- ---------------
(a) Excludes 3,421,169 shares of Common Stock reserved for issuance upon the
exercise of options currently outstanding under the Company's Incentive and
Non-Statutory Stock Option Plan (the "Stock Option Plan") and its Special
1997 Stock Option Plan (the "Special Option Plan"). The Stock Option Plan
and the Special Option Plan are collectively referred to herein as the
"Option Plans."
RISK FACTORS
See "Risk Factors" for a description of certain risks to be considered
before making an investment in the Common Stock.
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ significantly from
those discussed herein. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," as well as those discussed elsewhere in this
Prospectus. Statements contained in this Prospectus that are not historical
facts are forward-looking statements that are subject to the safe harbor created
by the Private Securities Litigation Reform Act of 1995. A number of important
factors could cause the Company's actual results for 1998 and beyond to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, the Company. These factors include, without limitation, those
discussed in "Risk Factors."
5
<PAGE> 9
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED
FINANCIAL DATA OF THE COMPANY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
---------------------------------------------------------------------- -------------------
ACTUAL PRO FORMA(A) ACTUAL
------------------------------------------------------- ------------ -------------------
2/27/94(B) 11/27/94(C) 12/3/95 12/1/96 11/30/97 11/30/97 4/6/97 4/5/98(H)
---------- ----------- ------- ------- -------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA(D):
Net sales............... $24,894 $31,729 $57,402 $94,171 $329,959 $755,364 $46,188 $192,420
Cost of products sold... 17,860 21,113 36,726 61,147 231,933 505,532 32,195 133,593
------- ------- ------- ------- -------- -------- ------- --------
Gross margin.......... 7,034 10,616 20,676 33,024 98,026 249,832 13,993 58,827
Selling, general and
administrative
expenses.............. 8,028 7,777 8,462 14,552 65,549 203,830 6,957 44,448
Restructuring costs..... -- -- -- -- 5,115 5,115
------- ------- ------- ------- -------- -------- ------- --------
Operating income
(loss).............. (994) 2,839 12,214 18,472 27,362 40,887 7,036 14,379
Net Income (loss)..... $(1,635) $ 1,110 $8,465 $13,436 $20,941 $ 31,570 $ 6,108 $ 9,117
======= ======= ======= ======= ======== ======== ======= ========
Net Income (loss) per
common share --
basic(e)(f)........... $ (0.09) $ 0.06 $ 0.41 $ 0.55 $ 0.73 $ 0.94 $ 0.21 $ 0.32
======= ======= ======= ======= ======== ======== ======= ========
Weighted average shares
outstanding -- basic(e).. 18,744 18,744 20,880 24,357 28,761 33,435 28,964 28,751
======= ======= ======= ======= ======== ======== ======= ========
Net Income (loss) per
common share --
diluted(e)(f)......... -- -- 0.41 0.55 0.71 0.93 0.21 0.30
======= ======= ======= ======= ======== ======== ======= ========
Weighted average shares
outstanding -- diluted(e).. -- -- 20,899 24,488 29,331 34,005 29,121 30,091
======= ======= ======= ======= ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
AS OF APRIL 5, 1998
-------------------------
ACTUAL AS ADJUSTED(G)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA(D):
Working capital............................................. $ 81,240 $228,854
Total assets................................................ 642,847 767,124
Short-term debt............................................. 23,337 --
Long-term debt, less current portion........................ 180,171 40,000
Stockholders' equity........................................ 168,741 456,526
</TABLE>
- ---------------
(a) Gives effect to the following as if each had occurred on December 2, 1996:
(i) the PLP and SLI, B.V. acquisitions and (ii) the issuance of 4,674,000
shares of Common Stock in the Offering, which is the number of shares
necessary to raise net proceeds equal to $163.5 million of outstanding debt
to be repaid. See "Use of Proceeds," "Business-Acquisitions" and the Pro
Forma Consolidated Statement of Operations Data and related notes thereto
included elsewhere in this Prospectus.
(b) The results of operations of Xenell, a predecessor to the Company, and the
Company are combined for the Company's year ended February 27, 1994.
(c) The Company changed its financial reporting year-end from the last Sunday
in February to the Sunday closest to December 1, which resulted in a year
containing 39 weeks in 1994.
(d) Revenues, expenses, assets, and liabilities have been significantly
affected by the number and timing of acquisitions made by the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business-Acquisitions."
(e) See Note 2 to Notes to the Company's Consolidated Financial Statements for
stock split information.
(f) See Note 5 to Notes to the Company's Unaudited Condensed Consolidated
Financial Statements for earnings per share information.
(g) Gives effect to the Offering and the application of the estimated net
proceeds to the Company therefrom as if the Offering had occurred on April
5, 1998. See "Use of Proceeds," "Business-Acquisitions" and the Pro Forma
Consolidated Statement of Operations Data and related notes thereto
included elsewhere in this Prospectus.
(h) In January 1998, the Company changed its fiscal year end from the Sunday
nearest December 1 to the Sunday nearest December 31. As a result of this
change, the Company had a one-month transition period ending January 4,
1998. Net sales, operating loss and net loss were $53.9 million, $(337,000)
and $(547,000), respectively. See the Company's Unaudited Condensed
Consolidated Financial Statements included elsewhere herein.
6
<PAGE> 10
RISK FACTORS
Prospective purchasers of the Company's Common Stock should carefully
consider the following factors as well as the other information contained in
this Prospectus in evaluating an investment in the Company's Common Stock.
GROWTH THROUGH ACQUISITIONS; INTEGRATION OF ACQUISITIONS
The Company's growth has been, and is expected to continue to be, driven
principally by acquisitions. While the Company intends to seek additional
acquisition opportunities, there can be no assurance that the Company will be
able to successfully identify suitable acquisition candidates, secure financing
on acceptable terms, complete acquisitions on favorable terms, successfully
integrate acquired operations (including without limitation the integration of
SLI, B.V.) into existing operations, expand into new markets or obtain
appropriate bank consents. There can also be no assurance that future
acquisitions will not have an adverse effect upon the Company's operating
results, particularly in the fiscal quarters immediately following the
completion of such acquisitions while the operations of the acquired businesses
are being integrated into the Company's operations. Once integrated, acquired
operations may not achieve levels of revenues, profitability or productivity
comparable with those achieved by the Company's existing operations, or
otherwise perform as expected. In addition, the Company competes for acquisition
and expansion opportunities with companies that have substantially greater
resources. Finally, the significant increase in the size of the Company's
operations as a result of the PLP and SLI, B.V. acquisitions will substantially
increase the demands placed upon the Company's management, including demands
resulting from the need to integrate accounting systems, computer systems,
manufacturing operations and other operations. See "Business -- Growth
Strategy."
INTERNATIONAL OPERATIONS
At November 30, 1997, the Company had 26 manufacturing facilities, as well
as sales offices and distribution facilities in more than 30 countries and sells
its products worldwide. For Fiscal 1997, on a pro forma basis after giving
effect to the PLP and SLI, B.V. acquisitions, approximately 81% and 79% of the
Company's net sales and operating income, respectively, would have been derived
from operations outside the United States. As a result of its international
operations, the Company is subject to risks associated with operating in foreign
countries, including limitations on remittance of dividends and other payments
by foreign subsidiaries, hyperinflation in certain foreign countries, imposition
of investment and other restrictions by foreign governments, trade barriers, the
effects of income and withholding taxes and governmental expropriation. Although
such risks have not had a material adverse effect on the Company to date, no
assurance can be given that such risks will not have a material adverse effect
on the Company in the future. See "Business -- International Operations."
FOREIGN CURRENCIES AND INTEREST RATE RISK
A significant amount of the Company's net sales are generated in foreign
currencies. For Fiscal 1997, on a pro forma basis after giving effect to the PLP
and SLI, B.V. acquisitions, approximately 58% of the Company's net sales would
have been denominated in European currencies, 19% in U.S. dollars, and the
remaining 23% in other currencies. Costs of the Company are primarily incurred
in the same currencies and in percentages which are not materially different
from the net sales percentages. Since the Company's financial statements are
denominated in U.S. dollars, devaluation and changes in exchange rates between
the dollar and other currencies have had and will have an impact on the reported
results of the Company. To date, this impact has not been material; however, no
assurance can be given that such impact will not have a material adverse effect
on the Company in the future. The Company may, from time to time, hedge
specifically identified committed cash flows in foreign currencies using forward
currency sale or purchase contracts. In addition, international operations are
subject to a number of other currency risks, including, among others, currency
exchange controls, transfer restrictions and rate fluctuations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business -- International
Operations."
7
<PAGE> 11
COMPETITION
The global lighting industry in which the Company operates is highly
competitive. The Company competes primarily on the basis of brand awareness,
price, product quality, design and engineering, customer service and
distribution strength. Competitors range from large global diversified companies
such as Philips Electronics N.V. ("Philips"), General Electric Corp. ("General
Electric"), Siemens A.G. ("Siemens") and its North American subsidiary,
Osram-Sylvania, Inc. ("Osram"), Matsushita Corp. and Toshiba Corp. to small
brokers representing Pacific Rim manufacturers. Many of these competitors offer
products which are substantially identical to those offered by the Company. In
addition, certain of the Company's competitors are significantly larger than the
Company and devote a substantial amount of money to research and development. As
a result of these competitive pressures, there can be no assurance that the
Company will be able to compete effectively or increase prices in the future.
Price increases by the Company, price reductions by competitors, decisions by
the Company with regard to maintaining profit margins rather than market share,
or other competitive or market factors or strategies could adversely affect the
Company's market share or results of operations. Competition could prevent the
institution of price increases or could require price reductions or increased
spending on research and development and marketing and sales which could
adversely effect the Company's results of operations. See
"Business -- Competition."
SOURCES OF RAW MATERIALS
For Fiscal 1997, on a pro forma basis after giving effect to the PLP and
SLI, B.V. acquisitions, the Company purchased approximately 90% of its
incandescent glass shells from a joint venture consisting of Philips and Osram
and approximately 80% of its fluorescent glass tubing from Osram, in each case
pursuant to long term agreements. The Company purchases certain of its other raw
materials, including plastic, metals, glass, copper, filaments, gases,
electrodes, electronic components, wire and resistors for use in the manufacture
of lamps, fixtures, ballasts and miniature lighting assemblies. All such raw
materials are readily available and are generally purchased from a variety of
independent, non-competing suppliers. Substantially all light emitting diodes
("LEDs") used by the Company in its miniature lighting assemblies are currently
imported from the Pacific Rim. The Company has recently acquired a European
company primarily engaged in the production of LEDs which will supply a portion
of the Company's needs. Any interruption in the supply of incandescent glass
shells, fluorescent glass tubing, LEDs or significant fluctuations in the prices
of other raw materials could have an adverse effect on the Company's operations.
LABOR RELATIONS
At April 5, 1998, approximately 46% of the Company's employees were covered
by collective bargaining or similar agreements which expire at various times.
Although the Company had a three-week work stoppage at its St. Etienne, France
facility in 1997, the Company believes that it has satisfactory relations with
its unions and, therefore, anticipates reaching new agreements on satisfactory
terms as existing agreements expire. There can be no assurance, however, that
new agreements will be reached without a work stoppage or strike or will be
reached on terms satisfactory to the Company. A prolonged work stoppage or
strike could have a material adverse effect on the Company's results of
operations. See "Business -- Employees."
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state, local and foreign
laws and regulations relating to the storage, handling, generation, treatment,
emission, release, discharge and disposal of certain substances and wastes.
While the Company believes that it is currently in material compliance with
those laws and regulations, there can be no assurance that the Company will not
incur significant costs to remediate violations of such laws and regulations,
particularly in connection with the Company's acquisitions of existing operating
facilities or to comply with changes in existing laws and regulations (or the
enforcement thereof). Such costs could have a material adverse effect on the
Company's results of operations. See "Business -- Environmental Matters."
8
<PAGE> 12
USE OF UNALLOCATED NET PROCEEDS
The Company has identified only one specific use for the $287.8 million
(approximately $331.1 million if the Underwriters' over-allotment option is
exercised in full) of estimated net proceeds from the sale of the shares of
Common Stock offered hereby. The Company expects to use $163.5 million of such
net proceeds to repay a portion of the indebtedness outstanding under the
Company's revolving credit facility. The remainder will be used for general
corporate purposes, including possible future acquisitions. Consequently,
management will have broad discretion in the allocation of a significant portion
of the net proceeds from the Offering. See "Use of Proceeds."
DEPENDENCE ON KEY PERSONNEL
The Company is dependent to a significant extent upon the efforts and
abilities of its President, Chief Executive Officer and principal shareholder,
Mr. Frank M. Ward, as well as Mr. Norman Scoular, the Chief Operating Officer of
the Company and President of SLI, B.V., the Company's principal subsidiary. The
loss of the services of either Mr. Ward or Mr. Scoular could have a material
adverse effect on the Company and may constitute a default under the Company's
revolving credit facility. The Company has entered into employment agreements
with Messrs. Ward and Scoular, the terms of which are set forth under
"Management -- Employment Agreements." The Company does not carry key-man life
insurance on either Mr. Ward or Mr. Scoular. See "Description of Certain
Indebtedness."
OWNERSHIP AND SIGNIFICANT INFLUENCE OF PRINCIPAL SHAREHOLDERS
After consummation of the Offering, Mr. Ward and trusts established for
members of his immediate family will own in the aggregate approximately 31.8% of
the outstanding shares of Common Stock of the Company. As a result of such
concentration of ownership, Mr. Ward and such trusts will have the ability to
exert significant influence on the policies and affairs of the Company and
corporate actions requiring shareholder approval, including the election of the
members of the Board of Directors. This concentration of ownership could have
the effect of delaying, deferring or preventing a change of control of the
Company, including any business combination with an unaffiliated party, and
could also affect the price that investors might be willing to pay in the future
for shares of Common Stock. See "Principal and Selling Shareholders."
NO DIVIDENDS ANTICIPATED
The Company intends to retain all future earnings for use in the
development of its business and does not anticipate paying any cash dividends in
the foreseeable future. In addition, cash dividend payments are prohibited under
the terms of the Company's revolving credit facility until 2002. See "Dividend
Policy" and "Description of Certain Indebtedness."
VOLATILITY OF MARKET PRICE FOR COMMON STOCK
From time to time, there may be significant volatility in the market price
for the Common Stock. Operating results of the Company, changes in general
economic conditions and the financial markets, or other developments affecting
the Company or its competitors could cause the market price for the Common Stock
to fluctuate substantially. See "Price Range of Common Stock."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 37,301,362 shares of
Common Stock outstanding. Of these shares, all of the 10,875,000 shares sold in
the Offering and 15,911,877 shares of Common Stock currently outstanding will be
freely tradable without restriction or further registration under the Securities
Act of 1933, as amended (the "Securities Act"). The remaining 10,514,485 shares
are deemed "restricted shares" as defined by Rule 144 under the Securities Act.
Of such restricted shares, 10,329,985 shares are currently eligible for sale
pursuant to Rule 144, subject to certain restrictions, and 184,500 shares will
become eligible for sale pursuant to Rule 144, subject to certain restrictions,
at various times between September 1998 and April 1999. Sales of substantial
amounts of Common Stock (including
9
<PAGE> 13
shares issued upon the exercise of stock options) in the public market, or the
perception that such sales could occur, could adversely affect the prevailing
market price for the Common Stock and the ability of the Company to raise
capital through a public offering of its equity securities. The Selling
Shareholders and Mr. Norman Scoular, who will beneficially own in the aggregate
12,125,250 shares of Common Stock following the completion of the Offering, and
the Company have agreed not to offer, sell, offer to sell, solicit an offer to
buy, contract to sell, pledge or grant any option to purchase or otherwise
transfer or dispose (or announce any of the foregoing) of any shares of Common
Stock, or any securities convertible into or exercisable for Common Stock,
without the prior written consent of Credit Suisse First Boston Corporation, for
a period of 120 days after the date of this Prospectus except in the case of the
Company for the issuance of stock options under the Stock Option Plans, the
issuance or sale of Common Stock by the Company upon exercise of outstanding
stock options and the issuance of no more than an agreed upon amount of
unregistered securities in consideration for the acquisition of stock or assets
of other companies. See "Shares Eligible for Future Sale."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 8,250,000 shares of
Common Stock offered by it hereby are estimated to be approximately $287.8
million (approximately $331.1 million if the Underwriters' over-allotment option
is exercised in full). This assumes a public offering price of $36.4375 per
share of Common Stock, the last reported sales price of the Common Stock on The
New York Stock Exchange on May 18, 1998, and expenses payable by the Company
estimated at $800,000. The Company will not receive any proceeds from the sale
of shares of Common Stock by the Selling Shareholders.
Of the net proceeds, the Company will use approximately $163.5 million to
repay a portion of the indebtedness outstanding under the Company's revolving
credit facility, which indebtedness was incurred primarily to finance the cash
portion of the purchase price of the PLP and SLI, B.V. acquisitions.
Indebtedness outstanding under the revolving credit facility bears interest at
various rates and matures on August 30, 2002. See "Description of Certain
Indebtedness." The remaining net proceeds will be available for general
corporate purposes, including possible future acquisitions. The Company has no
agreement, arrangement or understanding with respect to any other particular
acquisition, and there can be no assurance that any acquisition will be
completed. See "Risk Factors -- Use of Unallocated Net Proceeds."
Pending the Company's use of the net proceeds from the Offering, the
Company will make short-term investments in interest-bearing savings accounts,
certificates of deposit, United States Government obligations, money market
accounts, interest bearing securities or other insured short-term,
interest-bearing investments.
10
<PAGE> 14
PRICE RANGE OF COMMON STOCK
Until May 4, 1998, the Company's Common Stock traded on the Nasdaq National
Market. Since that date, the Common Stock has traded on The New York Stock
Exchange. The following table sets forth the range of high and low sales prices
for the Company's Common Stock for each period indicated since December 4, 1995
(adjusted for stock splits).
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL 1996
First Quarter............................................... $13.22 $ 8.89
Second Quarter.............................................. 18.78 12.22
Third Quarter............................................... 20.50 12.67
Fourth Quarter.............................................. 22.67 16.67
FISCAL 1997
First Quarter............................................... 29.50 11.08
Second Quarter.............................................. 16.67 11.33
Third Quarter............................................... 21.56 15.50
Fourth Quarter.............................................. 25.67 18.00
FISCAL 1998
First Quarter(1)............................................ 31.92 20.30
Second Quarter (through May 18, 1998)....................... 40.63 32.00
</TABLE>
- ---------------
(1) Includes transition month of December 1997.
Such market quotations reflect inter-dealer prices, without retail
mark-ups, mark-downs or commissions and may not necessarily represent actual
transactions.
As of April 5, 1998, the approximate number of holders of record of the
Company's Common Stock was 112 and the number of beneficial holders, including
individual participants in security position listings with clearing agencies,
was estimated at approximately 4,000.
DIVIDEND POLICY
No dividends have been paid during the two most recent fiscal years, and
the Company does not intend to pay dividends in the foreseeable future as it
intends to retain any earnings for the operation and expansion of its business.
In addition, the payment of cash dividends by the Company is prohibited under
the terms of its revolving credit agreement until 2002. See "Description of
Certain Indebtedness." Any determination to pay dividends in the future,
assuming the lender's consent is obtained, will be at the discretion of the
Company's Board of Directors and will be dependent upon the Company's results of
operations, financial condition, contractual restrictions and other factors
deemed relevant at that time by the Company's Board of Directors.
11
<PAGE> 15
CAPITALIZATION
The following table sets forth the capitalization of the Company at April
5, 1998, and at April 5, 1998, as adjusted to give effect to the Offering and
the application of the estimated net proceeds to the Company therefrom as
described under "Use of Proceeds." This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements and Notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF APRIL 5, 1998
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, less current portion(a)..................... $180,171 $ 40,000
Stockholders' equity:
Common Stock, $.01 par value; 100,000,000 shares authorized
29,468,328 issued, 37,944,707 shares as adjusted(b)....... 295 378
Additional paid-in capital.................................. 128,810 416,512
Retained earnings........................................... 53,788 53,788
Currency translation adjustment............................. (5,480) (5,480)
Less: Treasury stock at cost (643,345 shares)(c)............ (8,672) (8,672)
-------- --------
Total stockholders' equity........................ 168,741 456,526
-------- --------
Total capitalization.............................. $348,912 $496,526
======== ========
</TABLE>
- ---------------
(a) For a description of the Company's debt instruments, see "Description of
Certain Indebtedness" and Note 4 of Notes to the Company's Consolidated
Financial Statements.
(b) Includes 226,379 shares of Common Stock issued subsequent to April 5, 1998
in connection with certain acquisitions and the exercise of options.
Excludes 3,421,169 shares of Common Stock reserved for issuance upon the
exercise of options currently outstanding under the Company's Option Plans.
(c) See Note 2 to Notes to the Company's Consolidated Financial Statements for
treasury stock information.
12
<PAGE> 16
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS DATA
The pro forma consolidated statement of operations data for Fiscal 1997
give effect to the following as if each had occurred on December 2, 1996: (i)
the PLP and SLI, B.V. acquisitions and (ii) the issuance of 4,674,000 shares of
Common Stock in the Offering, which is the number of shares necessary to raise
net proceeds equal to $163.5 million of outstanding debt to be repaid. The pro
forma consolidated statement of operations data do not include adjustments for
the acquisitions of Gustav Bruckner GmbH ("Bruckner") or Solium, Inc.
("Solium"), as the adjustments are insignificant. The pro forma consolidated
statement of operations data do not purport to be indicative of the combined
results of operations that actually would have occurred if the transactions
described above had been effected at the dates indicated or to project future
results of operations for any period.
YEAR ENDED NOVEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS FOR PLP
FOR PLP SLI, FOR SLI, B.V. AND SLI, B.V. OFFERING
COMPANY PLP(A) ACQUISITION B.V.(B) ACQUISITION ACQUISITIONS ADJUSTMENTS PRO FORMA
-------- ------- ----------- -------- ------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............ $329,959 $15,491 $ -- $409,914 $ -- $755,364 $ -- $755,364
Cost of products
sold............... 231,933 13,149 (50)(c) 266,176 (5,676)(d) 505,532 -- 505,532
-------- ------- ---- -------- ------- -------- ------ --------
Gross margin....... 98,026 2,342 50 143,738 5,676 249,832 -- 249,832
Selling, general and
administrative
expenses........... 65,549 2,445 (25)(c) 135,143 718(e) 203,830 -- 203,830
Restructuring
costs.............. 5,115 -- -- -- -- 5,115 -- 5,115
-------- ------- ---- -------- ------- -------- ------ --------
Operating income... 27,362 (103) 75 8,595 4,958 40,887 -- 40,887
Interest income...... (4,082) -- -- -- -- (4,082) -- (4,082)
Interest expense..... 5,238 -- -- 2,776 -- 8,014 (5,686)(f) 2,328
Other expense
(income)........... (2,326) (5) -- 1,111 -- (1,220) -- (1,220)
-------- ------- ---- -------- ------- -------- ------ --------
Income before
income taxes....... 28,532 (98) 75 4,708 4,958 38,175 5,686 43,861
Income taxes......... 7,591 (35) -- 3,784 (641)(g) 10,699 1,592(g) 12,291
-------- ------- ---- -------- ------- -------- ------ --------
Net income
(loss)........... $ 20,941 $ (63) $ 75 $ 924 $ 5,599 $ 27,476 $4,094 $ 31,570
======== ======= ==== ======== ======= ======== ====== ========
Net income (loss) per
common share....... $ 0.73 $ 0.96 $ 0.94
======== ======== ========
Weighted average
shares
outstanding........ 28,761 28,761 33,435(h)
======== ======== ========
</TABLE>
- ---------------
(a) Two months of PLP operations have been included. Ten months of operating
results of PLP are included in the Company's Consolidated Financial
Statements from January 30, 1997, the date of acquisition.
(b) Nine months of SLI, B.V. operations have been included. Three months of
operating results of SLI, B.V. are included in the Company's Consolidated
Financial Statements from September 1, 1997, the date of acquisition.
(c) Depreciation expense related to buildings and equipment has been adjusted to
reflect revised estimated useful lives consistent with the Company's policy
on similar assets and the revaluation of fixed assets to fair market value
as if the acquisition of PLP had occurred on December 2, 1996.
(d) Depreciation expense related to buildings and equipment has been adjusted to
reflect revised estimated useful lives consistent with the Company's policy
on similar assets and the revaluation of fixed assets to fair market value
as if the acquisition of SLI, B.V. had occurred on December 2, 1996.
(e) The adjustment gives effect to the elimination of negative goodwill and the
related amortization as if the acquisition of SLI, B.V. had occurred on
December 2, 1996.
(f) Interest expense has been adjusted to reflect the decrease in interest
expense resulting from the repayment of $163.5 million of debt outstanding,
assuming that such indebtedness had been repaid at the beginning of the
period from the net proceeds to be received by the Company from the
Offering.
(g) Income tax expense has been adjusted to reflect a pro forma consolidated
effective tax rate of approximately 28%.
(h) Pro forma weighted average shares outstanding has been adjusted to reflect
the issuance of 4,674,000 shares of Common Stock in the Offering, which is
the number of shares necessary to raise net proceeds equal to the $163.5
million of outstanding debt to be repaid, as if such issuance had occurred
on December 2, 1996.
13
<PAGE> 17
SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA
The selected financial data of the Company for, and as of the end of, the
years ended November 30, 1997, December 1, 1996 and December 3, 1995 have been
derived from the audited consolidated financial statements of the Company, which
have been audited by Ernst & Young LLP, and should be read in conjunction with
the Company's Consolidated Financial Statements and Notes thereto included
elsewhere in this Prospectus. The selected financial data of the Company for,
and as of the end of, the nine months ended November 27, 1994 have been derived
from the audited consolidated financial statements of the Company not included
herein. The selected financial data of the Company for, and as of the end of,
the year ended February 27, 1994 have been derived from the audited combined
financial statements of the Company not included herein.
The selected financial data of the Company for the three-month periods
ended April 5, 1998 and April 6, 1997 have been derived from the unaudited
consolidated financial statements of the Company. The unaudited financial
statements for the three month periods ended April 5, 1998 and April 6, 1997
include all adjustments, consisting of normal recurring accruals that the
Company considers necessary for a fair presentation of its financial position
and results of operations for these periods. The results of operations for the
three months ended April 5, 1998 are not necessarily indicative of results that
may be expected for the full year.
<TABLE>
<CAPTION>
NINE
YEAR MONTHS YEAR YEAR THREE MONTHS ENDED
ENDED ENDED ENDED ENDED YEAR ENDED ---------------------
2/27/94(a) 11/27/94(b) 12/3/95 12/1/96 11/30/97 4/6/97 4/5/98(g)
---------- ----------- ------- ---------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(c):
Net sales............................. $24,894 $31,729 $57,402 $ 94,171 $329,959 $ 46,188 $192,420
Cost of products sold................. 17,860 21,113 36,726 61,147 231,933 32,195 133,593
------- ------- ------- -------- -------- -------- --------
Gross margin.......................... 7,034 10,616 20,676 33,024 98,026 13,993 58,827
Selling, general and administrative
expenses............................ 8,028 7,777 8,462 14,552 65,549 6,957 44,448
Restructuring costs................... -- -- -- -- 5,115 --
------- ------- ------- -------- -------- -------- --------
Operating income (loss)............. (994) 2,839 12,214 18,472 27,362 7,036 14,379
Interest expense, net................. 502 936 803 301 1,156 (1,094) 3,187
Other (income) expense, net........... (92) (7) (47) (1,294) (2,326) (1,213) (204)
------- ------- ------- -------- -------- -------- --------
Income (loss) before income taxes..... (1,404) 1,910 11,458 19,465 28,532 9,343 11,396
Income taxes(d)....................... 231 800 2,993 6,029 7,591 3,235 2,279
------- ------- ------- -------- -------- -------- --------
Net Income (loss)................... $(1,635) $ 1,110 $ 8,465 $ 13,436 $ 20,941 $ 6,108 $ 9,117
======= ======= ======= ======== ======== ======== ========
Net Income (loss) per common share --
basic(e)(f)......................... $ (0.09) $ 0.06 $ 0.41 $ 0.55 $ 0.73 $ 0.21 $ 0.32
======= ======= ======= ======== ======== ======== ========
Weighted average shares outstanding --
basic(e)............................ 18,744 18,744 20,880 24,357 28,761 28,964 28,751
======= ======= ======= ======== ======== ======== ========
Net Income per common share --
diluted(e)(f)....................... $ -- $ -- $ 0.41 $ 0.55 $ 0.71 0.21 0.30
======= ======= ======= ======== ======== ======== ========
Weighted average shares outstanding --
diluted(e).......................... -- -- 20,899 24,488 29,331 29,121 30,091
======= ======= ======= ======== ======== ======== ========
BALANCE SHEET DATA AT END OF PERIOD(c):
Working capital....................... $(1,507) $ (270) $ 9,923 $ 98,308 $117,606 $ 70,894 $ 81,240
Total assets.......................... 14,644 32,929 59,630 212,002 651,661 242,967 642,847
Short-term debt....................... 3,849 9,114 65 25,174 14,821 30,187 23,337
Long-term debt, less current
portion............................. 3,628 9,015 3,147 5,607 185,434 1,599 180,171
Stockholders' equity.................. 1,435 2,673 34,921 151,164 166,051 149,576 168,741
</TABLE>
- ---------------
(a) The results of operations of Xenell, a predecessor to the Company, and the
Company are combined for the Company's year ended February 27, 1994.
(b) The Company changed its financial reporting year-end from the last Sunday in
February to the Sunday closest to December 1, which resulted in a year
containing 39 weeks in 1994.
(c) Revenues, expenses, assets and liabilities have been significantly affected
by the number and timing of acquisitions made by the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Acquisitions."
(d) Between February 28, 1993 and January 1, 1994, Xenell was taxed as an "S"
corporation under the Internal Revenue Code, as amended (the "Code").
Provision for income taxes during such period reflects the provision for
income taxes attributable to certain other companies taxed as "C"
corporations under the Code and consolidated with the Company's results of
operations during such period.
(e) See Note 2 to Notes to the Company's Consolidated Financial Statements for
stock split information.
(f) See Note 5 to Notes to the Company's Unaudited Condensed Consolidated
Financial Statements for earnings per share information.
(g) In January 1998, the Company changed its financial reporting year end from
the Sunday nearest December 1 to the Sunday nearest December 31. As a result
of this change, the Company had a one-month transition period ending January
4, 1998. Net sales, operating loss and net loss were $53.9 million,
$(337,000) and $(547,000), respectively. See the Company's Unaudited
Condensed Consolidated Financial Statements included elsewhere herein.
14
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and Notes thereto included
elsewhere in this Prospectus.
GENERAL
The Company is a leading, vertically integrated manufacturer and supplier
of lighting systems, which include lamps, fixtures and ballasts. Through its 16
acquisitions completed since 1992, the Company has grown from a specialized U.S.
manufacturer of neon lamps and miniature lighting products into a manufacturer
and supplier of a wide variety of lighting products, including lamps
(incandescent, fluorescent, compact fluorescent, HID, halogen, miniature
incandescent, neon, LED's and special lamps), fixtures, magnetic and electronic
ballasts and fiber optic lighting systems. The Company believes that it is one
of the six largest global lighting companies and one of only three major
international producers to offer an integrated package of lamps, fixtures and
ballasts. The Company serves a diverse, international customer base and at
November 30, 1997 had 26 manufacturing plants in 13 countries.
The Company was established in 1985, and completed its initial public
offering (the "IPO") in June 1995 and a subsequent offering of Common Stock in
October 1996. An important part of the Company's initial development has been
its geographic and product range expansion through acquisitions. Since its IPO
and prior to the PLP and SLI, B.V. acquisitions, the Company completed the
following acquisitions: (i) Fredon Industrial Development Inc., ("Fredon"), a
manufacturer of machine tools and dies; (ii) STT Holdings Limited ("Badalex"),
an engineer and designer of lamp-making equipment; (iii) Electro Fiberoptics
Inc. ("CML Fiberoptics"), a manufacturer of fiber optic products; (iv) Phoenix
Lighting (U.K.) Limited ("CML Europe"), a manufacturer of halogen and specialty
lamps; and (v) W. Albrecht GmbH u. Co. KG ("Alba"), a manufacturer of miniature
lighting products. Such acquisitions, together with the pre-IPO 1995 acquisition
of Plastomer, Inc. ("CML Canada"), a manufacturer and supplier of miniature
lighting assemblies and bulb sockets, are hereinafter referred to as the "Prior
Acquisitions."
In January 1997, the Company acquired all of the capital stock of Gustav
Bruckner GmbH ("Bruckner") for DM 400,000 and the assumption of approximately DM
2.4 million in bank debt (or approximately $1.7 million in the aggregate at the
time of purchase). Bruckner engineers, designs and manufactures automated
lamp-making equipment. The Company also acquired in January 1997, all of the
outstanding stock of Power Lighting Products for approximately $22.3 million in
cash. Power Lighting Products is a manufacturer of magnetic and electronic
ballasts for the linear and compact fluorescent, signage and HID lighting
markets. In June 1997, the Company acquired a 35% interest in the capital stock
of Electro-Mag International, Inc. ("Electro-Mag"), which owns certain ballast
technology, for approximately $1.5 million in cash. In September 1997, the
Company acquired all of the outstanding stock of SLI, B.V. a privately held
company headquartered in Geneva, Switzerland, for $161.5 million in cash. SLI,
B.V. is the third largest lighting company in Europe and a major global lighting
company, which sells a variety of products in its principal markets under
recognized brand names, including Sylvania. Also in September 1997, the Company
increased its ownership in A&S Electric, Spol s.y.o. ("Alba-CZ"), a miniature
lighting company, from 60% to 98% for DM 150,000 and 4,500 shares of Common
Stock of the Company (or approximately $185,000 in the aggregate at the time of
purchase). In November 1997, the Company acquired the assets of Solium Inc., a
designer, engineer and manufacturer of electronic ballasts, for $2.5 million in
cash.
Subsequent to Fiscal 1997, the Company has acquired (i) three lighting
companies engaged in the manufacture of lamps for $33 million in cash plus
30,000 shares of Common Stock and (ii) the remaining outstanding capital stock
of Electro-Mag for 375,000 shares of Common Stock of the Company, of which
150,000 shares have been issued.
The Company's cash portion of the purchase price in the acquisitions have
been funded with a combination of the proceeds from the Company's Common Stock
offerings, bank borrowings and cash flows from operations.
The Company's acquisition strategy has had a significant impact on year to
year comparisons of revenues and earnings. The Company's operating results for
Fiscal 1997 include operating results for eleven months of
15
<PAGE> 19
Bruckner, ten months of Power Lighting Products and three months of SLI, B.V.
The Company's operating results for the fiscal year ended December 1, 1996
include the operating results for a full year of Badalex, CML Europe, CML
Fiberoptics, and seven months of Alba. The Company's operating results for the
fiscal year ended December 3, 1995 include operating results for eight months of
CML Canada and three months of Fredon.
In January 1998, the Company changed its financial reporting year-end from
the Sunday nearest to December 1 to the Sunday nearest to December 31. The
Company has included interim financial results for the one month ended January
4, 1998 herein. See the Company's Condensed Consolidated Financial Statements
included elsewhere herein.
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, certain items in
the Company's Consolidated Statements of Income expressed as a percentage of net
sales:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
----------------------------------------------
12/3/95 12/1/96 11/30/97 4/6/97 4/5/98
------- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
Net sales..................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of products sold......................... 64.0 64.9 70.3 69.7 69.4
----- ----- ----- ----- -----
Gross margin................................ 36.0 35.1 29.7 30.3 30.6
Selling, general and administrative
expenses.................................... 14.7 15.4 19.8 15.1 23.1
Restructuring costs........................... -- -- 1.6 -- --
----- ----- ----- ----- -----
Operating income............................ 21.3 19.7 8.3 15.2 7.5
Interest (income) expense, net................ 1.4 .3 .4 (2.4) 1.7
Other (income) expense........................ (.1) (1.3) (.7) (2.6) (.1)
----- ----- ----- ----- -----
Income before income taxes.................... 20.0 20.7 8.6 20.2 5.9
Income taxes.................................. 5.2 6.4 2.3 7.0 1.2
----- ----- ----- ----- -----
Net income.................................. 14.8 14.3 6.3 13.2 4.7
===== ===== ===== ===== =====
</TABLE>
Three months ended April 5, 1998 compared to the three months ended April 6,
1997.
Net sales. Net sales increased from $46.2 million for the three months
ended April 6, 1997 to $192.4 million for the three months ended April 5, 1998.
This 316% increase was primarily attributable to the SLI, B.V. acquisition which
accounted for $144.7 million of the increase in net sales. The net sales due to
the PLP acquisition, which was effective as of January 30, 1997, totaled $20.8
million for the three months ended April 5, 1998 as compared to $18.7 million
for the two month period from January 30, 1997 to April 6, 1997.
Gross Margin. Gross margin increased from $14.0 million for the three
months ended April 6, 1997 to $58.8 million for the three months ended April 5,
1998, due primarily to the increase in sales volume attributed to the SLI, B.V.
acquisition. Gross margin, as a percentage of net sales, increased from 30.3%
for the three months ended April 6, 1997 to 30.6%, for the three months ended
April 5, 1998. The SLI, B.V. gross margin, as a percentage of SLI, B.V. sales,
was 30.3% for the three months ended April 5, 1998. This gross margin percentage
is expected to improve as restructuring plans developed at the time of such
acquisition are implemented. However, SLI, B.V.'s gross margin percentage is
subject to the impact of seasonality and product mix.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $7.0 million for the three months ended
April 6, 1997 to $44.4 million for the three months ended April 5, 1998. This
increase was largely due to the impact of the SLI, B.V. acquisition. As a
percentage of net sales, selling, general and administrative expenses increased
from 15.1% for the three months ended April 6, 1997 to 23.1% for the three
months ended April 5, 1998, primarily as a result of the SLI, B.V. acquisition.
The Company's strategy is to decrease selling, general and administrative
expenses at SLI, B.V. through
16
<PAGE> 20
restructuring plans developed and accrued for at the time of such acquisition.
Additionally, the Company intends to utilize the selling, general and
administrative infrastructure of SLI, B.V. as a base for further sales growth.
Interest expense, net. Interest expense, net, increased from interest
income, net, of $1.1 million for the three months ended April 6, 1997 to
interest expense, net, of $3.2 million for the three months ended April 5, 1998,
primarily as a result of the bank debt incurred in connection with the SLI, B.V.
acquisition on September 8, 1997. Interest income, net, of approximately $1.1
million was generated for the three months ended April 6, 1997, primarily from
the investment of $98.3 million in proceeds received from the Company's public
offering in October 1996.
Other income. Other income decreased from $1.2 million for the three
months ended April 6, 1997 to $315,000 for the three months ended April 5, 1998.
Substantially all of the other income for the three months ended April 6, 1997
and the three months ended April 5, 1998 resulted from recording the effects of
foreign exchange transactions. The Company, which has substantial foreign
operations and activity, enters into foreign currency contracts to protect the
Company from the risk that sales and purchases of products in foreign currencies
will be adversely affected by changes in exchange rates. The Company does not
hold or issue financial instruments for trading purposes.
Income before income taxes. As a result of the above factors, income
before income taxes increased from $9.3 million for the three months ended April
6, 1997 to $11.4 million for the three months ended April 5, 1998. As a
percentage of net sales, income before provision for income taxes decreased from
20.2% for the three months ended April 6, 1997 to 5.9% for the three months
ended April 5, 1998, primarily as a result of the SLI, B.V. acquisition.
Income taxes. For the three months ended April 5, 1998, the Company
recorded a tax provision of $2.3 million on pre-tax income of $11.4 million, for
an effective rate of 20%, compared to an effective rate of 34.6% for the three
months ended April 6, 1997. The lower tax rate in the current year is due
primarily to changes in the derivation of taxable income in lower tax countries.
A lower effective rate than the statutory U.S. tax rate is expected to continue
for several years.
Fiscal Year Transition Period
As a result of the change in the Company's fiscal year end from the Sunday
nearest to December 1 to the Sunday nearest to December 31, the Company is
presenting interim financial results for the one month period ended January 4,
1998. Revenues were effected in the month of December by a natural slow down in
the trade cycle in the countries where the Company operates due to the holiday
season. The net loss for this transition period was due primarily from the
seasonally low revenues and increases in selling, general and administrative
expenses resulting from the acquisition of SLI, B.V. See the Company's Condensed
Consolidated Financial Statements included elsewhere herein.
Year ended November 30, 1997 compared to year ended December 1, 1996
Net sales. Net sales increased from $94.2 million for the year ended
December 1, 1996 to $330.0 million for Fiscal 1997. This increase was primarily
attributable to the impact of the PLP and SLI, B.V. acquisitions and to a lesser
extent, growth from existing operations. Net sales of PLP totaled $70.5 million
from January 31, 1997 (the effective date of acquisition) to November 30, 1997
and net sales of SLI, B.V. totaled $149.2 million from September 1, 1997 (the
effective date of acquisition) to November 30, 1997. The Company's strategy of
integrating acquisitions can affect sales comparisons as existing capacity is
utilized for internal purposes.
Gross margin. Gross margin increased from $33.0 million for the year ended
December 1, 1996 to $98.0 million for Fiscal 1997, due primarily to the increase
in sales volume attributable to the PLP and SLI, B.V. acquisitions. PLP
contributed $15.0 million to the total gross margin from the date of acquisition
and the gross margin of SLI, B.V. was $47.7 million for the period from the date
of acquisition to November 30, 1997. Gross margin, as a percentage of net sales,
decreased from 35.1% for the year ended December 1, 1996 to 29.7% for
17
<PAGE> 21
Fiscal 1997, due primarily to the impact of the lower gross margin of the
ballast business of PLP, which business has traditionally had lower gross
margins than the Company's other products. This gross margin percentage is
expected to improve as restructuring plans developed at the time of acquisition
are implemented.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $14.6 million for the year ended December
1, 1996 to $65.5 million for Fiscal 1997. This increase was largely due to the
impact of the PLP and SLI, B.V. acquisitions. As a percentage of net sales,
selling, general and administrative expenses increased from 15.4% for the year
ended December 1, 1996 to 19.8% for Fiscal 1997, primarily as a result of the
impact of the PLP and SLI, B.V. acquisitions. The Company's strategy is to
decrease selling, general and administrative expenses attributable to the
acquired companies through restructuring plans which are currently being
implemented.
Restructuring costs. During Fiscal 1997, in connection with the
acquisition of SLI, B.V., the Company approved a restructuring plan which
resulted in a non-recurring charge of $5.1 million. The restructuring plan was
put into effect to consolidate certain existing operations in an effort to
reduce operating cost. The provision relates to the consolidation of certain
North American and European operations and includes costs associated with the
excess of net book value over estimated recoverable value for certain assets,
severance payments and the probable closure of certain facilities or transfer of
certain assets, all of which, except for excess book value, require a cash
outlay. Substantially all of this restructuring plan has been completed and it
is expected that cash provided by operations will be used to cover the costs to
be incurred. The cash will be expended prior to the end of the current year. The
Company expects to realize approximately $3.0 million in cost savings over the
next two year period as a result of this restructuring plan. In addition to the
above, in connection with the purchase of SLI, B.V., the Company has accrued $25
million for a restructuring plan to improve the operations of SLI, B.V. Such
plan should be completed by the end of 1999. The component parts of such plan
are severance payments and the probable closure of certain facilities or
transfer of certain assets. The costs in connection therewith will be incurred
over the next two years and will be paid from cash provided from operations. The
Company expects to realize savings of approximately $12 million in 1998 and $18
million in 1999. The Company believes these restructuring plans will improve the
integration of SLI, B.V. into the Company. See Note 8 of Notes to the Company's
Consolidated Financial Statements.
Interest expense, net. Interest expense, net, increased from $301,000 for
the year ended December 1, 1996 to $1,156,000 for Fiscal 1997, primarily as a
result of the bank financing in connection with the acquisition of SLI, B.V.
Interest income of approximately $4.1 million was generated in Fiscal 1997,
primarily from the investment of $98.3 million in proceeds from the Company's
public offering completed in October 1996. A portion of these proceeds was used
during the year for the PLP and SLI, B.V. acquisitions ($65.0 million), the
repurchase of Common Stock ($8.7 million) and for other capital expenditures.
Other income. Other income increased from $1.3 million in the year ended
December 1, 1996 to $2.3 million in Fiscal 1997. This increase included a
$985,000 gain from the sale by CML Fiberoptics to Schott Corporation ("Schott")
of a 49% interest in a newly-created entity, Schott-CML Fiberoptics, LLC. See
"Business -- Joint Venture." The remainder of the increase and substantially all
of the remaining balance of other income for Fiscal 1997 was the result of
recording the effects of foreign exchange transactions.
Income before income taxes. As a result of the above factors, income
before provision for income taxes increased from $19.5 million for the year
ended December 1, 1996 to $28.5 million for Fiscal 1997. As a percentage of net
sales, income before provision for income taxes decreased from 20.7% for the
year ended December 1, 1996, to 8.6% for Fiscal 1997.
Income taxes. For Fiscal 1997, the Company recorded a tax provision of
$7.6 million on pre-tax income of $28.5 million, for an effective rate of 26.6%,
compared to a tax provision of $6.0 million on pre-tax income of $19.5 million,
for an effective rate of 31.0%, for the year ended December 1, 1996. The lower
effective tax rate in Fiscal 1997 was due to the impact of income in countries
with effective tax rates lower than those in the U.S. and realization of tax
attributes, including net operating loss carry forwards, attributable to the
acquisition of SLI, B.V. An effective tax rate lower than the U.S. statutory
effective tax rate is expected to continue for several years due to the
significant international operations of the Company. See Note 5 of Notes to the
Company's Consolidated Financial Statements.
18
<PAGE> 22
Year ended December 1, 1996 compared to year ended December 3, 1995
Net sales. Net sales increased from $57.4 million for the year ended
December 3, 1995 to $94.2 million for the year ended December 1, 1996. This
increase in sales was primarily attributable to the impact of the Prior
Acquisitions, growth in market share and continued customer development. The
Prior Acquisitions accounted for $29.8 million of the increase in net sales. A
number of the Company's Prior Acquisitions were not included in the operations
of the Company for the year ended December 3, 1995.
Gross margin. Gross margin increased from $20.7 million for the year ended
December 3, 1995 to $33.0 million for the year ended December 1, 1996, due
primarily to the increase in sales volume resulting from the Prior Acquisitions.
Gross margin, as a percentage of net sales, decreased from 36.0% for the year
ended December 3, 1995 to 35.5% for the year ended December 1, 1996, due to a
change in product mix and the impact of lower margins at the companies acquired
in the Prior Acquisitions.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $8.5 million for the year ended December
3, 1995 to $14.6 million for the year ended December 1, 1996. This increase was
largely due to the impact of the Prior Acquisitions. As a percentage of net
sales, selling, general and administrative expenses increased from 14.7% for the
year ended December 3, 1995 to 15.4% for the year ended December 1, 1996,
primarily as a result of the impact of the Prior Acquisitions.
Interest expense, net. Interest expense, net, decreased from $803,000 for
the year ended December 3, 1995 to $301,000 for the year ended December 1, 1996,
primarily as a result of the reduction of outstanding debt in June 1995 from the
application of a portion of the net proceeds from the Company's initial public
offering and cash flow from operations. This reduction in debt was offset by new
debt incurred to finance certain acquisitions. Interest income of approximately
$600,000 was generated from the investment of the proceeds from the public
offering completed in October 1996.
Other income. Other income increased from $47,000 for the year ended
December 3, 1995 to $1,294,000 for the year ended December 1, 1996.
Substantially all of this increase in income resulted from recording the effects
of foreign exchange transactions. The Company made yen-denominated borrowings at
favorable interest rates, which debt was marked to market at the existing
exchange rates as of the reporting dates, and resulted in an unrealized gain of
$440,000 in the year ended December 1, 1996.
Income before income taxes. As a result of the above factors, income
before provision for income taxes increased from $11.5 million for the year
ended December 3, 1995 to $19.5 million for the year ended December 1, 1996. As
a percentage of net sales, income before provision for income taxes increased
from 20.0% for the year ended December 3, 1995 to 20.7% for the year ended
December 1, 1996.
Income taxes. For the year ended December 1, 1996, the Company recorded a
tax provision of $6.0 million on pre-tax income of $19.5 million, for an
effective rate of 31%, compared to a tax provision of $3.0 million on pre-tax
income of $11.5 million, for an effective rate of 26%, for the year ended
December 3, 1995. The higher tax rate for the year ended December 1, 1996 was
due to the increase in pre-tax income generated in countries with tax rates
higher than those for the U.S.
LIQUIDITY AND CAPITAL RESOURCES
The Company's major uses of cash have historically been for acquisitions,
working capital to support sales growth and ongoing capital expenditures.
Sources of cash have typically included operating cash flow, bank borrowings and
proceeds from the sale of Common Stock. In October 1996, the Company completed a
public offering pursuant to which the Company issued and sold 5,287,125 shares
of its Common Stock and received net proceeds of approximately $98.3 million.
The Company used the net proceeds from such offering to reduce debt, and to
expand its manufacturing infrastructure primarily through acquisitions and
capital expenditures.
As of November 30, 1997, the Company's cash on hand was $73.4 million. For
Fiscal 1997, net cash provided by operating activities was $31.7 million
compared to net cash provided by operating activities of $400,000 for fiscal
1996. The increase was a result of increased net income ($8 million) and an
increase in accounts payable and long-term liabilities primarily for SLI, B.V.
since the date of acquisition ($24 million).
19
<PAGE> 23
The accounts payable increase related to the timing of purchases and payments.
For Fiscal 1997, cash used in investing activities totaled $189.3 million. The
investing activities included primarily (i) the Bruckner and PLP acquisitions in
connection with which the Company paid an aggregate amount of approximately
$25.0 million and (ii) the SLI, B.V. acquisition in connection with which the
Company paid approximately $161.5 million. Net cash provided by financing
activities in Fiscal 1997 aggregated $121.9 million, which included $132.4
million in borrowings under the Company's credit facilities net of, among other
things, repurchases of Common Stock totaling $8.7 million.
The Company's cash on hand as of April 5, 1998 was $30.4 million. Net cash
provided by operating activities was $6.1 million for the three months ended
April 5, 1998 and the cash used in investing activities totaled $26.1 million.
The investing activities included primarily acquisitions, net of cash, totalling
approximately $15.4 million, and capital expenditures totalling $10.7 million.
Net cash used as a result of financing activities aggregated $1.1 million, which
included net payments of long-term debt borrowings totaling $3.1 million and
cash provided through proceeds from the exercise of stock options totaling $2.0
million.
In connection with the acquisition of SLI, B.V., the Company entered into a
new bank financing agreement. The agreement provides for a $250.0 million
revolving credit facility, which includes (i) a $50.0 million foreign currency
facility and (ii) a $15.0 million letter of credit facility. These credit
facilities mature on August 30, 2002. The Company used $40.0 million of internal
cash on hand and borrowed approximately $121.5 million under the revolving
credit facility to finance the acquisition of SLI, B.V. Additionally, the
Company borrowed approximately $61.9 million under the revolving credit facility
to refinance indebtedness of the Company and certain of its subsidiaries and to
pay various expenses incurred in connection with the acquisition of SLI, B.V. As
of April 5, 1998, the Company had available borrowings of approximately $63.6
million under the revolving credit facility, and the face amount of letters of
credit issued and outstanding under the revolving credit facility totaled
approximately $11.9 million. See "Description of Certain Indebtedness" for
information concerning financial covenants, including financial ratios, under
the revolving credit facility.
Subsequent to Fiscal 1997, the Company has acquired three lighting
companies engaged in the manufacture of lamps for approximately $33 million in
cash and 30,000 shares of the Company's Common Stock. The cash was provided by
the Company's revolving credit facility and operating cash flow. In addition,
the Company purchased the remaining outstanding shares of capital stock of
Electro Mag for 375,000 shares of the Company's Common Stock, of which 150,000
shares have been issued.
The Company conducts business in countries outside of the United States
which exposes the Company to fluctuations in foreign currency exchange rates.
The Company may enter into short-term forward exchange contracts to hedge this
risk; nevertheless, fluctuations in foreign currency exchange rates could have
an adverse effect on the Company's business. The Company does not hold or issue
financial instruments for trading or speculative purposes. The Company has
significant operations in Europe and, to a lesser extent, in Latin America. The
introduction of a single European currency is expected to reduce the currency
risks associated with inter-European transactions. However, risks will remain
with respect to transactions with customers or suppliers outside of the zone
covered by the single European currency. The Company's operations in Latin
America are carried out primarily in Brazil, Costa Rica and Colombia. Although
currently not classified as a hyper-inflationary country, Brazil has been
classified as such in the past.
The Company believes that the proceeds to be received by it from the
Offering, cash from operations and borrowings available under the Company's
revolving credit facility will be sufficient to meet the Company's working
capital and capital expenditure needs for the next twelve months and for the
foreseeable future thereafter. Capital expenditures during the next twelve
months are expected to approximate $35 million, assuming that the Company does
not make any acquisitions.
NET OPERATING LOSS CARRY FORWARDS
SLI, B.V. had net operating loss ("NOL") carryforwards for tax purposes of
approximately $136 million at November 30, 1997, of which approximately $37.9
million expire through 2007 and $98.1 million do not expire. Approximately 25%
of these NOL carryforwards relate to operations in France (a portion of which
20
<PAGE> 24
expire through 2002), approximately 25% relate to operations in Belgium (which
do not expire) and the remaining NOL carryforwards relate to operations in
various other tax jurisdictions outside the United States.
SEASONALITY
As a result of the acquisition of SLI, B.V., it is expected that the
Company's operations will experience certain seasonal patterns. Generally, SLI,
B.V.'s sales have been highest in the fourth quarter of each year due to
abbreviated daylight hours and increased holiday light usage.
IMPACT OF YEAR 2000
The year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities.
Based on a recent assessment, the Company determined that it will be
required to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter. The Company presently believes that with modifications to existing
software and conversions to new software, the year 2000 issue will not pose
significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed in a timely
manner, the year 2000 issue could have a material impact on the operations of
the Company.
The Company will utilize both internal and external resources to reprogram
or replace and test the software for the year 2000 modifications. The Company
anticipates completing the year 2000 project no later than December 31, 1998,
which is prior to any anticipated impact on its operating systems. The total
cost of the year 2000 project is estimated at $3.3 million and is anticipated to
be funded through the Company's operating cash flows.
The costs of the project and the date on which the Company believes it will
complete the year 2000 modifications are based on management's best estimates,
which were derived by utilizing numerous assumptions of future events, including
the continued availability of certain resources, third party modification plans
and other factors. However, there can be no assurance that these estimates will
be achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties.
The Company is communicating with customers, suppliers, financial
institutions and other vendors with which it does business to coordinate year
2000 conversion efforts. The ability of third parties with whom the Company
transacts business to adequately address their year 2000 issues is outside the
Company's control. There can be no assurance that the failure of such third
parties to adequately address their respective year 2000 issues will not have a
material adverse effect on the Company's business, financial condition, cash
flows and results of operations.
21
<PAGE> 25
BUSINESS
GENERAL
The Company believes that it is one of the six largest full-line lighting
companies in the world and one of only three major international producers
offering lamps, fixtures and ballasts. Primarily through its acquisition-based
growth strategy, the Company has developed from a specialized U.S. manufacturer
and supplier of neon lamps and miniature lighting products into one of the
world's largest vertically integrated manufacturers and suppliers of lighting
systems to the industrial, commercial and consumer markets. The Company has
completed 16 acquisitions since 1992 as part of its growth strategy, with its
two most significant acquisitions being consummated in Fiscal 1997. In January
1997, the Company significantly expanded its operations with the acquisition of
Power Lighting Products, a manufacturer and supplier of lighting ballasts and in
September 1997, the Company completed the purchase of SLI, B.V., the third
largest lighting company in Europe and a major global lighting company, which
sells a variety of products under recognized brand names, including Sylvania.
Primarily as a result of the Company's acquisition strategy, net sales
increased from $57.4 million for the year ended December 3, 1995 to $330 million
for Fiscal 1997 and $192.4 million for the first quarter of Fiscal 1998. In
addition, operating income increased from $12.2 million to $27.4 million and
$14.4 million over the same periods. For Fiscal 1997, on a pro forma basis after
giving effect to the PLP and SLI, B.V. acquisitions, the Company's net sales and
operating income would have been $755.4 million and $40.9 million, respectively.
In addition, for Fiscal 1997, on a pro forma basis after giving effect to the
PLP and SLI, B.V. acquisitions, approximately 81% and 79% of the Company's net
sales and operating income, respectively, would have been derived from
operations outside the United States. The Company's net sales increased from
$46.2 million for the three months ended April 6, 1997 to $192.4 million for the
three months ended April 5, 1998 and operating income increased from $7.0
million to $14.4 million over the same period.
With the addition of SLI, B.V., the Company is able to offer a complete
range of lighting products throughout the world. The Company's product
categories include lamps, fixtures, miniature lighting assemblies and ballasts.
The lamp products produced by the Company include incandescent, fluorescent,
compact fluorescent, HID, halogen, and special and miniature lamps. The
Company's commercial and industrial fixture lines consist primarily of
fluorescent ceiling mounted fixtures; its accent and decorative fixture lines
range from simple downlights and spotlights to high performance lighting
fixtures for art galleries and museums. Miniature lighting assemblies
manufactured by the Company are used in various product applications, including
automobile message centers, and aviation and telecommunications status arrays.
Magnetic and electronic ballasts designed and manufactured by the Company supply
power to start and operate fluorescent and HID lamps and signage products (neon
displays).
The Company's strategy is to operate as a vertically integrated
manufacturer providing "one stop" lighting solutions for its customers' lighting
requirements by offering both discrete lighting components and value-added
integrated products. Through its acquisition of SLI, B.V., as well as several
niche businesses, the Company is able to offer its global customers extensive
design, engineering and manufacturing capabilities, while at the same time
providing local, responsive service. At November 30, 1997, the Company had 26
manufacturing facilities, as well as sales offices and distribution facilities,
in more than 30 countries. The Company's customers include wholesalers, OEMs,
retailers, architects, designers and contractors.
GROWTH STRATEGY
The Company believes that it is well positioned to continue its growth
internally and through acquisitions. Management believes that its industry
knowledge, experience consummating and integrating acquisitions and its access
to capital will facilitate the Company's external growth through future
acquisitions both domestically and internationally. Internal growth is expected
to be driven by (i) increasing sales to existing and new customers, (ii)
introducing new technologies and (iii) continuing to diversify geographic
operations.
Pursue Complementary Acquisitions. The Company plans to continue to use
strategic acquisitions and alliances to effect its vertical and horizontal
integration strategies. Acquisitions are selected based upon their
22
<PAGE> 26
potential to (i) augment the Company's technology, engineering and design
capabilities, (ii) broaden its product offering, (iii) provide additional
manufacturing facilities, (iv) access global markets, and/or (v) effect cost
reduction opportunities and other operational synergies. For example, the
acquisition of SLI, B.V., a large user of ballasts with no ballast manufacturing
capability, is expected to produce synergistic effects for the Company and its
Power Lighting Products subsidiary, a major producer of ballasts. The Company
believes that its extensive knowledge of the lighting industry, combined with
its experience in consummating numerous acquisitions and its access to capital,
provides an important competitive advantage in identifying domestic and
international acquisition opportunities and integrating the acquired operations
into the Company. Further, because of the fragmented nature of many sectors of
the lighting industry, the Company believes that there are many opportunities
available for future acquisitions.
Increase Sales to Existing and New Customers. The Company focuses on
expanding its markets by designing, developing and marketing "one stop" lighting
solutions, a strategy through which the Company seeks to capitalize on
cross-selling opportunities between customers of existing and acquired
businesses. The Company seeks to use its global distribution networks and
recognized brand names, including Sylvania (outside the United States, Canada,
Mexico and Puerto Rico) Alba, Claude, Linolite, Concord and Lumiance to help
sell and market the Company's domestic products overseas. Moreover, the
Company's international operations have broad product lines of consumer and
industrial lamps and fixtures which the Company plans to market domestically. In
addition, the Company plans to aggressively market complementary products such
as ballasts which can be offered with linear and compact fluorescent and HID
lighting products manufactured by SLI, B.V.
Introduce New Lighting Technologies. Through the introduction of new
lighting technologies, the Company has been able to participate in the high
growth and high margin segment of the lighting market. Because lighting products
and the related manufacturing technology are becoming increasingly
sophisticated, the Company has sought to enhance its technological capabilities
in order to fulfill its customers' outsourcing and "just-in-time" requirements
and adjust to shifts in demand. Through the acquisition of various niche
businesses operating within the lighting industry, the Company's technological
expertise has expanded, thus enabling it to manufacture more sophisticated
products. As a result of its technical know-how, the Company believes that it
can expand its business by developing new products and enter new niche markets
in which it can be one of a few leading suppliers. For example, the Company is
currently exploring opportunities for the development and integration of fiber
optic products for the automotive, aviation and consumer markets.
Diversify Geographic Operations. An important element of the Company's
growth strategy is to continue to establish manufacturing operations in areas of
high customer density or where manufacturing efficiencies can be realized. The
Company's operations are currently located in the Americas, Europe, Australia
and, to a lesser extent, Asia. The Company intends to continue to selectively
expand its operations internationally to better serve its existing customers and
to develop new customers.
OPERATING STRATEGY
The Company's operating strategy is designed to enhance the Company's
international position as a leading designer, manufacturer and supplier of
lighting products, while at the same time increasing profitability through (i)
continued vertical integration and automation, (ii) improved operating
efficiencies, and (iii) continued focus on responsiveness and superior product
quality.
Continue Vertical Integration and Automation. The Company intends to
continue to vertically integrate its operations by broadening the range of
components which it manufactures and uses in its lighting products. The
Company's ability to manufacture a wide array of components facilitates the
production of more complex, value-added lighting products, which generally have
higher average selling prices per unit and higher margins than discrete lighting
components. The Company intends to further increase its manufacturing
capabilities and continue to expand the automation at its facilities in order to
increase production and reduce production costs.
Improve Operating Efficiencies. The Company has realized cost savings in
connection with the integration of its acquired businesses. Cost reduction
initiatives have included the consolidation of certain
23
<PAGE> 27
administrative functions, vertical integration with existing operations and
leveraging of combined purchasing power. These recently acquired businesses have
been operating at significantly lower margins than the Company's base business,
resulting in temporary contraction of consolidated margins. Management believes
that the recent acquisition of SLI, B.V. with its extensive geographical and
physical infrastructure of manufacturing, sales and distribution facilities,
provides a significant opportunity to improve operating efficiencies.
Focus on Responsiveness and Quality. The Company's ability to conceive,
design and engineer new products in a short period of time is a significant
competitive advantage. Management has developed "Competency Centers" within its
manufacturing facilities to optimize the expertise of the Company's design,
engineering, manufacturing and technical sales support teams. In addition, the
Company has developed technology to monitor and control its production
performance. As a result of various quality initiatives, the Company has
achieved a preferred supplier designation for its miniature lighting products
from several of its OEM customers, including Q-1 certification from Ford Motor
Company and a Quality Excellence award from Chrysler Corp. In addition, certain
of the Company's facilities have received QS-9000, ISO 9001 and Euro-Net ISO
9000 and 9001 certifications. Such certifications in many instances are a
pre-requisite for contractual orders, particularly with large industrial users
of the Company's products.
ACQUISITIONS
The following table sets forth the acquisitions which have been consummated
by the Company since October 1992 and prior to November 30, 1997:
<TABLE>
<CAPTION>
DATE OF
BUSINESS ACQUISITION TYPE OF OPERATION LOCATION
- -------- -------------- ---------------------------- ------------------
<S> <C> <C> <C>
Chicago Miniature Lamp, Inc.... October 1992 Supplier of miniature Buffalo Grove,
(CML-Delaware)(a) lighting components Illinois, USA
Glolite Sales, Ltd............. April 1993 Manufacturer of miniature Pauls Valley,
neon and incandescent bulb Oklahoma, USA
and string lighting products
Industrial Devices, Inc. ...... May 1994 Designer and manufacturer of Hackensack,
(IDI) miniature lighting products New Jersey, USA
Plastomer, Inc................. March 1995 Manufacturer and supplier of Barrie, Ontario,
(CML Canada) miniature lighting Canada
assemblies and bulb sockets
Fredon Industrial.............. August 1995 Manufacturer of machine Newton,
Development, Inc. (Fredon) tools and dies New Jersey, USA
STT Holdings Limited........... November 1995 Engineer and designer of Byfleet, Surrey,
(Badalex)(b) lamp-making equipment United Kingdom
Electro Fiberoptics, Inc....... December 1995 Manufacturer of fiber optic Marlborough,
(CML Fiberoptics) lighting products Massachusetts, USA
Phoenix Lighting (U.K.)........ December 1995 Manufacturer of halogen and Coalville,
Limited (CML Europe) specialty lamps Leicestershire,
United Kingdom
W. Albrecht GmbH u. Co. KG..... May 1996 Manufacturer of miniature Bamberg,
(Alba)(c) lighting products Germany
Gustav Bruckner GmbH........... January 1997 Engineer, designer and Coburg,
(Bruckner) manufacturer of automated Germany
lamp-making equipment
Valmont Electric, Inc.......... January 1997 Manufacturer of magnetic El Paso,
(Power Lighting Products) and electronic ballasts Texas, USA
Sylvania Lighting.............. September 1997 Designer and manufacturer of Haarlem,
International, B.V. (SLI, integrated lighting systems Netherlands
B.V.) including lamps and fixtures
</TABLE>
24
<PAGE> 28
<TABLE>
<CAPTION>
DATE OF
BUSINESS ACQUISITION TYPE OF OPERATION LOCATION
- -------- -------------- ---------------------------- ------------------
<S> <C> <C> <C>
Solium, Inc. (Solium)........ November 1997 Designer and manufacturer of Randolph,
electronic ballasts Massachusetts, USA
</TABLE>
- ---------------
(a) In 1985, Mr. Frank Ward acquired all of the outstanding shares of capital
stock of Xenell, which had been engaged primarily in the business of
manufacturing neon lighting bulbs and assemblies since 1976. Mr. Ward
caused Chicago Miniature Lamp, Inc., an Oklahoma corporation ("CML") to be
organized in October 1992 for the purpose of acquiring Chicago Miniature
Lamp, Inc., a Delaware corporation ("CML-Delaware"). From 1992 to 1993, CML
and Xenell were under the common control of Mr. Ward and effective January
4, 1994, Xenell was merged into CML.
(b) The Company acquired substantially all of the assets of (i) STT Holdings
Limited, which included two of its subsidiaries (STT Badalex Limited and
STI Lighting Limited), and (ii) PRT Shipping Limited.
(c) In connection with the Alba acquisition, the Company acquired (i) W.
Albrecht GmbH u. Co. KG ("Alba-Germany"), (ii) Alba Light Design GmbH
("Alba-Light Design"), (iii) Alba Lamps, Inc. ("Alba-USA"), and (iv)
certain other affiliated entities. The Company also acquired a majority
interest in A&S Electric, spol.s.r.o. ("Alba-CZ") and Alba Technology (M)
Sdn. Bhd. ("Alba-Malaysia").
Subsequent to Fiscal 1997, the Company has acquired (i) three lighting
companies engaged in the manufacture of lamps for approximately $33 million in
cash and 30,000 shares of the Company's Common Stock and (ii) the remaining
outstanding capital stock of Electro-Mag for 375,000 shares of Common Stock of
the Company, of which 150,000 shares have been issued.
INDUSTRY OVERVIEW
The lighting industry is a large, mature market, which is characterized by
the long life cycle of its lighting products. The global lighting industry
consists of many firms, ranging from large, multinational, multiproduct,
publicly owned companies to small, single-product, private firms. The industry
includes three dominant firms, General Electric, Osram and Philips. While these
three companies are active in all of the major sectors of the global lighting
industry, concentration levels vary by sector and region. The lamp market is
highly concentrated whereas the fixture and miniature lighting markets are
highly fragmented. The ballast market is concentrated and consists of several
large companies including Power Lighting Products. Smaller firms have found or
created niches in certain markets which have been defined by specific
competencies, technologies or differentiated products. Some specialized areas,
such as normal line voltage halogens, compact fluorescents and metal halides,
have recently experienced a rapid rate of growth.
The lamp market, which is estimated at approximately $7.6 billion annually,
is relatively stable because much of the demand is generated by replacement
needs. Management believes that trends toward more efficient, longer life lamps
will continue to reduce the absolute number of units sold but that increases in
the average price per unit are expected to more than offset the decline and
result in overall growth of the market. Increased usage and applications will
depend largely on economic growth, especially housing starts and new vehicle
sales. However, economic development in areas such as Eastern Europe and Central
and South America is expected to provide accelerated growth opportunities.
Aggregate sales of lamps have demonstrated moderate cyclicality and seasonality.
The fourth quarter tends to be the industry's strongest demand period, given
abbreviated daylight hours and increased holiday light usage.
The fixture market, which is estimated at approximately $14.0 billion
annually, is highly fragmented since barriers to entry to the market are low in
comparison to the lamp manufacturing business. A large number of suppliers are
active in certain segments of the market, where they offer products for specific
applications. However, several companies offer a complete range of interior,
exterior and display and decorative fixtures for commercial and industrial
applications. Competition is based primarily on product design, quality, brand
recognition and distribution outlets. Interior fixtures constitute the largest
part of the fixture market, followed by exterior fixtures and display and
decorative fixtures. Interior fixture applications include offices, department
stores, shops, hotels, schools, factories and warehouses. Exterior fixtures
include all types of fixtures used in professional outdoor applications such as
street lighting, amenity and public lighting, port, tunnels and security
lighting. The display and decorative fixtures market includes applications for
shop window displays and other public buildings. Continued demand will be
dependent upon economic growth, especially industrial and
25
<PAGE> 29
commercial construction. As with lamps, economic development in Eastern Europe
and Central and South America is expected to provide accelerated growth
opportunities.
The miniature lighting market exhibits slow product obsolescence, stable
underlying demand and moderate growth. Purchasers for miniature lighting
assemblies are primarily OEMs in the automotive, electronics and communications,
appliance and aviation industries, whose products require a wide variety of
illumination and status indicators. Miniature lamps are inserted in lighting
assemblies that may be used in circuit board and panel mount applications that
can be incorporated into a wide variety of OEM products. There has been
increased acceptance by OEMs of the use of lighting manufacturers for the
production of miniature lighting assemblies. Many OEMs have adopted and are
becoming increasingly reliant upon the outsourcing of customized assemblies, and
the Company believes that this trend will continue as OEMs attempt to (i) reduce
time to market, (ii) reduce capital investment, (iii) gain access to leading
technological solutions, and (iv) improve inventory management.
The ballast market is estimated at approximately $3.2 billion annually and
is experiencing growth due to an increasing need to conserve energy, better
luminescence output, increased lamp life and less color shift. Ballasts are used
to supply power to start and operate fluorescent, compact fluorescent and HID
lamps and signage products.
Management believes that the following trends may also lead to increased
global use of lighting products: (i) increased lighting usage by manufacturing
and service companies, operating overtime or second and third shifts, (ii)
development of more energy-efficient and user-friendly lamps, despite an
increase in cost, and (iii) increased demand by developing countries, including
Eastern Europe, Central and South America and Asia, for lighting products.
PRODUCTS AND MARKETS
Prior to 1997, nearly two-thirds of the Company's net sales were
attributable to miniature lighting assemblies, with miniature discrete bulbs and
LEDs accounting for the bulk of the remainder. The Company's product category
profile has changed significantly with the addition of PLP and SLI, B.V. The
following table sets forth the percentage of net sales by product category for
Fiscal 1996 and Fiscal 1997 on a pro forma basis after giving effect to the PLP
and SLI, B.V. acquisitions.
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------
PRODUCT 12/01/96 11/30/97 11/30/97
- ------- -------- -------- -----------
(ACTUAL) (ACTUAL) (PRO FORMA)
<S> <C> <C> <C>
Lamps....................................................... 27% 38% 52%
Fixtures.................................................... -- 15 24
Miniature Lighting Assemblies............................... 59 21 9
Ballasts.................................................... -- 23 12
Other....................................................... 14 3 3
--- --- ---
Total............................................. 100% 100% 100%
=== === ===
</TABLE>
The Company's manufacturing and developmental activities are focused as
follows:
Lamps. The Company intends to continue to address the market's
demands for affordable, energy-efficient lamps with longer life cycles. In
this regard, the Company has produced and is continuing to develop, among
other lighting products, (i) compact fluorescent lamps with novel features
and performance characteristics, (ii) tungsten halogen lamps using line
voltage, which have the capability of replacing standard incandescent
lamps, (iii) twin-arc high pressure sodium ("SHP") and mercury-free SHP
lamps for general lighting as well as special applications such as film and
theater use, (iv) triphosphor fluorescent lamps with improved lumen
maintenance, and (v) metal halide lamps that combine energy efficient
illumination, long lamp life, excellent color rendition and compact lamp
size. Through the introduction of a new range of "high voltage" halogen
reflector lamps, known as "Hi- Spot," which has been supplemented with a
miniature 50 millimeter line voltage lamp, SLI, B.V. has demonstrated
leadership in product development in this area.
26
<PAGE> 30
Fixtures. Trend setting accent fixtures track both the requirements
of the marketplace and the emergence of new concept lamps, notably line
voltage halogen, metal halide and compact fluorescents. New fixture
development by the Company has been launched in response to new legislation
requiring low glare in the area of visual display units, as well as lower
wattage per square meter of illuminated surface. In addition, the Company
intends to continue to focus its efforts on providing industrial and
commercial lighting fixtures that will meet the changing performance and
aesthetic requirements of its customers.
Miniature Lighting Assemblies. The Company's miniature lighting
assemblies are used mainly as visual fault or status indicators. Because of
competition and rapid technological change, the Company believes that many
OEMs are motivated to work with lighting manufacturers, such as the
Company, in order to gain access to advanced manufacturing facilities
without an increase in their overall capital requirements.
Ballasts. Magnetic and electronic ballasts supply power to start and
operate fluorescent, compact fluorescent and HID lamps and signage
products. Patented technology acquired by the Company in connection with
the acquisition of Solium in Fiscal 1997 has provided the Company with new
three way switching and dimming capabilities for its fluorescent lamps. It
is expected that a substantial portion of the ballasts produced by Power
Lighting Products will be used by SLI, B.V.
The Company sells its products under a variety of brand names in over 30
countries. Its flagship brand, Sylvania, is one of the world's leading lighting
brands and covers a full line of lamps, industrial and commercial fixtures, and
specialty products. Other lamp and fixture lines include Concord, architectural
and display lighting; Claude, consumer and industrial and commercial lamps and
fixtures; Lumiance, display lighting fixtures; Linolite, residential and
commercial task lighting fixtures; and Le Dauphin, high fashion table fixtures.
Ballasts are sold under the Power Lighting Products brand label. Miniature
lighting assemblies are sold under the Chicago Miniature Lamp and Alba labels.
While the Company generally sells its products under its own brand names, it
also sells under its customers' private brand labels, a practice which is common
in the retail sector. The Company also sells its products to other lighting
companies under such companies' brand labels.
CUSTOMERS
The Company's customer profile has also changed significantly since the
acquisition of SLI, B.V. The Company's customers currently include wholesalers,
OEMs, retailers, architects, designers and contractors whereas, prior to the PLP
and SLI, B.V. acquisitions, the Company's primary customers for its miniature
lighting products were distributors and OEMs in the electronics and
communications, automotive, appliance and aviation industries. For Fiscal 1997,
on a pro forma basis after giving effect to the PLP and SLI, B.V. acquisitions,
the Company's main customer base for lamps and industrial and commercial
fixtures was the wholesale channel (approximately 50% of the Company's revenue,
of which more than 5% was through international electrical wholesalers such as
Rexel, Sonepar and Hagemeyer). The retail market for lamps is characterized by a
small number of large customers which contributes to competitive and pricing
pressure from suppliers located in the Pacific Rim, especially in compact
fluorescent lamps, which provide an attractive combination of high unit price
and low freight cost. The professional installer market is important to the
Company for lamps and accent fixture products. These products, which the Company
sells under the Concord and Lumiance brands, are often designed pursuant to
customer specifications. The Company does not believe that any one customer
accounted for more than 5% of net sales in Fiscal 1997.
MANUFACTURING
At November 30, 1997, the Company had 26 manufacturing facilities in 13
countries, including 4 facilities in the U.S. The manufacturing operations of
the Company are vertically integrated through design, engineering,
manufacturing, assembly and sales. This integration enables the Company to
control product cost more effectively, helps ensure quality and allows the
Company to offer its customers a wide array of products and services. The
Company's manufacturing capabilities include lamp forming and cutting, socket
manufacturing, glass and plastic fiber drawing, lamp equipment manufacturing,
plastic injection molding, and the
27
<PAGE> 31
production of complex molds and dies, as well as various assembly operations. In
Fiscal 1997, on a pro forma basis after giving effect to the PLP and SLI, B.V.
acquisitions, the Company manufactured approximately 90% of the products sold.
The Company's manufacturing operations are based on a number of "Competency
Centers." The production activities of each manufacturing facility are generally
specialized in the manufacturing of a particular line of related lighting
products. For example, the Company produces fluorescent lamps in Germany, accent
fixtures in the United Kingdom, ballasts in Texas, U.S.A., and miniature
lighting products in New Jersey, U.S.A. The design, engineering, manufacturing
and technical support sales teams associated with each product line are located
at the related manufacturing facility.
The Company has specialized design and engineering capabilities which it
uses to improve its manufacturing process by automating single, labor intensive
operations within a product assembly line, as well as automating entire product
assembly lines. Most of the Company's automated manufacturing equipment is
custom designed by its own engineers. The Company fabricates most of its own
equipment and many parts are machined in-house and customized to perform
specific functions. The Company develops and uses automated material handling,
testing and packaging systems and has automated the manufacture of its various
lamps, fixtures and miniature lighting assemblies. By automating its operations,
the Company has been able to reduce its manufacturing costs, thereby enabling it
to be competitive with many products produced worldwide.
For Fiscal 1997, on a pro forma basis after giving effect to the PLP and
SLI, B.V. acquisitions, the Company purchased approximately 90% of its
incandescent glass shells from Emgo, in which Philips and Osram are
participants, and approximately 80% of its fluorescent glass tubing from Osram
in each case pursuant to long term agreements. The Company purchases certain of
its other raw materials, including plastic, metals, glass, copper, filaments,
gases, electrodes, electronic components, wire and resistors for use in the
manufacture of lamps, fixtures, ballasts and miniature lighting assemblies. All
such raw materials are readily available and are generally purchased from a
variety of independent, non-competing suppliers. All LEDs used by the Company in
its miniature lighting assemblies are currently imported from the Pacific Rim.
The Company intends to equip a facility for, or to acquire a business primarily
engaged in, the production of LEDs; however, there is no assurance that either
event will occur. Any interruption in the supply of incandescent glass shells,
fluorescent glass tubing, LEDs or significant fluctuations in the prices of
other raw materials could have an adverse effect on the Company's operations.
RESEARCH AND DEVELOPMENT
As a result of the acquisition of SLI, B.V., the Company's research and
development expenditures increased to $1.9 million for Fiscal 1997. On a pro
forma basis after giving effect to the PLP and SLI, B.V. acquisitions, the
Company's research and development expenditures would have been $9.3 million for
Fiscal 1997. SLI, B.V.'s research and development, in recent years, has been
focused on product and process innovation, applying tested lighting
technologies, rather than in the exploration of new lighting techniques. Much of
SLI, B.V.'s focus has been directed toward improvements in material science to
improve lamp photometric performance, energy-efficiency and miniaturization as
well as to lengthen the life of its products and reduce or eliminate the use of
environmentally hazardous materials. Through a technical agreement, in effect
from January 1993 to September 1997, SLI, B.V. was entitled to royalty-free use
of Osram's worldwide intellectual property including patents, research and
development, product and process know-how for use outside the United States,
Canada, Mexico and Puerto Rico. The agreement provides that, commencing in
September 1997, SLI, B.V. no longer has the right to receive new Osram
technology and know-how although SLI, B.V. continues to have the right to use
all of the information and know-how acquired up to 1997 within its existing
business outside the United States, Canada, Mexico and Puerto Rico. This
restriction does not prohibit the Company from selling a broad range of lighting
products, which are not dependent upon Osram technology, in such areas. Certain
of the Company's competitors are significantly larger than the Company and
devote a substantial amount of money to research and development.
28
<PAGE> 32
SALES AND MARKETING
The Company sells its lighting products through a direct sales force, sales
representatives and distribution companies. The Company currently employs
approximately 1,021 people in sales and marketing, with 674 in Europe, 124 in
the U.S., 97 in Australia, 80 in Central and South America and 46 in Asia. In
addition, the Company's sales force is augmented with independent sales
representative organizations, with approximately 677 sales people responsible
for sales in designated geographic territories in the United States, Canada and
Europe.
The Company advertises in most major electronic and electrical trade
publications. To help ensure positive results of its advertising programs, the
Company has developed a lead fulfillment and tracking program that monitors
opportunities for the internal sales force, the sales representatives and
distributors. The Company also publishes a full-line of catalog/data books and
CD-ROMs for use by its customers.
INTERNATIONAL OPERATIONS
Approximately 61% and 69% of the Company's net sales and operating income,
respectively, for Fiscal 1997 were derived from outside the United States. On a
pro forma basis after giving effect to the PLP and SLI, B.V. acquisitions,
approximately 81% and 79% of the Company's net sales and operating income,
respectively, would have been derived from operations outside the United States.
The Company currently operates in more than 30 countries located in the
Americas, Europe, Australia and Asia. As a result of its foreign sales and
facilities, the Company's operations are subject to the risks of doing business
internationally.
<TABLE>
<CAPTION>
YEAR ENDED PRO FORMA
------------------------------ YEAR ENDED
12/03/95 12/01/96 11/30/97 11/30/97
-------- -------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net Sales:
United States........................................ $44,340 $ 49,843 $129,120 $144,611
Canada............................................... 7,064 13,084 14,605 14,605
Europe............................................... -- 22,801 135,719 435,673
Asia/Pacific......................................... -- -- 15,621 59,552
Central and South America............................ 5,998 8,443 34,894 100,923
------- -------- -------- --------
Total........................................ $57,402 $ 94,171 $329,959 $755,364
======= ======== ======== ========
Operating Income:
United States........................................ $ 9,034 $ 7,038 $ 8,582 $ 8,554
Canada............................................... 707 2,683 3,039 3,039
Europe............................................... -- 4,574 6,880 15,876
Asia/Pacific......................................... -- -- 1,145 2,218
Central and South America............................ 2,473 4,177 7,716 11,918
------- -------- -------- --------
Total........................................ $12,214 $ 18,472 $ 27,362 $ 41,605
======= ======== ======== ========
Identifiable Assets(a):
United States........................................ $30,560 $ 41,255 $107,228 $107,228
Canada............................................... 9,429 9,887 10,459 10,459
Europe............................................... 10,287 50,080 429,418 429,418
Asia/Pacific......................................... -- -- 32,602 32,602
Central and South America............................ 7,104 11,314 51,405 51,405
------- -------- -------- --------
Total........................................ $57,380 $112,536 $631,112 $631,112
======= ======== ======== ========
</TABLE>
- ---------------
(a) At December 3, 1995, December 1, 1996 and November 30, 1997.
29
<PAGE> 33
THE PLP AND SLI, B.V. ACQUISITIONS
Power Lighting Products. On January 30, 1997, the Company consummated the
purchase of all of the outstanding capital stock of Power Lighting Products.
Power Lighting Products is a manufacturer of magnetic and electronic ballasts
for the linear and compact fluorescent, sign and HID lighting markets. The
purchase price was approximately $22 million which was paid using cash proceeds
from the Company's public offering completed in October 1996.
Power Lighting Products was established in 1987 when Valmont Industries,
Inc. purchased the business and certain assets of the ballast division of
General Electric. Power Lighting Products is currently a significant supplier of
both magnetic and electronic ballasts with approximately a 10% share of a total
U.S. market estimated at $900 million to $1 billion. Lighting ballasts (magnetic
and electronic) supply power to start and operate linear and compact
fluorescent, HID lamps and signage products (neon displays). Magnetic ballasts
use an older and well established technology and have a lower initial cost than
electronic ballasts. The Company believes that electronic ballasts are gaining
market share, despite their higher initial cost, as they provide reduced energy
consumption and longer lamp life. In addition, the Company believes that
lighting retrofit projects driven by energy efficiency regulations and utility
rebates have accelerated the increasing market share of electronic ballasts in
recent years. Power Lighting Products also provides the Company with
relationships with major OEMs. For Fiscal 1997, sales to OEMs accounted for
approximately 60% of Power Lighting Products' sales. The remaining 40% of Power
Lighting Products' sales in Fiscal 1997 were through electrical distributors
(30%) and directly to the "Do-It-Yourself" retail store market (10%). The
Company views Power Lighting Products' distribution channels as a major part of
its future domestic marketing strategy as the Company continues to expand its
range of products.
SLI, B.V. In September 1997, the Company consummated the purchase of all
of the outstanding shares of capital stock of SLI, B.V., a privately held
company headquartered in Geneva, Switzerland for $161.5 million cash, financed
with the Company's internal cash and borrowings under its revolving credit
facility. SLI, B.V. originally formed part of Sylvania Lighting, which has been
in the business of producing lamps since 1900. GTE acquired the business in
1959, at which time Sylvania Lighting did business exclusively in the United
States. Under GTE's ownership, Sylvania Lighting expanded into Europe in 1961,
initially with its camera "flash cube" product. Between 1966 and 1985, GTE grew
the worldwide operations of Sylvania Lighting, setting up plants in Central and
South America between 1966 and 1979 and opening operations in Australia and Asia
during the 1970's. In the 1980's, Sylvania Lighting made two acquisitions;
Claude Lamp Company, a French lamp and fixture manufacturer, and Rotaflex Plc, a
European fixture manufacturer. In 1993, GTE sold the international operations of
Sylvania Lighting, excluding the North American business, to a group of private
investors and sold the North American business, including the trademark Sylvania
for use in the United States, Canada, Mexico and Puerto Rico, to Osram GmbH.
SLI, B.V. is an integrated designer and manufacturer of lighting systems
which are comprised of lamps and fixtures. SLI, B.V. manufactures and offers a
wide range of lamps (incandescent, fluorescent, compact fluorescent, HID,
halogen, and special lamps) and a substantially complete range of fixtures to
meet the lighting needs of its customers, which include wholesalers, OEMs,
retailers, architects, designers and contractors. SLI, B.V.'s product portfolio
is sold under several brands, most notably the Sylvania name, for which SLI,
B.V. has rights in all regions with the exception of the United States, Canada,
Mexico and Puerto Rico. SLI, B.V. manufactures approximately 90% of all its
product requirements in-house through 13 plants in nine countries; seven plants
are in Europe, four are in Central and South America and two are in Australia.
SLI, B.V. conducts its operations in over 30 countries through sales and
distribution facilities.
JOINT VENTURE
In January 1997, the Company entered into an agreement with Schott to form
Schott-CML Fiberoptics, owned 51% by the Company and 49% by Schott. Pursuant to
the terms of the agreement, Schott has an option to buy additional shares for a
nominal consideration, which, if exercised, will result in each party having a
50% ownership interest. The joint venture has an indefinite term. Revenues to
date have been nominal. Since its formation, the joint venture has devoted its
efforts to developing and marketing fiber optic lighting products.
30
<PAGE> 34
Schott, headquartered in Mainz, Germany, is a large global manufacturer of
optical and technical glasses for commercial, industrial, scientific and
consumer markets.
COMPETITION
The industry in which the Company operates is highly competitive. Most of
the Company's competitors offer products in some but not all of the markets
served by the Company. The Company competes primarily on the basis of brand
awareness, price, product quality, design and engineering, customer service and
distribution strength. The lamp manufacturing industry is dominated by Philips,
Osram and General Electric. The Company believes that it is the third largest
lighting company in Europe, behind Philips and Osram. The fixture and miniature
lighting assembly markets are highly fragmented with many suppliers. The ballast
market is dominated by several large companies including Power Lighting
Products. PLP's competitors in the ballast market include MagneTek, Advance
Transformer (a division of Philips) and Motorola. Some of the Company's
competitors have substantially greater resources than the Company.
ENVIRONMENTAL REGULATIONS
The Company's operations are subject to federal, state, local and foreign
laws and regulations relating to the storage, handling, generation, treatment,
emission, release, discharge and disposal of certain substances and wastes.
While the Company believes that it is currently in material compliance with
these laws and regulations, there can be no assurance that the Company will not
incur significant costs to remediate violations thereof or to comply with
changes in existing laws and regulations (or the enforcement thereof). Such
costs could have a material adverse effect on the Company's results of
operations.
The Company uses a radioactive gas in its manufacture of neon bulbs in the
United States, and maintains a U.S. Nuclear Regulatory Commission license for
the use of such gas. The Company must comply with federal, state and local
regulations pertaining to the storage and discharge of radioactive materials. In
view of the low dosage of radioactivity in the gas used, the requirements for
compliance with these regulations do not, and the Company anticipates will not,
have any material adverse effect upon its capital expenditures, results of
operations or financial condition.
PATENTS, LICENSES AND TRADEMARKS
The Company owns and has obtained licenses to various domestic and foreign
patents, patent applications and trademarks related to its products, processes
and business. While these patents and patent applications in the aggregate are
important to the Company's competitive position, no single patent or patent
application is material to the Company. The trademark Sylvania is owned by
Osram-Sylvania, Inc. in the United States, Canada, Mexico and Puerto Rico and by
the Company in all other jurisdictions where the name is registered. The
Company's license agreements generally have a duration which coincides with
either the patents or the trademarks (which have an indefinite life) covered
thereby. SLI, B.V.'s intellectual property rights are licensed from Osram, which
is a competitor of the Company, and there is no assurance that the Company's
licenses may not be subject to challenge by Osram arising out of any future
sales by the Company in the United States, Canada, Mexico and Puerto Rico.
EMPLOYEES
As of November 30, 1997, the Company employed approximately 7,408 employees
of whom 3,545 were employed in Europe, 591 in the U.S., 82 in Canada, 2,879 in
Central and South America, 227 in Australia and 84 in Asia. Manufacturing and
engineering operations employed 5,927 people, sales and marketing employed 1,021
people, and administration and finance employed 460 people. Union recognition
and collective bargaining arrangements are in place in 8 countries (including
the United States), covering a total of approximately 3,400 persons (144 in the
United States). These agreements are with various labor unions and consortiums
and expire at various dates. The Company experienced a three-week strike at its
St. Etienne, France facility in 1997. Such strike did not materially effect SLI,
B.V. operations and the employees are currently working under a collective
bargaining agreement which has no expiration date. The remaining collective
bargaining agreements expire on various dates ranging from October 1998 through
March 1999.
31
<PAGE> 35
Management believes that it generally has a good relationship with its unionized
and non-unionized employees.
PROPERTIES
At November 30, 1997, the Company's manufacturing operations were being
carried on at the following locations:
<TABLE>
<CAPTION>
LOCATION SQUARE FOOTAGE PRODUCT
- -------- -------------- -------
<S> <C> <C>
UNITED STATES
Texas(a)........................... 108,000* magnetic and electronic ballasts
Oklahoma(b)........................ 30,000* miniature neon lamps and assemblies
New Jersey(a)...................... 59,200* miniature lighting assemblies,
injection molding of housings and
lenses
New Jersey(b)...................... 7,000* molds, tool and die
CANADA
Ontario(b)......................... 75,000* socket and socket lamp assemblies
EUROPE
Lyon, France(a).................... 235,000 specialty incandescent lamps
St. Etienne, France(a)............. 105,000 industrial/commercial fluorescent
fixtures
St. Marcellin, France(b)........... 42,000 table lighting fixtures
Erlangen, Germany(c)............... 255,000* linear fluorescent lamps
Bamberg, Germany(b)................ 54,400* miniature lamp manufacturing and
assembly
Coburg, Germany(a)................. 17,000* manufacturer of automated lamp
making equipment
Hranice u Ase, Czech Republic(b)... 7,500* miniature lamp assembly
Newhaven, United Kingdom(a)........ 7,900* architectural fixtures
Shipley, United Kingdom(b)......... 110,000* miniature linear fluorescent and
compact lamps
Byfleet, United Kingdom(a)......... 53,000* manufacturing of automated lamp
making equipment
Tienen, Belgium(b)................. 308,000* HID lamps, halogen lamps for low
and line voltage and general
lighting service ("GLS") lamps
Haarlem, Netherlands(a)............ 45,000* display fixtures
AUSTRALIA
Gosford, Australia(b).............. 72,000 high bay industrial fixtures
Brookvale, Australia(a)............ 17,000 suspended linear fixtures
CENTRAL AND SOUTH AMERICA
Vinhedo, Brazil(b)................. 74,000* incandescent glass shells and
fluorescent glass tubes
Santo Amaro, Brazil(b)............. 390,000 incandescent and fluorescent low
and line voltage and GLS lamps
Juarez, Mexico(b).................. 163,000* magnetic and electronic ballasts
Bogota, Colombia(b)................ 55,000* linear fluorescent and incandescent
lamps
San Jose, Costa Rica(b)............ 75,000* starters and glow bottles
San Jose, Costa Rica(b)............ 19,000* miniature lighting assemblies
</TABLE>
- ---------------
(a) Leased or subleased. Such leases expire on various dates from the current
year to 2010. Lease payments for Fiscal 1998 will be approximately $5.3
million. See Note 9 to Notes to the Company's Consolidated Financial
Statements.
(b) Owned.
32
<PAGE> 36
(c) Manufacturing facility owned, warehouse space leased.
(*) Includes warehouse space.
The Company has sales offices and distribution facilities in over 30
countries.
The Company-owned facilities in the United States, Canada, Germany, the
United Kingdom, Belgium and Costa Rica are subject to mortgages which were
entered into in connection with the Company's revolving credit facility.
LEGAL PROCEEDINGS
Although the Company from time to time is a party to various litigation, it
is not a party to any material legal proceedings at this time.
33
<PAGE> 37
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding the directors and
executive officers of the Company:
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS AGE POSITION WITH THE COMPANY
-------------------------------- --- -------------------------
<S> <C> <C>
Frank M. Ward.......................... 53 President, Chief Executive Officer,
Director and Chairman of the Board
Norman Scoular(a)...................... 45 Chief Operating Officer and Director of
the Company, President and Chief
Executive Officer of SLI, B.V.
Richard F. Parenti..................... 44 Vice President Finance, Secretary and
Chief Accounting Officer
Werner A. Arnold....................... 44 Director and President of Alba
Donald S. Dewsnap(b)................... 63 Director
Frederick B. Howard.................... 62 Director
Richard E. Ingram(b)................... 56 Director
</TABLE>
- ---------------
(a) Member of Special Option Committee.
(b) Member of Audit Committee, Compensation Committee and Stock Option
Committee.
DIRECTORS AND EXECUTIVE OFFICERS
Frank M. Ward has served as President, Chief Executive Officer and Director
of the Company and its predecessor, Xenell, since 1985. Prior to 1985, Mr. Ward
was President of Xenell Marketing Corporation, an organization formed to manage
the product development, marketing and distribution of the products of Xenell.
Mr. Ward holds a degree in Electrical Engineering from Northeastern University
and has completed post graduate studies in physics and metallurgy.
Norman Scoular has served as President of SLI, B.V., a subsidiary of the
Company, since its acquisition in September 1997 and has served as the Chief
Executive Officer of SLI, B.V. since its inception in January 1993. Prior to
1993, he held senior positions with several large engineering groups. Mr.
Scoular was Managing Director of the Electrical Products Group of FKI Plc. from
1987 to 1989 and Chief Executive Officer of FKI Plc from 1989 to 1992. Between
1979 and 1987, he was Managing Director of several large companies within GEC
Plc, including its low voltage control activities in Europe. He commenced his
career in industrial engineering with Philips. Mr. Scoular was elected a
director of the Company in November 1997 and appointed Chief Operating Officer
in March 1998. He has a General Engineering degree from Herriot Watt University
and is a Chartered Accountant.
Richard F. Parenti joined the Company in October 1987, and held the
position of Controller from 1988 to 1992. He was appointed Vice President
Finance in 1992 and Secretary of the Company in March 1998. Since 1992 he has
served as a senior financial officer of the Company. Mr. Parenti has a Bachelor
of Business Administration degree in accounting from Loyola University, Chicago.
Werner A. Arnold is the President of Alba, a subsidiary of the Company
formed in May 1996 to consummate the acquisition of Alba. From 1994 to 1996, Mr.
Arnold served as President and Chief Executive Officer of Alba-Germany. From
1985 to 1993, he served as General Manager and Executive Vice President of
Engineering, Sales and Marketing of Alba-Germany. Mr. Arnold also served as an
officer and director of certain affiliates of Alba-Germany. Mr. Arnold was
elected as a Director of the Company in June 1996. Mr. Arnold has a Masters
degree in Engineering from Technical University of Munich, Germany.
Donald S. Dewsnap has been Chairman of Norlico Corp. since 1977, a supplier
of engineered chemical dispense systems to industrial users, since 1977. Prior
thereto he was involved in industrial research at Arthur D. Little Corp. and
spent fourteen years with GTE Sylvania Lighting in various product marketing,
management and sales engineering positions. Mr. Dewsnap was elected a director
of the Company in March 1995. Mr. Dewsnap holds a Bachelor of Arts degree from
Merrimack College.
34
<PAGE> 38
Frederick B. Howard had been, until his retirement in June 1997, vice
president and general manager of Electronic Control Systems, a division of
Osram-Sylvania Inc., since its formation in June 1996. From 1994 until 1996, he
had been vice president and general manager of Osram Sylvania Glass
Technologies. Other positions held during his 35 year tenure with GTE Sylvania
Lighting include vice president of marketing for the Sylvania Lighting
Division -- U.S., vice president of Lighting Special Products and vice
president, Latin America, for International Lighting. Mr. Howard was elected a
director of the Company in February 1998. Mr. Howard holds a Bachelor of Arts
degree in economics from Babson College, serves as a member of the Advisory
Board of Directors, Mayer Electric Supply Company, and is a member of the
National Electric Manufacturers Association.
Richard E. Ingram has been the Chairman of the Board of Builder Marts of
America, Inc., a national distributor of lumber and building materials, since
November 1988, and he was its Chief Executive Officer until November 1993. He
was a founding director of Carolina First Corporation, the holding company for
Carolina First Bank, and Ingram Enterprises, Inc., a real estate development and
investment banking company. He is also a director of Synalloy Corporation,
Columbia Lumber, a retail lumber business, and Tel-Pan Communications, Inc., a
long distance telephone service provider in Panama. He has served on the Policy
Advisory Board of the Joint Center for Urban Studies at Harvard University. Mr.
Ingram was elected a director of the Company in August 1996. Mr. Ingram is a
graduate of the American Institute of Banking and the University of North
Carolina Executive Program.
Directors are elected annually by the shareholders for terms of one year
and until their successors are elected and qualified. Officers serve at the
discretion of the Board of Directors.
The Company currently pays its non-employee and non-affiliated directors an
annual fee of $10,000 for attendance at meetings of the Board of Directors or
committees thereof. All directors are reimbursed for their reasonable expenses
in connection with the performance of their duties. In August 1997, Messrs.
Ingram and Dewsnap were each granted an option to purchase 15,000 shares of the
Company's Common Stock at $18.67 per share. Such option vests over five years
and expire in August 2007. In March 1998, Mr. Howard was granted an option to
purchase 20,000 shares at $34.00 per share. Such option vests over five years
and expires in March 2008.
COMMITTEES
The members of the Audit Committee, Compensation Committee and the Stock
Option Committee are Donald S. Dewsnap and Richard E. Ingram. The Audit
Committee has general responsibility for accounting and audit activities of the
Company and its subsidiaries. The Audit Committee annually reviews the
qualifications of the independent certified public accountants, makes
recommendations to the Board as to their selection, reviews the scope, fees and
results of their audit and approves their non-audit services and related fees.
The Audit Committee meets periodically with management and with the Company's
independent auditors to determine the adequacy of internal controls and other
financial reporting matters. The Compensation Committee reviews general policy
matters relating to compensation and benefits of employees generally and has
responsibility for reviewing and approving compensation and benefits for all
executive officers of the Company. The Stock Option Committee administers the
Company's Incentive and Non-Statutory Stock Option Plan (the "Stock Option
Plan") and recommends grants of the specific options thereunder. The Special
1997 Stock Option Plan (the "Special Option Plan") is administered by a separate
committee with the right to grant options thereunder (the "Special Option
Committee"). Currently, the Special Option Committee consists of Norman Scoular
only, with authority from the Board to grant options only with respect to the
employees of SLI, B.V. and its subsidiaries. None of the committees has been
charged with the responsibility to review or approve transactions between the
Company and management or their affiliates. However, all transactions between
the Company and management or their affiliates must be approved by a majority of
the independent directors.
35
<PAGE> 39
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Ronald S. Goldstein, a former member of the Board of Directors and a former
member of the Compensation Committee, served as the Chief Financial Officer and
Secretary of the Company during the fiscal year ended November 30, 1997. Mr.
Goldstein is no longer an executive officer of the Company, nor is he a member
of the Board of Directors. No other person serving on the Compensation Committee
at any time during Fiscal 1997 was a present or former officer or employee of
the Company or any of its subsidiaries. During Fiscal 1997, no executive officer
of the Company served as a member of the board of directors or compensation
committee (or other board committee performing equivalent functions) of another
entity, one of whose executive officers served on the Company's Board of
Directors or Compensation Committee.
EXECUTIVE COMPENSATION
The following table sets forth certain information relating to the
compensation earned by the Chief Executive Officer of the Company and each of
the other most highly compensated executive officers of the Company whose total
cash compensation for the year indicated exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
--------------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(A) OPTIONS
- --------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Frank M. Ward................................. 1997 $250,000 $ -- --
President and 1996 250,000 74,000 --
Chief Executive Officer 1995 360,000 -- --
Norman Scoular................................ 1997(b) 99,054 99,355 375,000(c)
Chief Operating Officer of the Company and
President of SLI
Ronald S. Goldstein(d)........................ 1997 122,376 -- --
Chief Financial Officer 1996 140,769 -- 112,500
1995(e) -- -- --
Richard F. Parenti............................ 1997 109,299 -- 75,000
Vice President -- Finance 1996 100,000 -- --
1995 89,213 -- 45,000
</TABLE>
- ---------------
(a) Represents bonus earned during the indicated fiscal year. In some
instances, all or a portion of the bonus was paid during the next fiscal
year.
(b) Mr. Scoular became an executive officer of the Company in September 1997.
(c) Excludes an option granted by Mr. Ward to Mr. Scoular on September 8, 1997
to purchase 525,000 shares of the Company's Common Stock owned by him at
$18.67 per share. Such option vests over a five year period and expires in
September 2007.
(d) Mr. Goldstein resigned from his positions as a director and officer of the
Company in January 1998.
(e) Mr. Goldstein became an executive officer of the Company in September 1995.
36
<PAGE> 40
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(A)
OPTIONS IN PRICE EXPIRATION ------------------------------
NAME GRANTED(B) FISCAL YEAR ($/SH) DATE 5% 10%
- ---- ---------- ----------- -------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Frank M. Ward................... -- --% $ -- -- $ -- $ --
President and
Chief Executive Officer
Norman Scoular.................. 375,000(c) 12.15 18.67 9/8/07 4,403,000 11,158,000
Chief Operating Officer of the
Company and President of SLI,
B.V.
Ronald S. Goldstein(d).......... -- -- -- -- -- --
Chief Financial Officer
Richard F. Parenti.............. 75,000 2.43 16.00 7/3/07 754,800 1,912,800
Vice President -- Finance
</TABLE>
- ---------------
(a) The assumed annual rates of appreciation of 5% and 10% would result in the
price of the Company's stock increasing 62.9% and 159.4%, respectively over
the term of the option.
(b) All options were granted at an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant. Options vest at
the rate of 20% per year for each of the first five years after the date of
grant and terminate ten years from the date of grant.
(c) Excludes an option granted by Mr. Ward to Mr. Scoular on September 8, 1997
to purchase 525,000 shares of the Company's Common Stock owned by him at
$18.67 per share. Such option vests over a five year period and expires in
September 2007.
(d) Mr. Goldstein resigned from his positions as a director and officer of the
Company in January 1998.
OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT 11/30/97 OPTIONS AT 11/30/97(A)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(B) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frank M. Ward.............. -- $ -- -- -- $ -- $ --
President and CEO
Norman Scoular............. -- -- -- 375,000(c) -- 1,468,750
Chief Operating Officer
of the Company and
President of SLI, B.V.
Ronald S. Goldstein(d)..... 53,933 393,081 58,568 -- 813,144 --
Chief Financial Officer
Richard F. Parenti......... -- -- 16,050 82,500 259,538 621,475
Vice President -- Finance
</TABLE>
- ---------------
(a) Value is based on the closing sale price of the Common Stock as reported on
the Nasdaq National Market as of the last business day prior to the end of
Fiscal 1997, $22.583, minus the exercise price, multiplied by the number of
shares to which the exercise relates.
(b) Value realized is based on the fair market value of the Common Stock as of
the date of exercise, minus the exercise price, multiplied by the number of
shares to which the exercise relates.
37
<PAGE> 41
(c) Excludes an option granted by Mr. Ward to Mr. Scoular on September 8, 1997
to purchase 525,000 shares of the Company's Common Stock owned by him at
$18.67 per share. Such option vests over a five year period and expires in
September 2007.
(d) Mr. Goldstein resigned from his positions as a director and officer of the
Company in January 1998.
EMPLOYMENT AGREEMENTS
The Company has entered into a two year employment agreement with Mr. Frank
Ward, effective as of January 5, 1998 pursuant to which Mr. Ward receives an
annual salary of $500,000 plus a bonus of $500,000 based upon the Company
achieving net income of $30 million for 1998 and $41 million for 1999, after
accruing for bonus amounts being paid to Messrs. Ward and Scoular (see below).
Mr. Ward is also entitled to participate in all employee benefits, automobile
and expense allowances.
On May 12, 1993, SLI, B.V. entered into a Service Agreement with Mr. Norman
Scoular, which was subsequently amended, pursuant to which, commencing as of
January 1, 1998 Mr. Scoular receives a base salary of $500,000 per year and a
bonus for each of the fiscal years ending December 31, 1998 and 1999 of
$500,000, based upon the Company realizing net income of $30 million and $41
million for each of the years, respectively, after accruing for bonus amounts
being paid to Messrs. Ward and Scoular (see above). Mr. Scoular is entitled to
participation in SLI, B.V.'s retirement benefits plan, medical insurance, and
life insurance coverage. Mr. Scoular is also entitled to reimbursement of
reasonable expenses incurred in connection with the performance of his duties
and to the use of an automobile. The agreement also provides for indemnification
for good faith actions performed in his capacities as an officer or director.
Mr. Scoular's employment continues until proper notice is given, unless sooner
terminated for gross misconduct, material breach or other cause, by either
party, and the employment agreement provides for liquidated damages in such
events. Upon termination, Mr. Scoular may not compete with SLI, B.V. for a
period of twenty-four months.
The Company has also entered into a four year employment agreement with Mr.
Richard Parenti, the Company's vice president of finance and chief accounting
officer, commencing as of May 1, 1998. Mr. Parenti receives an annual salary of
$125,000 and is entitled to participate in all employee benefits. In the event
of disability that renders the employee incapable of performing his normal
duties that continues for a period of 90 days, the Company may terminate the
employee's employment. The employment agreement is also terminable by either
party for cause.
In connection with the Alba acquisition in May 1996, the Company entered
into a three-year employment agreement with Mr. Werner A. Arnold. After the
first three-year term, the agreement can be extended annually for additional
one-year terms. Mr. Arnold will be paid an annual salary of DM 225,000 and has
received stock options totaling 112,500 shares of common stock, which options
have an exercise price of $16.22 per share and vest at the rate of 20% per year
commencing May 30, 1997. The agreement with Mr. Arnold also provides for
reimbursement of reasonable and necessary business expenses and the use of an
automobile. Under the employment agreement, Mr. Arnold is entitled to
participate in all employee benefits. In the event of disability that renders
the employee incapable of performing his normal duties that continues for a
period of six consecutive months, the Company may terminate the employee's
employment. The employment agreement is also terminable by either party for
cause. The agreement also contains a non-compete clause that prohibits Mr.
Arnold from competing with the Company for a period of five years following
termination of his employment with the Company.
STOCK OPTION PLANS
The Company's 1995 Incentive and Non-Statutory Stock Option Plan, as
amended (the "Stock Option Plan"), became effective on January 25, 1995, and the
Special 1997 Stock Option Plan, as amended (the "Special Option Plan"), became
effective on September 8, 1997 (the Stock Option Plan and the Special Option
Plan collectively referred to as the "Plans"). A total of 3,000,000 shares of
Common Stock of the Company is reserved for issuance under the Stock Option
Plan. A total of 3,000,000 shares of Common Stock of the Company is reserved for
issuance under the Special Option Plan.
38
<PAGE> 42
The Stock Option Plan was adopted as a performance incentive for officers
and employees of the Company and for certain other individuals providing
services to or acting as directors of the Company. The Special Option Plan was
adopted as a performance incentive for employees of those subsidiaries of the
Company whose principal operations are located outside of the United States and
Canada, and for certain other individuals providing services to the Company or
its subsidiaries. The Plans are intended to enable the optionees to acquire or
increase a proprietary interest in the success of the Company.
The Plans are intended to be incentive stock option plans within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). Options granted under both the Special Option Plan as well as the Stock
Option Plan may be either incentive stock options within the meaning of Section
422 of the Code ("Incentive Options") or options that are not incentive stock
options ("Non-statutory Options") (Incentive Options and Non-statutory Options
being hereinafter generally referred to as "Options"). The Plans are
administered by the Board, which has full and final authority to operate, manage
and administer the Plans on behalf of the Company. The Board may delegate
certain of its powers to a Stock Option Committee (the "Committee").
Under the Stock Option Plan, Incentive Options may be granted only to
officers and other employees of the Company or its subsidiaries, including
members of the Board who are also employees of the Company or a subsidiary.
Non-Statutory Options may be granted to officers or other employees of the
Company or its subsidiaries, and to certain other individuals providing services
to the Company or its subsidiaries. Non-employee directors are not eligible to
participate in the Stock Option Plan.
Under the Special Option Plan, Options may be granted to employees of the
Company or any of its subsidiaries who are not also officers of the Company or
members of the Board, and to certain other individuals providing services to the
Company or its subsidiaries. No person who is either an officer of the Company
or a member of the Board is eligible to participate in the Special Option Plan.
The exercise price of an Incentive Option must be not less than 100% (or
110% with respect to any optionee beneficially owning more than 10% of the total
combined voting power of all classes of stock of the Company) of the fair market
value of the Common Stock on the date of grant, and the aggregate fair market
value (determined at the time of grant) of shares issuable to any one employee
pursuant to Incentive Options which first become exercisable in any calendar
year may not exceed $100,000. The price at which shares may be purchased
pursuant to Non-statutory Options shall be specified by the Board at the time
the Option is granted, and may be less than, equal to or greater than the fair
market value of the shares of Common Stock on the date such Non-statutory Option
is granted.
The exercisability of each Option and its date of termination (which may
not be more than ten (10) years after its date of grant) are also established by
the Board at the time of grant, except that the date of termination of any
Incentive Option granted to an optionee who owns more than 10% of the total
combined voting power of all classes of stock of the Company may not be more
than five years after its date of grant. Generally, the option price of any
shares of Common Stock purchased must be paid in cash at the time of exercise,
with shares of Common Stock, or by a combination of the above. Options generally
terminate on the earlier to occur of: (i) the stated expiration date; (ii) in
the event of termination other than by reason of death or disability, 90 days
after termination; (iii) 180 days after the death of the optionee; or (iv) 180
days after the optionee's employment terminates due to disability.
An outstanding Option immediately becomes exercisable upon the occurrence
of certain events, including any transaction which results in shareholders of
the Company immediately before such transaction ceasing to own at least 51% of
the voting stock of the Company; the approval by shareholders of a transaction
in which the Company does not survive; or a disposition of all or substantially
all the property and assets of the Company. In addition, the Board or the
Committee may accelerate the date on which any Option may be exercised and may
accelerate the vesting of any shares of Common Stock subject to any Option or
previously acquired by the exercise of any Option.
Options under the Stock Option Plan may not be granted later than January
25, 2005. Options under the Special Option Plan may not be granted later than
September 8, 2007. The Board may amend the Plans at any
39
<PAGE> 43
time, and from time to time, (subject to the limitation that no amendment will
be effective unless approved by the shareholders of the Company in accordance
with applicable law and regulations at an annual or special meeting held within
12 months before or after the date of adoption of such amendment) in any
instance in which such amendment would: (i) increase the number of shares of
Common Stock as to which Options may be granted under the Plans; or (ii) change
in substance the provisions of the Plans relating to eligibility to participate
in the Plan.
The Special Option Plan is intended to further the growth and development
of the Company by encouraging employees and consultants of the Company and its
subsidiaries who are not also officers or directors to obtain a proprietary
interest in the Company through the grant of options to acquire shares of Common
Stock. The Special Option Plan was adopted as a performance incentive for
employees of those subsidiaries of the Company whose principal operations are
located outside of the United States and Canada, and for certain other
individuals providing services to the Company or its subsidiaries. The Company
believes that the Special Option Plan will aid in attracting and retaining
employees and consultants and in stimulating the efforts of such individuals for
the success of the Company and its subsidiaries.
CERTAIN TRANSACTIONS
The Company leases on a month-to-month basis approximately 2,200 square
feet of office space in Canton, Massachusetts from Frank M. Ward, the President,
Chief Executive Officer and a director of the Company. Rent expense on this
facility was $60,000 for the fiscal year ended December 3, 1995, $67,000 for the
year ended December 1, 1996, and $60,000 for the fiscal year ended November 30,
1997. Management believes the rent to be comparable to the rent that would be
paid to an unrelated party. At December 2, 1996, Mr. Ward owed the Company
$594,000 for advances made to him or payments made on his behalf. Such amount
was repaid by Mr. Ward in March 1997.
Mr. Werner A. Arnold, President of Alba and a director of the Company,
together with his wife and her father (collectively, the "Arnold Family"), were
the direct or indirect owners of Alba, and they sold their ownership interests
in Alba to the Company in May 1996. In connection with the acquisition of Alba-
Germany and certain related entities, the Company paid to the Arnold Family
approximately DM 10.0 million (or approximately $6.4 million) in cash and
assumed certain liabilities totaling approximately DM 7.5 million (or
approximately $4.9 million). In addition, Mr. Arnold had an ownership interest
in Alba-USA and Alba-Malaysia. In connection with the acquisition of Alba-USA
and Alba-Malaysia, the Company paid an aggregate of approximately DM 3.15
million (or approximately $2.1 million) in cash and 225,000 shares of the
Company's Common Stock. The shares were valued at such time at approximately
$14.43 per share, or $3.3 million in the aggregate.
40
<PAGE> 44
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth as of April 5, 1998, information with
respect to the beneficial ownership of the Common Stock by (i) each person who
is known by the Company to be the beneficial owner of more than 5% of the
Company's outstanding shares of Common Stock, (ii) each director and executive
officer of the Company, (iii) all directors and executive officers of the
Company as a group, and (iv) the Selling Shareholders. Unless otherwise
indicated, each of the shareholders listed below has sole voting and investment
power with respect to the shares of Common Stock beneficially owned.
<TABLE>
<CAPTION>
SHARES TO BE
SHARES BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING OFFERING
------------------------- SHARES --------------------
BEING
NAME AND ADDRESS(A) NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------- ---------- ------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
Frank M. Ward....................... 12,383,355(b)(c) 42.0% 1,350,000(d) 11,033,355 29.3%
Patrick J. Cox and
Marianne Connaughton,
Trustees of Trusts
established for the children
of Frank M. Ward(e)............... 2,059,395 7.0 1,125,000 934,395 2.5
Norman Scoular(c)................... -- * -- -- *
Richard F. Parenti(f)............... 19,050 * -- 19,050 *
Werner A. Arnold(g)................. 307,500 1.0 150,000 157,500 *
Donald S. Dewsnap................... 20,925 * -- 20,925 *
Frederick B. Howard................. -- * -- -- *
Richard E. Ingram(h)................ 37,950 * -- 37,950 *
All directors and
executive officers as
a group (8 persons)............... 12,771,880 43.4% 1,500,000 11,268,880 29.9%
</TABLE>
- ---------------
* Less than 1%
(a) The address of the Company's directors and officers is Chicago Miniature
Lamp, Inc., 500 Chapman Street, Canton, Massachusetts 02021.
(b) Includes 11,633,355 shares owned by Frank M. Ward and Eileen M. Ward as
joint tenants with right of survivorship and 750,000 shares owned by the
Frank M. Ward GRAT Trust, of which Mr. Ward is one of two Trustees.
(c) On September 8, 1997, Mr. Ward granted Mr. Scoular an option to purchase
525,000 shares of Common Stock owned by him, exercisable at $18.67 per
share. The option expires on September 8, 2007 and is exercisable 20% per
year, commencing on September 8, 1998.
(d) Includes 1,125,000 shares owned by Frank M. Ward and Eileen M. Ward and
225,000 shares owned by the Frank M. Ward GRAT Trust.
(e) Ms. Connaughton is the sister of Mr. Frank Ward. The address of the Trusts
is c/o Veritas Advisers, Inc., 84 State Street, Boston, Massachusetts
02109.
(f) Includes 3,000 shares owned by Mr. Parenti and 16,050 shares subject to
options exercisable within 60 days of the date of this Prospectus.
(g) Includes 255,000 shares owned by Mr. Arnold and 45,000 shares subject to
options exercisable within 60 days of the date of this Prospectus.
(h) Includes 3,450 shares owned by Mr. Ingram and 34,500 shares owned by
Richard E. Ingram as trustee of the Donna C. Ingram Trust.
41
<PAGE> 45
DESCRIPTION OF CERTAIN INDEBTEDNESS
REVOLVING CREDIT FACILITY
In connection with the SLI, B.V. acquisition, the Company entered into a
new bank financing agreement with a syndicate of banks led by BankBoston, N.A.,
as administrative agent, providing to the Company and its domestic subsidiaries
(the "Borrowers") a $250.0 million multi-currency revolving credit facility
including a $10.0 million swing-line loan facility and a $15.0 million letter of
credit facility. Non-US-dollar borrowings are capped at $50.0 million. There are
no scheduled amortization payments or repayment penalties. The facility
terminates and is repayable in full on August 30, 2002. As of February 28, 1998,
approximately $173 million was outstanding under the revolving credit facility,
including borrowings denominated in US dollars, German deutschemarks and Belgian
francs.
The Borrowers are required to make mandatory prepayments of loans at
specified times and subject to certain exceptions, in amounts equal to (a) 100%
of the net proceeds of certain dispositions of assets or the stock of
subsidiaries or the incurrence of certain indebtedness, and (b) 50% of the net
proceeds of the issuance of any equity securities. The maximum availability
under the credit facility is reduced by the amount of any mandatory repayment
from the proceeds of asset or subsidiary stock dispositions.
The facility is secured by a security interest in substantially all of the
tangible and intangible personal property and in the owned real property of the
Company and certain of its subsidiaries, in the capital stock of the Company's
wholly-owned domestic subsidiaries, and in 65% of the capital stock of, or other
equity interests in, each non-US subsidiary of the Company, other than SLI, B.V.
and its subsidiaries (in each case, to the extent permitted by applicable
contractual and legal provisions).
At the Company's option, the interest rates per annum applicable to the
revolving credit facility are either adjusted LIBOR plus a margin ranging from
0.75% to 1.75%, or, with respect to US-dollar-denominated loans only, an
adjusted base rate plus a margin ranging from zero to 0.75%. The adjusted base
rate is the higher of BankBoston's prime rate for lending in US dollars or the
federal funds effective rate plus 0.50%. The interest rates per annum applicable
to the swing-line facility are either adjusted base rate plus a margin ranging
from zero to 0.75%, with respect to US dollar borrowings, or BankBoston's
applicable non-US-dollar base rate plus a margin ranging from 1.0% to 2.0%. The
Borrowers pay a per annum fee ranging between 0.75% and 1.75% of the aggregate
face amount of letters of credit and bank guaranties outstanding under the
facility, and a fee ranging between 0.25% and 0.375% per annum on the undrawn
portion of the revolving credit facility commitment.
Events of default under the facility are typical for senior credit
facilities and include the occurrence of certain changes in control. For this
purpose, a change in control occurs on the date on which (i) any person (other
than Frank M. Ward, or any other owner of 5% of the Company's Common Stock as of
September 8, 1997) beneficially owns more than 35% of the total voting power of
the Company; (ii) Frank M. Ward ceases to be employed as Chief Executive Officer
of the Company; or (iii) Norman Scoular ceases to be employed as President and
Chief Executive Officer of SLI, B.V. and, if such event occurs at any time after
September 8, 1998, no replacement satisfactory to lenders holding a majority of
the revolving credit commitments is employed within 90 days of such event.
The Company's revolving credit facility contains a number of covenants
typical in senior credit facilities that, among other things, restrict the
ability of the Company to dispose of assets (including the stock of
subsidiaries), incur additional indebtedness, create additional liens on assets,
enter into certain leases, investments or acquisitions, engage in mergers or
consolidations, make capital expenditures or engage in certain transactions with
subsidiaries and affiliates, and that otherwise restrict corporate activities.
In addition, the Company is also required to comply with certain financial
covenants which are summarized below. For the purpose of the following
discussion, "EBITDA" means, for any period, (x) consolidated net income, plus
(i) all deduction for income taxes accrued during such period, (ii) consolidated
interest expense, (iii) depreciation and amortization and (iv) any other
non-cash income or charges accrued for such period, plus (y) income or loss
attributable to equity in affiliates for such period, but (z) excluding from
this
42
<PAGE> 46
calculation (i) any extraordinary and unusual gains or losses during such period
and (ii) the proceeds of any casualty events and dispositions.
In each of the fiscal years 1998, 1999 and 2000, the maximum leverage
ratio, or indebtedness to EBITDA, may not exceed (i) 3.75 to 1, (ii) 3.50 to 1
and (iii) 3.00 to 1, respectively. For the fiscal year 2000 and thereafter, the
maximum leverage ratio may not exceed 2.75 to 1. The consolidated interest
coverage ratio, or the ratio of (a) for the period of four consecutive fiscal
quarters to (b) the Company's consolidated interest expense for the same period,
may not be less than 3.5 to 1. Through the fiscal year ended 1999 and at all
times thereafter, the consolidated cash flow coverage ratio, or the ratio (a)
for the period of 4 consecutive fiscal quarters, minus capital expenditures for
such periods, minus income taxes paid in cash for such period, to (b) all debt
service for such period, may not be less than 1.30 to 1 and 1.50 to 1,
respectively. In addition, the Company is required to maintain a minimum
consolidated net worth of at least (i) $154 million plus (ii) 75% of positive
net income in each fiscal year. Capital expenditures may not, in the aggregate
for any fiscal year, exceed $40 million. The Company is also prohibited from
paying cash dividends to its shareholders, or from spending more than an
aggregate amount of $15 million to repurchase shares of its Common Stock. The
Company is currently in compliance with all of its financial covenants.
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company's Amended and Restated Certificate of Incorporation authorizes
the Company to issue up to 100,000,000 shares of Common Stock, $.01 par value
per share. After giving effect to the Offering, the Company will have 37,301,362
shares of Common Stock issued and outstanding. Subject to the rights of the
holders of any outstanding shares of preferred stock and such restrictions as
are imposed by the Company's lenders, holders of Common Stock are entitled to
receive such dividends, if any, as may be declared by the Board of Directors out
of funds legally available for such purpose. Upon the liquidation, dissolution
or winding-up of the Company, after payment in full of creditors and any
liquidation preference payable to the holders of any preferred stock, the
remaining assets of the Company will be distributed ratably to the holders of
the Common Stock, in proportion to the number of shares held by them.
Holders of Common Stock are entitled to one vote per share on all matters
submitted to a vote of the shareholders. Because holders of Common Stock do not
have cumulative voting rights in the election of directors, the holders of a
majority of the shares of Common Stock represented at a meeting can elect all
the directors. Holders of Common Stock do not have preemptive rights to
subscribe for or purchase any additional shares of capital stock issued by the
Company. All outstanding shares of Common Stock are, and the shares of Common
Stock offered hereby will be when issued, duly authorized, validly issued, fully
paid and non-assessable.
PREFERRED STOCK
The Company's Amended and Restated Certificate of Incorporation authorizes
the issuance of up to 5,000,000 shares of Preferred Stock, $.01 par value
("Preferred Stock"). No shares of Preferred Stock are outstanding, but the Board
of Directors is empowered by the Company's Amended and Restated Certificate of
Incorporation to designate and issue from time to time one or more series of
Preferred Stock without shareholder approval. The Board of Directors has the
power to establish the preferences, limitations and optional or other special
rights of each series of Preferred Stock so issued. Because the Board of
Directors has the power to establish the preferences and rights of each series
of Preferred Stock, it may afford the holders of any series of Preferred Stock
preferences and rights, voting otherwise, senior to the rights of holders of
Common Stock. The Board of Directors, without approval of the holders of Common
Stock, could issue Preferred Stock with voting rights that could adversely
affect the voting power of holders of Common Stock. The issuance of Preferred
Stock could be used to delay or prevent a change in control of the Company
opposed by the Board of Directors. The Company has no present intention to issue
any shares of Preferred Stock.
43
<PAGE> 47
Under the Company's Amended and Restated Certificate of Incorporation, the
Board of Directors is authorized to divide the Preferred Stock into one or more
series with such attributes, powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof as provided in the adopting resolution or
resolutions providing for the issue of such series.
TRANSFER AGENT
The transfer agent for the Common Stock is the American Stock Transfer &
Trust Company, New York, New York.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 37,301,362 shares of
Common Stock outstanding. Of these shares, all of the 10,875,000 shares sold in
the Offering and 15,911,877 shares of Common Stock currently outstanding will be
freely tradable without restriction or further registration under the Securities
Act. The remaining 10,514,485 shares are deemed "restricted shares" under Rule
144 in that they were originally issued and sold by the Company in private
transactions in reliance upon exemptions under the Securities Act. The
restricted shares may not be sold except in compliance with the registration
requirements of the Securities Act or pursuant to an exemption from
registration, such as the exemption provided by Rule 144 under the Securities
Act. The Selling Shareholders and Mr. Norman Scoular, who will beneficially own
an aggregate of 12,125,250 shares of Common Stock following the completion of
the Offering, and the Company have agreed that, for a period of 120 days after
the date of this Prospectus, they will not, without the prior written consent of
Credit Suisse First Boston Corporation, offer, sell, offer to sell, solicit an
offer to buy, contract to sell, pledge or grant any option to purchase or
otherwise transfer or dispose (or announce any of the foregoing) of any shares
of Common Stock or any securities convertible into, or exercisable or
exchangeable for, Common Stock, except, in the case of the Company, for the
issuance of stock options under the Stock Option plans the issuance or sale of
Common Stock by the Company upon exercise of outstanding stock options and the
issuance of no more than an agreed upon amount of unregistered securities in
consideration for the acquisition of stock or assets of other companies. Upon
the expiration of the 120-day period, all but 184,500 of the outstanding shares
held will be eligible for sale, subject to the restrictions of Rule 144.
In general, Rule 144 allows a shareholder (including persons who may be
deemed "affiliates" of the Company under Rule 144) who has beneficially owned
restricted shares for at least one year to sell a number of shares of Common
Stock within any three-month period that does not exceed the greater of (i) one
percent of the then outstanding shares of Common Stock; or (ii) the average
weekly trading volume in the Common Stock during the four calendar weeks
immediately preceding the date on which notice of sale is filed with the
Securities and Exchange Commission (the "Commission"). Sales under Rule 144 are
also subject to certain requirements as to the manner and notice of sale and the
availability of public information about the Company. A shareholder (or
shareholder whose shares are aggregated) who is not an "affiliate" of the
Company at any time during the 90 days immediately preceding a sale, and who has
beneficially owned his shares for at least two years (as computed under Rule
144), is entitled to sell shares under Rule 144 without regard to the volume and
manner of sale limitations described above. Shares properly sold in reliance
upon Rule 144 to persons who are not "affiliates" are thereafter freely tradable
without restrictions or registration under the Securities Act. As defined in
Rule 144, an "affiliate" of an issuer is a person who directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such issuer.
The preceding description does not give effect to the shares of Common
Stock that may be offered and sold pursuant to the Company's Stock Option Plans.
The shares of Common Stock issued under such plans are covered by an effective
registration statement on Form S-8 filed under the Securities Act. Shares issued
upon the exercise of stock options generally will be available for sale in the
public market.
No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock, or the availability of shares for future sales, will
have on the market price of the Common Stock prevailing from time
44
<PAGE> 48
to time. Sales of substantial amounts of Common Stock (including shares issued
upon the exercise of stock options) in the public market, or the perception that
such sales could occur, could adversely affect the prevailing market price for
the Common Stock and the ability of the Company to raise capital through a
public offering of its equity securities.
UNDERWRITING
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated , 1998 (the "Underwriting Agreement"), the
underwriters named below (the "Underwriters"), for whom Credit Suisse First
Boston Corporation, Bear, Stearns & Co. Inc., Lehman Brothers Inc., Smith Barney
Inc. and McDonald & Company Securities, Inc. are acting as representatives (the
"Representatives"), have severally but not jointly agreed to purchase from the
Company and the Selling Shareholders the following respective numbers of shares
of Common Stock:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Credit Suisse First Boston Corporation...........
Bear, Stearns & Co. Inc. ........................
Lehman Brothers Inc. ............................
Smith Barney Inc. ...............................
McDonald & Company Securities, Inc...............
----------
Total.................................. 10,875,000
==========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the shares of Common Stock
offered hereby (other than those shares covered by the over-allotment option
described below) if any are purchased. The Underwriting Agreement provides that,
in the event of a default by an Underwriter, in certain circumstances the
purchase commitments of non-defaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
The Company and the Selling Shareholders have granted to the Underwriters
an option, expiring at the close of business on the 30th day after the date of
this Prospectus, to purchase up to 1,237,500 additional shares from the Company
and an aggregate of 393,750 additional outstanding shares from the Selling
Shareholders at the public offering price less the underwriting discounts and
commissions, all as set forth on the cover page of this Prospectus. Such option
may be exercised only to cover over-allotments in the sale of the shares of
Common Stock. To the extent such option is exercised, each Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional shares of Common Stock as it was obligated to
purchase pursuant to the Underwriting Agreement.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public initially at the
public offering price set forth on the cover page of this Prospectus and,
through the Representatives, to certain dealers at such price less a concession
of $ per share, and the Underwriters and such dealers may allow a
discount of $ per share on sales to certain other dealers. After the
initial public offering of such shares, the public offering price and concession
and discount to dealers may be changed by the Representatives.
45
<PAGE> 49
The Selling Shareholders and Mr. Norman Scoular, who will beneficially own
an aggregate of 12,125,250 shares of Common Stock following the completion of
the Offering, and the Company have agreed that they will not offer, sell,
contract to sell, announce their intention to sell, pledge or otherwise dispose
of, directly or indirectly, or file or cause to be filed with the Commission a
registration statement under the Securities Act relating to, any shares of the
Common Stock of the Company or securities convertible into or exchangeable or
exercisable for any shares of Common Stock without the prior written consent of
Credit Suisse First Boston Corporation for a period of 120 days after the date
of this Prospectus, except in the case of the Company for the issuance of stock
options under the Stock Option plans, the issuance or sale of Common Stock by
the Company upon exercise of outstanding stock options and the issuance of no
more than an agreed upon amount of unregistered securities in consideration for
the acquisition of stock or assets of other companies.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act, or contribute to payments which the Underwriters may be required
to make in respect thereof.
The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids. Over-allotment involves syndicate sales in excess of the offering
size, which creates a syndicate short position. Stabilizing transactions permit
bids to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases of
the securities in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the
Representatives to reclaim a selling concession from a syndicate member when the
securities originally sold by such syndicate member are purchased in a syndicate
covering transaction to cover syndicate short positions. Such stabilizing
transactions, syndicate covering transactions and penalty bids may cause the
price of the securities to be higher than it would otherwise be in the absence
of such transactions. These transactions may be effected on The New York Stock
Exchange or otherwise and, if commenced may be discontinued at any time.
Certain of the Underwriters have provided financial advisory services to
the Company for which they have received customary fees.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company and the
Selling Shareholders prepare and file a prospectus with the securities
regulatory authorities in each province where trades of the Common Stock are
effected. Accordingly, any resale of the Common Stock in Canada must be made in
accordance with applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made in accordance
with available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the Common Stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company, the Selling
Shareholders and the dealer from whom such purchase confirmation is received
that (i) such purchaser is entitled under applicable provincial securities laws
to purchase such Common Stock without the benefit of a prospectus qualified
under such securities laws, (ii) where required by law, that such purchaser is
purchasing as principal and not as agent, and (iii) such purchaser has reviewed
the text above under "Resale Restrictions".
46
<PAGE> 50
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's, directors and officers as well as the experts named
herein and the Selling Shareholders may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or such persons. All or a substantial
portion of the assets of the issuer and such persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the issuer or such persons in Canada or to enforce a judgment obtained in
Canadian courts against such issuer or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of the Common Stock to whom the Securities Act (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any Common Stock acquired by such purchaser pursuant to the Offering. Such
report must be in the form attached to British Columbia Securities Commission
Blanket Order BOR #95/17, a copy of which may be obtained from the Company. Only
one such report must be filed in respect of the Common Stock acquired on the
same date and under the same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of the Common Stock should consult their own legal and
tax advisors with respect to the tax consequences of an investment in the Common
Stock in their particular circumstances and with respect to the eligibility of
the Common Stock for investment by the purchaser under relevant Canadian
Legislation.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Crowe & Dunlevy P.C., Tulsa, Oklahoma. Certain legal matters in
connection with the Offering are being passed upon for the Company by Schifino &
Fleischer, P. A., Tampa, Florida, and for the Underwriters by Simpson Thacher &
Bartlett, New York, New York.
EXPERTS
The consolidated financial statements of the Company and related financial
statement schedule of the Company for and as of the end of the years ended
December 3, 1995, December 1, 1996, and November 30, 1997, and the consolidated
financial statements of SLI, B.V. for and as of the end of the eight months
ended August 31, 1997 and for and as of the end of years ended December 31, 1995
and 1996 appearing in this Prospectus have been audited by Ernst & Young LLP,
independent auditors, and the historical statements of operations data and
historical balance sheet data for the Company for and as of the end of the years
ended December 3, 1995, December 1, 1996, and November 30, 1997 under the
heading "Selected Condensed Consolidated Financial Data" appearing in this
Prospectus have been derived from such consolidated financial statements of the
Company audited by Ernst & Young LLP, as set forth in their report thereon
appearing elsewhere herein. Such consolidated financial statements, financial
statement schedule and statements of operations data and balance sheet data are
included herein in reliance upon such reports given upon the authority of such
firm as experts in accounting and auditing.
47
<PAGE> 51
The financial statements of CML Canada for the 244 days ended December 3,
1995 and for and as of the years ended December 1, 1996 and November 30, 1997
appearing in this Prospectus and Registration Statement have been audited by
Hards Pearson, independent auditors, as set forth in their reports thereon
appearing elsewhere herein. Such financial statements are included herein in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
A registration statement on Form S-1 (the "Registration Statement") under
the Securities Act, has been filed with the Securities and Exchange Commission,
Washington, D. C. 20549, with respect to the Common Stock offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement and exhibits and schedules thereto, certain portions having been
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Common Stock, reference
is hereby made to the Registration Statement and such exhibits and schedules
filed as a part thereof. The Company is subject to the informational
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 Commission. Such reports, proxy statements and other
information can be inspected and copied at the Public Reference Section of the
Commission, 450 Fifth Avenue, N. W., Judiciary Plaza, Washington, D. C. 20549;
and at the regional offices of the Commission at 7 World Trade Center, New York,
New York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such materials can also be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N. W., Judiciary Plaza,
Washington D. C. 20549, at prescribed rates. The Commission maintains a World
Wide Web site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants such as the Company which
file electronically with the Commission. In addition, reports, proxy statements
and other information concerning the Company can also be inspected and copied at
the offices of The New York Stock Exchange, 20 Broad Street, New York, New York
10005.
48
<PAGE> 52
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND
SUBSIDIARIES
Report of Independent Auditors.............................. F-2
Consolidated Financial Statements
Consolidated Balance Sheets as of November 30, 1997 and
December 1, 1996.......................................... F-3
Consolidated Statements of Income for the years ended
November 30, 1997, December 1, 1996 and December 3,
1995...................................................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended November 30, 1997, December 1, 1996 and
December 3, 1995.......................................... F-5
Consolidated Statements of Cash Flows for the years ended
November 30, 1997, December 1, 1996 and December 3,
1995...................................................... F-6
Notes to Consolidated Financial Statements.................. F-7
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND
SUBSIDIARIES
Unaudited Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheet as of April
5, 1998................................................... F-24
Unaudited Condensed Consolidated Statements of Operations
for the three months ended April 5, 1998 and April 6, 1997
and the one month ended January 4, 1998 and January 5,
1997...................................................... F-25
Unaudited Condensed Consolidated Statements of Cash Flows
for the three months ended April 5, 1998 and April 6, 1997
and the one month ended January 4, 1998 and January 5,
1997...................................................... F-26
Notes to Unaudited Condensed Consolidated Financial
Statements................................................ F-27
CHICAGO MINIATURE LAMP (CANADA), INC.
Auditors' Report............................................ F-29
Financial Statements
Balance Sheets as of November 30, 1997 and December 1,
1996...................................................... F-30
Statements of Income for the years ended November 30, 1997
and December 1, 1996 and for the 244 days ended December
3, 1995................................................... F-31
Statements of Retained Earnings for the years ended November
30, 1997 and December 1, 1996 and for the 244 days ended
December 3, 1995.......................................... F-32
Statements of Cash Flows for the years ended November 30,
1997 and December 1, 1996 and for the 244 days ended
December 3, 1995.......................................... F-33
Notes to Financial Statements............................... F-34
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
Report of Independent Auditors.............................. F-38
Consolidated Financial Statements
Consolidated Balance Sheets as of August 31, 1997, December
31, 1996 and December 31, 1995............................ F-39
Consolidated Statements of Income for the eight months ended
August 31, 1997 and for the years ended December 31, 1996
and 1995.................................................. F-40
Consolidated Statements of Stockholders' Equity for the
eight months ended August 31, 1997 and for the years ended
December 31, 1996 and 1995................................ F-41
Consolidated Statements of Cash Flows for the eight months
ended August 31, 1997 and for the years ended December 31,
1996 and 1995............................................. F-42
Notes to Consolidated Financial Statements.................. F-43
</TABLE>
F-1
<PAGE> 53
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
SLI, Inc. (formerly Chicago Miniature Lamp, Inc.)
We have audited the accompanying consolidated balance sheets of SLI, Inc.
(formerly Chicago Miniature Lamp, Inc.) and subsidiaries as of November 30, 1997
and December 1, 1996, and the related consolidated statements of income,
stockholders' equity, and cash flows for the years ended November 30, 1997,
December 1, 1996, and December 3, 1995. Our audits also included the financial
statement schedule for the years ended November 30, 1997, December 1, 1996, and
December 3, 1995, listed in the index at Item 14(a). These financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits. We did not audit the financial statements of
Chicago Miniature Lamp (Canada), Inc., a wholly owned subsidiary, which
statements reflect total assets of $10,469,000 and $9,887,000 as of November 30,
1997 and December 1, 1996, respectively, and total revenues of $14,605,000 and
$13,031,000 for the years ended November 30, 1997 and December 1, 1996 and
$7,064,000 for the period from March 30, 1995 (date of acquisition) to December
3, 1995. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to data included for
Chicago Miniature Lamp (Canada), Inc., is based solely on the report of the
other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provides a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of SLI, Inc. (formerly Chicago Miniature
Lamp, Inc.) and subsidiaries at November 30, 1997 and December 1, 1996, and the
consolidated results of their operations and their cash flows for the years
ended November 30, 1997, December 1, 1996, and December 3, 1995, in conformity
with generally accepted accounting principles. Also in our opinion, the related
financial statement schedule for the years ended November 30, 1997, December 1,
1996, and December 3, 1995, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Chicago, Illinois
January 9, 1998,
except for the 1998 stock split as
described in Note 2 and subsequent event in Note 16, as to
which the dates are February 11, 1998 and May 15, 1998, respectively
F-2
<PAGE> 54
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 1,
1997 1996
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 73,416 $109,027
Accounts receivable, less allowances for doubtful accounts
of $7,889 in 1997 and $524 in 1996..................... 140,380 18,532
Receivable from stockholder............................... -- 594
Inventories............................................... 124,086 16,186
Prepaid expenses and other................................ 12,120 1,496
-------- --------
Total current assets.............................. 350,002 145,835
Property, plant, and equipment, net......................... 269,650 52,151
Other assets:
Goodwill, net of accumulated amortization................. 7,651 6,931
Other intangible assets, net of accumulated
amortization........................................... 12,039 7,030
Other..................................................... 12,319 55
-------- --------
Total assets...................................... $651,661 $212,002
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term notes payable.................................. $ 5,432 $ 21,560
Current portion of long-term debt......................... 9,389 3,614
Accounts payable.......................................... 102,104 6,404
Accrued expenses.......................................... 107,616 12,907
Income taxes payable...................................... 7,855 3,042
-------- --------
Total current liabilities......................... 232,396 47,527
Long-term debt, less current portion........................ 185,434 5,607
Other liabilities:
Deferred income taxes..................................... 5,532 6,116
Other long-term liabilities............................... 62,037 1,542
-------- --------
Total other liabilities........................... 67,569 7,658
Minority interests.......................................... 211 46
Commitments.................................................
Stockholders' equity:
Preferred stock, $.01 par value -- Authorized -- 5,000,000
shares, none issued and outstanding.................... -- --
Common stock, $.01 par value --
Authorized -- 100,000,000 shares
-- Issued -- 29,301,979 and 29,185,873 shares in 1997
and 1996, respectively................................ 293 292
Additional paid-in capital................................ 126,835 126,005
Retained earnings......................................... 45,218 24,277
Foreign currency translation adjustment................... 2,377 590
Less: Treasury stock at cost, 643,345 shares in 1997...... (8,672) --
-------- --------
Total stockholders' equity........................ 166,051 151,164
-------- --------
Total liabilities and stockholders' equity........ $651,661 $212,002
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 55
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
NOVEMBER 30, DECEMBER 1, DECEMBER 3,
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
Net sales............................................... $ 329,959 $ 94,171 $ 57,402
Cost of products sold................................... 231,933 61,147 36,726
----------- ----------- -----------
Gross margin............................................ 98,026 33,024 20,676
Selling, general and administrative expenses............ 65,549 14,552 8,462
Restructuring costs..................................... 5,115 -- --
----------- ----------- -----------
Operating income........................................ 27,362 18,472 12,214
Other (income) expenses:
Interest income....................................... (4,082) (635) (352)
Interest expense...................................... 5,238 936 1,155
Other, net............................................ (2,326) (1,294) (47)
----------- ----------- -----------
Income before income taxes.............................. 28,532 19,465 11,458
Income taxes............................................ 7,591 6,029 2,993
----------- ----------- -----------
Net income.............................................. $ 20,941 $ 13,436 $ 8,465
=========== =========== ===========
Net income per common share -- basic.................... $ .73 $ .55 $ .41
=========== =========== ===========
Weighted-average shares outstanding -- basic............ 28,760,505 24,357,099 20,880,169
=========== =========== ===========
Net income per common share -- diluted.................. $ .71 $ .55 $ .41
=========== =========== ===========
Weighted-average shares outstanding -- diluted.......... 29,331,979 24,488,873 20,899,354
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 56
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK FOREIGN
---------------------- ADDITIONAL CURRENCY
NUMBER OF PAID-IN RETAINED TRANSLATION TREASURY
SHARES PAR VALUE CAPITAL EARNINGS ADJUSTMENT STOCK
---------- --------- ---------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at November 28, 1994....... 18,743,625 $187 $ 110 $ 2,376 $ -- $ --
Net income......................... -- -- -- 8,465 -- --
Issuance of common stock:
Initial public offering,
including over allotment, net
of offering costs............. 4,792,500 48 23,636 -- -- --
Other stock issuance............. 21,229 1 59 -- -- --
Translation adjustment (net of
deferred taxes of $24)........... -- -- -- -- 39 --
---------- ---- -------- ------- ------ -------
Balance at December 3, 1995........ 23,557,354 236 23,805 10,841 39 --
Net income......................... -- -- -- 13,436 -- --
Issuance of common stock:
Public offering, including over
allotment, net of offering
costs......................... 5,287,125 53 98,291 -- -- --
Alba acquisition................. 225,000 2 3,248 -- -- --
Exercise of stock options........ 116,394 1 661 -- -- --
Translation adjustment (net of
deferred taxes of $180).......... -- -- -- -- 551 --
---------- ---- -------- ------- ------ -------
Balance at December 1, 1996........ 29,185,873 292 126,005 24,277 590 --
Net income......................... -- -- -- 20,941 -- --
Issuance of common stock:
Additional offering costs........ -- -- (212) -- -- --
A&S acquisition.................. 4,500 -- 100 -- -- --
Exercise of stock options........ 111,606 1 942 -- -- --
Repurchase shares for treasury
(643,345 shares)................. -- -- -- -- -- (8,672)
Translation adjustment (net of
deferred taxes of $771).......... -- -- -- -- 1,787 --
---------- ---- -------- ------- ------ -------
Balance at November 30, 1997....... 29,301,979 $293 $126,835 $45,218 $2,377 $(8,672)
========== ==== ======== ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 57
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
NOVEMBER 30, DECEMBER 1, DECEMBER 3,
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................. $ 20,941 $ 13,436 $ 8,465
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................ 7,252 3,165 1,901
Deferred income taxes.................................... (3,094) 907 155
Stock issued to employees................................ -- -- 60
Minority interest in income of joint venture............. 162 -- --
Loss on disposal of property, plant, and equipment....... 876 -- --
Changes in operating assets and liabilities:
Accounts receivable................................... (15,597) (5,110) (1,728)
Inventories........................................... 695 (4,873) (623)
Prepaid expenses and other............................ (182) (440) (272)
Accounts payable...................................... 21,051 (3,478) (95)
Accrued expenses...................................... (4,669) 1,452 (579)
Income taxes payable.................................. (1,825) (652) 2,092
Stockholder payable/receivable........................ 594 (594) (1,079)
Other long-term liabilities........................... 5,455 (3,402) (155)
Other................................................. -- (18) (54)
--------- -------- --------
Net cash provided by operating activities........ 31,659 393 8,088
INVESTING ACTIVITIES
Purchases of property, plant, and equipment................ (23,992) (8,921) (2,465)
Acquisitions, net of cash acquired......................... (165,325) (10,293) (10,308)
Maturities (purchases) of held-to-maturity investments..... -- 2,102 (2,102)
--------- -------- --------
Net cash used for investing activities........... (189,317) (17,112) (14,875)
FINANCING ACTIVITIES
Net borrowings (repayments) of line of credit.............. (4,541) 1,804 (7,055)
Proceeds from borrowings................................... 189,105 24,442 9,046
Payments of long-term debt................................. (52,128) (3,214) (19,441)
Payment of deferred financing costs........................ (2,616) (297) --
Proceeds from issuance of common stock -- Net of offering
costs.................................................... -- 98,344 23,684
Repurchase of shares for treasury.......................... (8,672) -- --
Exercise of stock options.................................. 943 662 --
Other...................................................... (212) -- --
--------- -------- --------
Net cash provided by financing activities.................. 121,879 121,741 6,234
Effect of exchange rate changes on cash.................... 168 -- --
--------- -------- --------
Net increase (decrease) in cash and cash equivalents....... (35,611) 105,022 (553)
Cash and cash equivalents, beginning of year............... 109,027 4,005 4,558
========= ======== ========
Cash and cash equivalents, end of year..................... $ 73,416 $109,027 $ 4,005
========= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid for:
Interest................................................. $ 2,097 $ 936 $ 1,155
========= ======== ========
Income taxes............................................. $ 7,447 $ 3,802 $ 629
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 58
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND ACQUISITIONS
SLI, Inc. (formerly Chicago Miniature Lamp, Inc. (an Oklahoma corporation))
and subsidiaries (collectively, the Company) designs, manufactures and sells
lighting systems which are comprised of lamps, fixtures and ballasts. The
Company offers a complete range of lamps (incandescent, flourescent, compact
flourescent, high intensity discharge, halogen, miniature incandescent, neon,
LED's, and special lamps), a near complete range of fixtures, and fiber optic
lighting systems. The Company serves a diverse international customer base and
markets, has major plants in 13 countries and operates throughout the world.
In March 1995, the Company initiated operations at IDI Internacional, S.A.
located in Costa Rica. Operations at this facility include the manufacture of
value-added lighting assemblies.
On March 30, 1995, the Company acquired all of the capital stock of Chicago
Miniature Lamp (Canada) Inc. (CML Canada; formerly named Plastomer, Inc.), a
Canadian company, for $5.0 million Canadian in cash. The foreign currency
exchange rate as of March 30, 1995, was 0.713 U.S. dollars to one Canadian
dollar. CML Canada manufactures injection molded components for the automotive
industry.
In August 1995, the Company acquired all of the capital stock of Fredon
Development Industries, Inc. (Fredon) for $2,245,000 in cash.
On November 10, 1995, the Company, through its wholly owned subsidiary
Badalex Limited (Badalex), acquired substantially all of the assets of STT
Badalex Limited, STI Lighting Limited, PRT Shipping Limited, and STT Holdings
Limited, all companies formed under the laws of England for approximately $4.2
million in cash. The Company also assumed liabilities of up to $4.8 million. At
the end of 1995, the purchase allocation was preliminary. In 1996, adjustments
were made to goodwill in the amount of $2.8 million. Badalex designs and
manufactures lamp machinery.
On December 1, 1995, the Company acquired all of the outstanding stock of
Electro Fiberoptics, Inc. for $1.6 million in cash. This acquisition was made
through the Company's wholly owned subsidiary, CML Fiberoptics, Inc.
(Fiberoptics). Subsequently, Fiberoptics contributed substantially all of its
net assets (approximating to $500,000) to a newly formed L.L.C. In January 1997,
the Company entered into a joint venture agreement with Schott Corporation
whereby Schott Corporation acquired a 49% interest in the newly formed L.L.C.
(Schott CML Fiberoptics L.L.C.) for $1.3 million.
In December 1995, the Company through Badalex acquired certain assets of
Phoenix Lighting (UK) Limited for approximately $2,400,000 in cash.
Effective May 1, 1996, the Company acquired all the outstanding equity of
W. Albrecht GmbH U.Co. KG (Germany) and Alba Lamps, Inc. (USA) and certain
equity interests in their affiliates (collectively Alba) for approximately $8.5
million in cash, 225,000 shares of common stock of the Company, and the
assumption of approximately $4.9 million of bank debt (total consideration of
approximately $16,650,000). Alba is a manufacturer and supplier of miniature
lamps, value-added assemblies and instrument backed lighting systems.
In January 1997, the Company through Alba, acquired all the capital stock
of Gustav Bruckner GmbH (Bruckner) for DM 400,000 and the assumption of
approximately DM 2.4 million in bank debt (total consideration of approximately
$1,652,000).
On January 30, 1997, the Company acquired all the outstanding capital stock
of Valmont Electric, Inc. for approximately $22.3 million in cash and changed
the entity name to Power Lighting Products, Inc. (PLP). PLP is a manufacturer of
magnetic and electronic ballasts.
Effective September 1, 1997, the Company acquired all the outstanding
capital stock of Sylvania Lighting International, B.V. and its subsidiaries
(SLI, B.V.) for $161.5 million in cash financed with the
F-7
<PAGE> 59
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's cash and a new credit facility (Note 4). SLI, B.V. is an integrated
designer, manufacturer, and seller of lighting systems. SLI, B.V. has a total of
13 manufacturing facilities in Europe, Latin America, and Australia and sells to
customers throughout the world.
In September 1997, the Company, through Alba, acquired an additional 38% of
A&S Electric s.r.o., Czech Republic for DM 150,000 and 4,500 shares of common
stock of the Company (total consideration of approximately $185,000).
On November 24, 1997, the Company acquired certain assets of Solium, Inc.
for $2,500,000 in cash.
For financial reporting purposes, each acquisition was accounted for as a
purchase, and the purchase price was allocated to assets acquired and
liabilities assumed based on the estimated fair market value existing at the
date of acquisition. The excess of purchase price over fair market value of net
assets acquired is reflected in the accompanying consolidated balance sheets as
goodwill. The PLP and SLI, B.V. allocations are based on preliminary information
and are subject to adjustment. Any adjustment is not expected to be material.
Based on unaudited data, the following table presents selected financial
information for the Company and its subsidiaries on a pro forma basis, assuming
the companies had been consolidated since December 4, 1995:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------
NOVEMBER 30, DECEMBER 1,
1997 1996
------------ -----------
<S> <C> <C>
Net sales................................................... $755,364 $808,372
Net income.................................................. 22,264 17,071
Net income per share, as adjusted for 1998 stock split, as
described in Note 2....................................... .77 .70
</TABLE>
The pro forma results are not necessarily indicative of future operations
or the actual results that would have occurred had the acquisitions been made as
of December 4, 1995.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated from the consolidated financial statements.
The minority interests represent the separate ownership of A&S Electric s.r.o.,
Czech Republic (A&S) (40% in 1996 and up to September 1997, 2% thereafter), Alba
Technology (M) Sdn. Bdn., Malaysia (30% in 1996 and 1997), and Schott CML
Fiberoptics L.L.C. (49% in 1997).
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Fiscal Year
In January 1998, the Company changed its financial reporting year-end to
the Sunday nearest to December 31 of each year. Previously, the fiscal year
ended the Sunday nearest December 1.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
F-8
<PAGE> 60
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Investments
Management determines the appropriate classification of investments at the
time of purchase and reevaluates such designation as of each balance sheet date.
Investments are classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity. Held-to-maturity
securities are stated at cost adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization and accretion is included
in interest expense, net.
Inventories
Inventories are stated at the lower cost, determined by the first in, first
out (FIFO) method, or market. Inventories consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 1,
1997 1996
------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Raw materials............................................... $ 28,262 $ 7,240
Work in process............................................. 14,693 5,916
Finished goods.............................................. 81,131 3,030
======== =======
$124,086 $16,186
======== =======
</TABLE>
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. The Company provides for
depreciation using the straight-line method over the following estimated useful
lives:
<TABLE>
<S> <C>
Buildings and improvements.................................. 25-39 years
Machinery and equipment..................................... 12-25 years
Molds....................................................... 10-20 years
Furniture and fixtures...................................... 5-10 years
</TABLE>
Leasehold improvements are amortized on a straight-line basis over the
shorter of the estimated useful lives of the assets or the remaining lease term.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of
identifiable net assets acquired related to the business acquisitions described
in Note 1. Goodwill is amortized on a straight-line basis over 40 years.
Accumulated amortization is approximately $593,000 and $377,000 at November 30,
1997 and December 1, 1996, respectively. Amortization expense was approximately
$216,000, $200,000, and $53,000, for the years ended November 30, 1997, December
1, 1996, and December 3, 1995, respectively. The Company continually evaluates
the value and future benefits of its goodwill. The Company assesses
recoverability from future operations using income from operations of the
related acquired business as a measure. Under this approach, the carrying value
of goodwill would be reduced if it becomes probable that the Company's best
estimate for expected undiscounted future cash flows of the related business
would be less than the carrying amount of goodwill over its remaining
amortization period. There have been no adjustments to the carrying amounts of
goodwill resulting from these evaluations.
Other Intangible Assets
Other intangible assets include the fair value of engineering technology,
patents, noncompete, and other agreements related to the business acquisitions
described in Note 1. The intangibles are being amortized using the straight-line
method over their respective useful lives or contract periods, which range from
3 to 25 years.
F-9
<PAGE> 61
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accumulated amortization is approximately $2,290,000 and $1,810,000 at November
30, 1997 and December 1, 1996, respectively. Amortization expense was
approximately $480,000, $392,000, and $380,000 for the years ended November 30,
1997, December 1, 1996, and December 3, 1995, respectively.
Warranty Costs
PLP provides a limited warranty on all of its products. The warranty period
is two years from the date of manufacture for magnetic ballasts and five years
(three years prior to June 1994) from the date of manufacture for electronic
ballasts. Under the terms of the warranty policy, PLP will replace any ballast
that fails during the warranty period. Provision for the estimated warranty
costs is made in the period in which such costs become probable. As a result of
the change in the length of the warranty period in 1994 and changes in the
product design, PLP has limited history for electronic ballasts from which
warranty costs may be estimated. It is therefore reasonably possible that actual
warranty costs may differ from the amount accrued in the accompanying balance
sheet, however, an estimate of any additional possible loss cannot be made.
Treasury Stock
In February 1997, the board of directors authorized, subject to certain
business and market conditions, the repurchase of shares of the Company's stock.
At November 30, 1997, a total of 643,345 shares have been repurchased.
Financial Instruments
The Company uses derivative financial instruments to reduce its exposure to
adverse fluctuations in interest and foreign exchange rates. Financial
instruments are not used for trading purposes.
The Company and its subsidiaries utilize forward foreign currency exchange
contracts to minimize the impact of currency movements, principally on
anticipated intercompany inventory purchases and loans denominated in currencies
other than their functional currencies.
The Company may enter into interest rate swap agreements to limit the
effect of increases in the interest rates on any floating rate debt. The
differential is accrued as interest rates change and is recorded in interest
expense. Upon termination of interest rate swap agreements any resulting gain or
loss is recognized over the remaining term of the underlying debt obligation.
Revenue Recognition
Revenues from product sales are recognized at the time of shipment.
Research and Development
Research and development costs are charged to operations in the year
incurred and totaled $1,926,000 in 1997. The costs incurred in 1996 and 1995
were not material.
Income Taxes
Deferred income taxes are recognized based on the expected future tax
consequences of differences between the financial statement and tax bases of
assets and liabilities, calculated using enacted tax rates in effect for the
year in which the differences are expected to be reflected in the tax return.
Foreign Currency Translation
Transactions arising in foreign currencies have been translated at rates of
exchange in effect at the dates of the transactions. Gains or losses during the
year have been included in net income. Assets and liabilities of
F-10
<PAGE> 62
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
foreign affiliates are translated at current exchange rates, and income
statement accounts are translated at the average rates during the period.
Related translation adjustments are reported as a component of stockholders'
equity.
Stock Splits and Recapitalization
The Company effected a 99-for-1 recapitalization on December 1, 1994, and a
stock split effected in the form of a dividend of 0.716-for-1 in February 1995.
On August 5, 1996, the Company approved a three-for-two stock split of its
outstanding common stock to be effected in the form of a 50% stock dividend. The
dividend was paid on August 27, 1996, to shareholders of record August 16, 1996.
On February 11, 1998, the Company approved a three-for-two stock split of
its outstanding common stock to be effected in the form of a 50% stock dividend.
The dividend is to be paid on March 6, 1998 to shareholders of record February
23, 1998.
All share and per share data have been adjusted to reflect these stock
splits and recapitalization as of the earliest period presented.
Stock-Based Compensation
Stock-based compensation awards are accounted for under APB Opinion No. 25
Accounting for Stock Issued to Employees. In October 1995, Statement of
Financial Accounting Standards No. 123 (FASB No. 123), Accounting for
Stock-Based Compensation was issued. FASB No. 123 establishes an alternative
method of accounting for stock-based employee compensation plans (Note 10).
Earnings Per Common Share
Pursuant to certain Securities and Exchange Commission requirements,
earnings per common share have been computed giving retroactive effect to the
stock dividends and recapitalization described above.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share (FAS 128), which is required to be adopted by the
Company in fiscal 1998. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods (Note 16). Under the new requirements for calculating earnings per
share, the dilutive effect of stock options will be excluded from basic earnings
per share, but included in the computation of diluted earnings per share. The
Company has historically excluded the dilutive effect of common stock
equivalents in the calculation of primary and fully diluted earnings per share
as the effect has been less than 3%. As such, basic earnings per share under the
new standard will remain unchanged from primary earnings per share. The impact
on diluted earnings per share for the year ended November 30, 1997 is not
expected to be material.
Segment Reporting
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information (Statement 131), which is effective for years
beginning after December 15, 1997. Statement 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports. It
also establishes standards for related disclosures about products and services,
geographic areas, and major customers. Statement 131 is effective for financial
statements for fiscal years beginning after December 15, 1997, and therefore the
company will adopt the new requirements retroactively in 1998. Management has
not completed its evaluation of Statement 131, but does not anticipate that the
adoption of this statement will have a significant effect on the Company's
reported segments.
F-11
<PAGE> 63
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Reclassifications
Certain amounts in the 1996 and 1995 financial statements have been
reclassified to conform with the 1997 presentation.
3. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consists of the following:
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 1,
1997 1996
------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 8,051 $ 2,857
Buildings and improvements.................................. 66,726 13,114
Machinery and equipment..................................... 189,748 35,074
Molds....................................................... 10,662 5,999
Furniture and fixtures...................................... 6,493 747
-------- -------
281,680 57,791
Less: Accumulated depreciation.............................. 12,030 5,640
======== =======
$269,650 $52,151
======== =======
</TABLE>
4. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 1,
1997 1996
------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Operating revolving credit loan, due October 30, 1998,
unless extended, interest payable monthly at LIBOR plus
2.25%, repaid in 1997..................................... $ -- $ 3,636
Short-term notes denominated in Japanese yen due August and
November 1997............................................. -- 21,560
Acquisition and other revolving credit loans, due August 31,
2002, variable interest payable quarterly................. 183,375 --
Note payable to bank, due in full in 1998, interest payable
monthly at LIBOR plus 1.5%................................ 8,418 --
Acquisition loan, due October 30, 1998, unless extended,
interest payable at LIBOR plus 2.25%, repaid in 1997...... -- 1,893
Other loans, due in monthly installments plus interest at
rates of 4.8% to 8.0%..................................... 8,462 2,786
Lines of credit with interest payable monthly at average
rate of 7.5%, repaid in 1997.............................. -- 906
-------- -------
200,255 30,781
Less: Current portion....................................... 14,821 25,174
======== =======
$185,434 $ 5,607
======== =======
</TABLE>
On September 8, 1997, the Company entered into a $250,000,000 credit
agreement that provides for acquisition loans, a maximum of $15,000,000 under
letters of credit and bankers' acceptances, revolving loans, and a maximum of
$10,000,000 in swing loans. Borrowings under this agreement, which expires
August 31, 2002, totaled $183,375,000 at November 30, 1997. The U.S. dollar
loans bear interest at LIBOR (6.03% at
F-12
<PAGE> 64
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
November 30, 1997) plus a margin or prime (8.5% at November 30, 1997) plus a
margin, payable quarterly. Foreign-denominated loans bear interest at local spot
rates. The interest rate margin (1.5% for LIBOR loans and .5% for prime loans at
November 30, 1997) fluctuates based on the Company's leverage ratio. The
agreement provides for a quarterly commitment fee (.25% to .375%), based on the
Company's leverage ratio. Mandatory prepayments are required upon the occurrence
of certain events, as defined in the agreement.
The credit agreement is secured by substantially all the Company's assets
and requires the Company to comply with a number of affirmative and negative
covenants. Among other things, the credit agreement requires the Company to
satisfy certain financial tests and ratios and restricts the payment of cash
dividends.
At November 30, 1997, long-term debt includes $18,977,000 denominated in
Deutsche Marks and $3,311,000 denominated in Belgian Francs under the credit
agreement. The Deutsche Mark loan bears interest at 5.35% per annum and the
Belgian Franc loan bears interest at 5.40% per annum. The amounts outstanding at
November 30, 1997, have been adjusted based on the exchange rate at that date
and an unrealized gain of $401,000 has been recorded.
Interest expense was $5,238,000, $936,000, and $1,155,000 for the years
ended November 30, 1997, December 1, 1996 and December 3, 1995, respectively.
As of November 30, 1997, annual debt principal payments required were as
follows:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
-----------
<S> <C>
1998........................................................ $ 14,821
1999........................................................ 1,000
2000........................................................ 191
2001........................................................ 191
2002........................................................ 183,566
Thereafter.................................................. 486
--------
$200,255
========
</TABLE>
5. INCOME TAXES
The following is a summary of income before income taxes:
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
NOVEMBER 30, DECEMBER 1, DECEMBER 3,
1997 1996 1995
------------ ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Domestic operations................................ $14,005 $ 9,280 $ 8,289
Foreign operations................................. 14,527 10,185 3,169
======= ======= =======
$28,532 $19,465 $11,458
======= ======= =======
</TABLE>
F-13
<PAGE> 65
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a summary of the provision for income taxes:
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
NOVEMBER 30, DECEMBER 1, DECEMBER 3,
1997 1996 1995
------------ ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal:
Current.......................................... $ 7,729 $3,082 $2,278
Deferred......................................... (3,002) 632 77
------- ------ ------
4,727 3,714 2,355
State:
Current.......................................... 1,005 425 408
Deferred......................................... (413) (49) (26)
------- ------ ------
592 376 382
Foreign:
Current.......................................... 1,951 1,615 152
Deferred......................................... 321 324 104
------- ------ ------
2,272 1,939 256
======= ====== ======
$ 7,591 $6,029 $2,993
======= ====== ======
</TABLE>
The Company's manufacturing facility in Costa Rica is operated under a tax
holiday, which expires in 2005. The impact of this tax holiday was an increase
to net income of $1,393,000 or $.05 per share for the year ended November 30,
1997, $1,309,000 or $.05 per share for the year ended December 1, 1996, and
$742,000 or $.04 per share for the year ended December 3, 1995.
A reconciliation between the provision for income taxes computed at
statutory rates and the amount reflected in the accompanying consolidated
statements of operations is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
NOVEMBER 30, DECEMBER 1, DECEMBER 3,
1997 1996 1995
------------ ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Computed federal tax provision at statutory
rates............................................ $ 9,986 $ 6,618 $3,896
Increase (decrease) in taxes resulting from:
Amortization of goodwill......................... 86 35 24
Nonstatutory stock options....................... (185) -- --
State income taxes, net of federal benefit....... 396 205 252
Effect of different income taxes of other
countries..................................... (573) (1,484) (841)
Utilization of net operating loss
carryforwards................................. (2,211) -- --
Other............................................ 92 655 (338)
======= ======= ======
$ 7,591 $ 6,029 $2,993
======= ======= ======
</TABLE>
F-14
<PAGE> 66
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The significant items comprising deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 1,
1997 1996
------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Assets:
Net operating loss carryforwards.......................... $ 46,065 $ --
Reserves.................................................. 5,181 217
Other..................................................... 416 322
-------- -------
Total assets...................................... 51,662 539
Liabilities:
Differences between book and tax bases of depreciable
assets................................................. (9,984) (5,873)
Other..................................................... (2,383) (782)
-------- -------
Total liabilities................................. (12,367) (6,655)
-------- -------
39,295 (6,116)
Less: Valuation allowance for net operating loss
carryforwards............................................. (44,827) --
======== =======
Net deferred tax liabilities................................ $ (5,532) $(6,116)
======== =======
</TABLE>
SLI, B.V. had net operating loss (NOL) carryforwards for tax purposes of
approximately $144,806,000 at September 1, 1997. The valuation allowance
originated in 1997 upon the acquisition of SLI, B.V. (see Note 1) and has been
reduced through the utilization of NOL carryforwards of $2,211,000. SLI, B.V.
has NOL carryforwards for tax purposes of approximately $135,977,000 at November
30, 1997.
Bruckner had NOL carryforwards for tax purposes of approximately $1,906,000
at January 7, 1997 (see Note 1). Bruckner has NOL carryforwards for tax purposes
of approximately $2,295,000 at November 30, 1997, which do not expire.
The expiration dates of operating loss carryforwards at November 30, 1997
are as follows (dollars in thousands):
<TABLE>
<S> <C>
1998........................................................ $ 5,044
1999........................................................ 7,962
2000........................................................ 2,757
2001........................................................ 1,245
2002........................................................ 770
No expiration date.......................................... 120,494
--------
$138,272
========
</TABLE>
6. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 1,
1997 1996
------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Payroll and related expenses................................ $ 27,596 $ 319
Warranty and customer rebates............................... 27,036 --
Restructuring expenses...................................... 17,147 --
Value-added taxes payable................................... 7,249 --
Other....................................................... 28,588 12,588
-------- -------
$107,616 $12,907
======== =======
</TABLE>
F-15
<PAGE> 67
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. OTHER LONG-TERM LIABILITIES
Other long-term liabilities consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 1,
1997 1996
------------ -----------
<S> <C> <C>
Pension..................................................... $18,240 $ --
Restructuring expenses...................................... 18,831 --
Other....................................................... 24,966 1,542
======= ======
$62,037 $1,542
======= ======
</TABLE>
8. RESTRUCTURING
In fiscal 1997, the Company approved a restructuring plan which resulted in
a charge of approximately $5.1 million. This restructuring plan was put into
effect to consolidate certain existing operations to reduce operating costs. The
provision relates to the consolidation of certain European and to a lesser
extent North American operations and includes costs associated with the excess
of net book value over estimated recoverable value for certain assets, severance
payments, and the closure of facilities. With the exception of $1.6 million of
severance payments accrued but not paid, as certain contracts need to be
completed, all charges have been realized. Noted below are the restructuring
charge components for existing operations as of November 30, 1997:
<TABLE>
<CAPTION>
BEGINNING ACCRUED ENDING ACCRUED
LIABILITIES UTILIZED LIABILITIES
------------------ ---------- --------------
<S> <C> <C> <C>
Severance and related costs.................. $3,490,000 $2,890,000 $1,600,000
Plant and facility write down and related
costs...................................... 1,610,000 1,610,000 --
---------- ---------- ----------
$5,100,000 $3,500,000 $1,600,000
========== ========== ==========
</TABLE>
Additionally, the Company approved a restructuring plan as part of the SLI,
B.V. purchase in fiscal 1997. The purchase liabilities recorded included
approximately $16.8 million for severance and related costs and $8.2 million for
costs associated with the shutdown and consolidation of certain acquired
facilities. The Company expects to substantially complete its termination of
employees and consolidation of facilities by the end of fiscal 1999. Noted below
is a reconciliation of changes in the components of this plan as of November 30,
1997:
<TABLE>
<CAPTION>
BEGINNING ACCRUED ENDING ACCRUED
LIABILITIES EXPENDITURES LIABILITIES
------------------ ------------- --------------
<S> <C> <C> <C>
Severance and related costs................. $16.8 $.6 $16.2
Facility related costs...................... 8.2 -- 8.2
----- --- -----
Total............................. $25.0 $.6 $24.4
===== === =====
</TABLE>
F-16
<PAGE> 68
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. COMMITMENTS
Leases
The Company leases certain facilities and equipment under operating lease
and sublease agreements that expire at various dates from the current year to
2010. As of November 30, 1997, the aggregate minimum future commitments under
operating leases are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
1998........................................................ $ 5,277
1999........................................................ 4,292
2000........................................................ 3,020
2001........................................................ 2,317
2002........................................................ 1,813
Thereafter.................................................. 4,977
=======
$21,696
=======
</TABLE>
Rent expense for the years ended November 30, 1997, December 1, 1996, and
December 3, 1995, was $2,846,000, $948,000 and $593,000, respectively.
10. STOCK OPTION PLAN
In January 1995, the Company's Board of Directors approved a stock option
plan for up to 675,000 shares (amended to 3,000,000 shares on July 2, 1997) of
common stock. The plan provides for the granting of both incentive stock options
(as defined in section 422 of the Internal Revenue Code) and nonqualified stock
options. Options may be granted under the plan on such terms and at such prices
as determined by the Board of Directors, except that the per share exercise
price of incentive stock options cannot be less than the fair market value of
the common stock on the date of grant. Each option will be exercisable after the
period or periods specified in the option agreement, but no option may be
exercisable after the expiration of 10 years from the date of grant.
In September 1997, the Board of Directors approved the Special 1997 Stock
Option Plan for up to 3,000,000 shares of common stock. The plan provides for
the granting of incentive stock options to employees outside the U.S. and Canada
and certain other persons. The Board of Directors may determine the terms and
prices of each grant, except that no option may be exercisable after the
expiration of 10 years from the date of grant. The Board granted options for
2,026,500 shares under this plan in September 1997.
The Company has elected to follow APB No. 25 and related interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB No. 123 requires use
of option valuation models that were not developed for the use in valuing
employee stock options. Pro forma information regarding net income is required
by FASB No. 123, which also requires that the information be determined as if
the Company had accounted for the employee stock options granted subsequent to
December 3, 1995, under the fair value method of that Statement. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for the
years ended November 30, 1997 and December 1, 1996, respectively: risk-free
interest rates of 6.1% and 6.5%; no dividend yield; and a weighted-average
expected life of the option of 7 years. The volatility factor was assumed to be
0.3.
The Black-Scholes option valuation model was developed for the use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
F-17
<PAGE> 69
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
management's option, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of the pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the respective
option. Because FASB No. 123 is applicable only to options granted subsequent to
December 3, 1995, its pro forma impact will not be fully reflected until 2000.
The Company's pro forma net income and pro forma net income per share on a
historical basis would be $18,248 and $.63 and $13,039 and $.54 and $8,174 and
$.39 for the years ended November 30, 1997, December 1, 1996, and December 3,
1995, respectively.
The table below summarized option activity through November 30, 1997:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER OF RANGE OF EXERCISE EXERCISE
OPTIONS PRICES PRICE
--------- ----------------- ---------
<S> <C> <C> <C>
Outstanding at November 27, 1994................. -- -- --
Options granted during 1995...................... 517,500 $5.555 - 7.889 $ 6.471
---------
Outstanding at December 3, 1995.................. 517,500 5.555 - 7.889 6.471
Options granted during 1996...................... 339,750 9.111 - 15.554 13.257
Options exercised during 1996.................... (116,391) 5.555 - 7.167 6.440
Options canceled during 1996..................... (198,752) 5.555 - 9.111 7.568
---------
Outstanding at December 1, 1996.................. 542,107 5.555 - 15.554 10.328
Options granted during 1997...................... 3,086,700 12.917 - 18.667 17.810
Options exercised during 1997.................... (111,606) 5.555 - 12.667 8.449
Options canceled during 1997..................... (61,425) 12.667 - 18.667 14.165
=========
Outstanding at November 30, 1997................. 3,455,776 5.555 - 18.667 17.003
=========
</TABLE>
Information with respect to stock options outstanding and stock options
exercisable at November 30, 1997, is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------------
WEIGHTED
AVERAGE
NUMBER REMAINING WEIGHTED
RANGE OF OUTSTANDING CONTRACTUAL AVERAGE
EXERCISE PRICES AT 11/30/97 LIFE EXERCISE PRICE
- --------------- ----------- ----------- --------------
<S> <C> <C> <C>
$ 5.555 - 7.889................................... 193,077 7.6 years $ 6.051
9.111 - 13.333................................... 274,500 9.1 12.466
15.167 - 18.667................................... 2,988,199 9.6 18.127
---------
3,455,776
=========
</TABLE>
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
----------------------------
NUMBER WEIGHTED
RANGE OF EXERCISABLE AVERAGE
EXERCISE PRICES AT 11/30/97 EXERCISE PRICE
- --------------- ----------- --------------
<S> <C> <C>
$ 5.555 - 7.889............................................ 148,117 $ 6.203
9.111 - 13.333............................................ 139,500 11.680
15.167 - 18.667............................................ 68,148 15.737
-------
355,765
=======
</TABLE>
F-18
<PAGE> 70
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. EMPLOYEE BENEFIT PLANS
Defined Benefit Plans
The Company sponsors separate noncontributory, defined-benefit pension
plans (the Plans) covering eligible employees, including employees in foreign
countries. The domestic plans cover union employees of SLI, Inc. (formerly
Industrial Devices, Inc.) and substantially all employees of Fredon. As a result
of the SLI, B.V. acquisition in 1997, the Company also has plans covering
employees in various foreign locations. The principal locations are Germany, the
United Kingdom, and Switzerland. Benefits are based on years of service and
compensation. The Plans' 1997 and 1996 combined funded status (based on the most
recent valuations) and the amounts recognized in the accompanying consolidated
balance sheets are as follows:
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 1,
1997 1996
------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits........................................... $ 49,099 $1,094
Nonvested benefits........................................ 2,143 117
-------- ------
Accumulated benefit obligation.............................. 51,242 1,211
Effect of future salary increases......................... 5,762 57
-------- ------
Projected benefit obligation................................ 57,004 1,268
Plan assets at fair value, primarily common stocks and fixed
income securities......................................... 41,879 1,063
-------- ------
Plan assets less than projected benefit obligation.......... (15,125) (205)
Unrecognized transition amount.............................. 75 80
Unrecognized net (gain) loss................................ 1,196 141
Unamortized prior service cost.............................. 14 16
======== ======
(Accrued) prepaid pension cost.............................. $(13,840) $ 32
======== ======
</TABLE>
The components of net periodic pension cost for the significant locations
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
NOVEMBER 30, DECEMBER 1, DECEMBER 3,
1997 1996 1995
------------ ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost....................................... $ 608 $ 44 $ 99
Interest cost on projected benefit obligation...... 1,149 81 67
Actual return on plan assets....................... (814) (63) (71)
Net amortization and deferral...................... -- (7) 12
====== ==== ====
Net pension cost................................... $ 943 $ 55 $107
====== ==== ====
</TABLE>
The assumptions used for the significant locations were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ -----------
(U.S. ONLY) (U.S. ONLY)
<S> <C> <C> <C>
Discount rate used to determine present value of
the projected benefit obligations............. 4.5% to 7.5% 6.5% to 7.5% 7.5%
Expected long-term rate of return on assets..... 5.0% to 8.5% 6.5% to 9.0% 9.0%
Assumed rate of increase in future compensation
levels........................................ 2.5% to 5.0% 5.0% 5.0%
</TABLE>
Alba and Bruckner also maintain defined benefit plans with benefit
obligations of approximately $4.4 million and $3.2 million at November 30, 1997
and December 1, 1996, respectively. The pension expense for
F-19
<PAGE> 71
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
these plans, consisting primarily of interest cost, for the periods ended
November 30, 1997 and December 1, 1996 was $344,000 and $124,000. The Alba plan
was suspended in 1996.
Defined Contribution Plans
The Company sponsors a number of defined contribution plans. Participation
in these plans is available to all U.S. non-union employees and employees in
various other countries. Company contributions to these plans are based on
either a percentage of employee contributions or on a specified amount per hour
based on the provisions of each plan. The Company's expense under these plans
was approximately $650,000, $38,000, and $41,000 for the years ended November
30, 1997, December 1, 1996 and December 3, 1995, respectively.
12. CAPITAL STOCK
In December 1996, the Company amended its Articles of Incorporation to
increase the authorized shares of common stock to 100,000,000 shares.
At November 30, 1997, 5,772,003 shares of common stock have been reserved
for future issuance upon the exercise of stock options.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
Interest Rate Risk Management
The Company uses interest rate swaps to reduce the impact on interest
expense of fluctuating interest rates on its variable rate debt. Under the
Company's interest rate swap agreement, the Company agreed with the counterparty
to exchange, at quarterly intervals, the difference between the Company's fixed
pay rate and the counterparty's variable pay rate of three-month LIBOR. At
November 30, 1997, the notional principal amounts of fixed interest rate swap
agreements was $40 million having a fixed rate of 5.82%.
In connection with the interest swap agreement, the Company sold an option
to the counterparty whereby the counterparty may terminate the swap agreement on
January 29, 1999. The fair value of the option at November 30, 1997, was
estimated to be approximately $388,000.
Foreign Exchange Risk Management
The Company hedges certain foreign currency transactions and firm foreign
currency commitments by entering into forward exchange contracts (forward
contracts). Gains and losses associated with currency rate changes on forward
contracts hedging foreign currency transactions are recorded currently in
income. Gains and losses on forward contracts hedging firm foreign currency
commitments are deferred off-balance sheet and included as a component of the
related transaction, when recorded; however, a loss is not deferred if deferral
would lead to the recognition of a loss in future periods. The aggregate foreign
exchange gains recorded in 1997 and 1996 were approximately $1,664,000 and
$1,283,000, respectively and have been included in other income.
The forward contracts have maturities of one to 12 months. The
counterparties to the Company's forward contracts consist of a number of major
international financial institutions. The credit ratings and concentration of
risk of these financial institutions are monitored on a continuing basis and
management believes they present no significant credit risk to the Company.
The following table summarizes by major currency the contractual amounts of
the Company's forward contracts in U.S. dollars. Foreign currency amounts are
translated at year-end rates at the respective reporting date. The "buy" amounts
represent the U.S. equivalent of commitments to purchase foreign currencies and
the "sell" amounts represent the U.S. equivalent of commitments to sell foreign
currencies. Some of the forward contracts involve the exchange of two foreign
currencies according to local needs in foreign subsidiaries.
F-20
<PAGE> 72
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At November 30, 1997 and December 1, 1996, the contractual amounts were:
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 1,
1997 1996
---------------- ---------------
BUY SELL BUY SELL
------- ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Belgian francs....................................... $ 6,170 $ -- $ -- $ --
Deutsche marks....................................... 8,759 -- -- --
French francs........................................ 2,516 -- -- --
Swiss francs......................................... 2,179 1,236 -- --
U.S. dollars......................................... 4,695 -- -- --
Other................................................ 3,290 -- -- --
------- ------ ------ ------
$27,609 $1,236 $8,000 $ --
======= ====== ====== ======
</TABLE>
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable,
short-term borrowings, accounts payable, and accruals are a reasonable estimate
of their fair value due to the short-term nature of these instruments. The
Company's domestic long-term borrowings have variable interest rates and
carrying value approximates fair value at November 30, 1997. The following table
summarizes the estimated fair value of the Company's remaining financial
instruments at November 30, 1997 and December 1, 1996:
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Foreign currency forward contracts............. $ (657) $ (681) $ -- $ 7,801
Short-term Yen-denominated loans............... -- -- 21,560 21,560
Long-term foreign denominated loans............ 22,289 22,289 -- --
</TABLE>
14. SELECTED QUARTERLY FINANCIAL DATA
The following is a summary of unaudited quarterly financial data for the
fiscal years ended November 30, 1997 and December 1, 1996.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1997
Net sales............................................. $34,130 $51,861 $45,826 $198,142
Gross margin.......................................... 10,043 14,645 13,898 59,440
Net income............................................ 4,985 4,811 3,184 7,961
Net income per common share........................... .17 .17 .11 .28
1996
Net sales............................................. $19,401 $22,126 $25,091 $ 27,553
Gross margin.......................................... 6,520 7,764 8,682 10,058
Net income............................................ 2,471 2,903 3,106 4,956
Net income per common share........................... .11 .12 .13 .19
</TABLE>
15. GEOGRAPHIC SEGMENT INFORMATION
Prior to February 1995, the Company's operations were solely in the United
States. As described in Note 1, the Company made acquisitions during fiscal 1995
in Canada, the United Kingdom, and commenced operations in Costa Rica and during
fiscal 1996 in Germany. The SLI, B.V. acquisition in fiscal 1997 expanded
operations of the Company to include Western Europe, Latin America, and
Australia.
F-21
<PAGE> 73
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Financial information as of and for the years ended November 30, 1997,
December 1, 1996, and December 3, 1995, summarized by geographic area, is as
follows:
<TABLE>
<CAPTION>
UNITED ASIA LATIN
STATES CANADA EUROPE PACIFIC AMERICA ELIMINATIONS CONSOLIDATED
-------- ------- -------- ------- ------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
1997
TOTAL REVENUES
Unaffiliated customers.... $129,120 $14,605 $135,719 $15,621 $34,894 $ -- $329,959
Interarea transfers....... -- 105 9,956 112 1,718 (11,891) --
-------- ------- -------- ------- ------- -------- --------
Total..................... $129,120 $14,710 $145,675 $15,733 $36,612 $ -- $329,959
======== ======= ======== ======= ======= ======== ========
Income from operations.... $ 8,582 $ 3,039 $ 6,880 $ 1,145 $ 7,716 $ -- $ 27,362
======== ======= ======== ======= ======= ======== ========
ASSETS
Identifiable assets....... $107,228 $10,459 $429,418 $32,602 $51,405 $ -- $631,112
Corporate assets.......... 20,549 -- -- -- -- -- 20,549
-------- ------- -------- ------- ------- -------- --------
Total assets.............. $127,777 $10,459 $429,418 $32,602 $51,405 $ -- $651,661
======== ======= ======== ======= ======= ======== ========
1996
TOTAL REVENUES
Unaffiliated customers.... $ 49,843 $13,084 $ 22,801 $ -- $ 8,443 $ -- $ 94,171
Interarea transfers....... 203 (53) 2,894 -- -- (3,044) --
-------- ------- -------- ------- ------- -------- --------
Total..................... $ 50,046 $13,031 $ 25,695 $ -- $ 8,443 $ (3,044) $ 94,171
======== ======= ======== ======= ======= ======== ========
Income from operations.... $ 7,038 $ 2,683 $ 4,574 $ -- $ 4,177 $ -- $ 18,472
======== ======= ======== ======= ======= ======== ========
ASSETS
Identifiable assets....... $ 41,255 $ 9,887 $ 50,080 $ -- $11,314 $ -- $112,536
Corporate assets.......... 99,466 -- -- -- -- -- 99,466
-------- ------- -------- ------- ------- -------- --------
Total assets.............. $140,721 $ 9,887 $ 50,080 $ -- $11,314 $ -- $212,002
======== ======= ======== ======= ======= ======== ========
1995
TOTAL REVENUES
Unaffiliated customers.... $ 44,340 $ 7,064 $ -- $ -- $ 5,998 $ -- $ 57,402
Interarea transfers....... -- 138 -- -- -- (138) --
-------- ------- -------- ------- ------- -------- --------
Total..................... $ 44,340 $ 7,202 $ -- $ -- $ 5,998 $ (138) $ 57,402
======== ======= ======== ======= ======= ======== ========
Income from operations.... $ 9,034 $ 707 $ -- $ -- $ 2,473 $ -- $ 12,214
======== ======= ======== ======= ======= ======== ========
ASSETS
Identifiable assets....... $ 30,560 $ 9,429 $ 10,287 $ -- $ 7,104 $ -- $ 57,380
Corporate assets.......... 2,150 -- -- -- -- -- 2,150
-------- ------- -------- ------- ------- -------- --------
Total assets.............. $ 32,710 $ 9,429 $ 10,287 $ -- $ 7,104 $ -- $ 59,530
======== ======= ======== ======= ======= ======== ========
</TABLE>
Interarea transfers primarily represent shipments of work in process and
finished goods inventory to subsidiaries and affiliates. These interarea
shipments are made at transfer prices which approximate prices charged to
unaffiliated customers and have been eliminated from consolidated net revenues.
Corporate assets consist primarily of cash equivalents.
16. SUBSEQUENT EVENT
In the first quarter of 1998, the Company adopted FAS 128 and all earnings
per share amounts have been restated to reflect this change in accounting
method.
F-22
<PAGE> 74
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF APRIL 5, 1998 AND FOR THE THREE MONTHS ENDED APRIL 5, 1998
AND APRIL 6, 1997 AND FOR THE ONE MONTH PERIODS ENDED
JANUARY 4, 1998 AND JANUARY 5, 1997.
F-23
<PAGE> 75
SLI, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 5,
1998
-----------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 30,390
Accounts receivable, net.................................. 136,830
Inventories............................................... 131,110
Prepaid expenses and other................................ 14,597
--------
Total current assets.............................. 312,927
--------
PROPERTY, PLANT AND EQUIPMENT, AT COST:..................... 314,621
Less -- Accumulated depreciation.......................... 16,906
--------
297,715
--------
OTHER ASSETS................................................ 32,205
--------
Total assets...................................... $642,847
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term notes payable.................................. $ 14,094
Current portion of long-term debt......................... 9,243
Accounts payable.......................................... 99,504
Accrued income taxes payable.............................. 5,262
Other accrued expenses.................................... 103,584
--------
Total current liabilities......................... 231,687
--------
LONG-TERM DEBT, LESS CURRENT PORTION........................ 180,171
OTHER LIABILITIES:
Deferred income taxes..................................... 4,715
Other long-term liabilities............................... 57,183
Minority interests........................................ 350
--------
Total other liabilities........................... 62,248
--------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value --
Authorized -- 100,000,000 shares
Issued -- 29,468,328
shares at April 5, 1998................................ 295
Additional paid-in capital................................ 128,810
Foreign currency translation adjustment................... (5,480)
Retained earnings......................................... 53,788
Treasury stock at cost, 643,345 shares.................... (8,672)
--------
Total stockholders' equity........................ 168,741
--------
Total liabilities and stockholders' equity........ $642,847
========
</TABLE>
See accompanying notes to the condensed financial statements.
F-24
<PAGE> 76
SLI, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ONE MONTH
ENDED ENDED
------------------- -----------------------
APRIL 5, APRIL 6, JANUARY 4, JANUARY 5,
1998 1997 1998 1997
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales.............................................. $192,420 $46,188 $53,866 $ 7,698
Cost of products sold.................................. 133,593 32,195 40,199 6,070
-------- ------- ------- -------
Gross margin........................................... 58,827 13,993 13,667 1,628
Selling, general and administrative expenses........... 44,448 6,957 14,004 1,599
-------- ------- ------- -------
Operating income (loss)................................ 14,379 7,036 (337) 29
Other (income) expense
Interest, net........................................ 3,187 (1,094) 1,206 (395)
Minority interest.................................... 111 17 28 --
Other, net........................................... (315) (1,230) (499) (498)
-------- ------- ------- -------
Income (loss) before income taxes...................... 11,396 9,343 (1,072) 922
Income taxes........................................... 2,279 3,235 (525) 251
-------- ------- ------- -------
Net income (loss)............................ $ 9,117 $ 6,108 $ (547) $ 671
======== ======= ======= =======
Net income (loss) per common share -- basic
Net income per share....................... $ 0.32 $ 0.21 $ (0.02) $ 0.02
======== ======= ======= =======
Weighted average shares outstanding........ 28,751 28,964 28,659 28,546
======== ======= ======= =======
Net income (loss) per common share -- diluted
Net income per share....................... $ 0.30 $ 0.21 $ (0.02) $ 0.02
======== ======= ======= =======
Weighted average shares outstanding........ 30, 091 29,121 28,659 28,793
======== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE> 77
SLI, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED ONE MONTH ENDED
-------------------- -----------------------
APRIL 5, APRIL 6, JANUARY 4, JANUARY 5,
1998 1997 1998 1997
-------- --------- ---------- ----------
<S> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES........................................ $ 6,131 $ 1,254 $(17,182) $ 1,965
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment....... (10,748) (1,746) (1,966) (151)
Acquisitions, net of cash acquired................ (15,402) (26,315) -- --
-------- --------- -------- ---------
Net cash used in investing activities..... (26,150) (28,061) (1,966) (151)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) of lines of credit.... 1,227 2,518 193 --
Payments of long-term debt and capital leases..... (4,320) (1,188) (423) (254)
Repurchase of common stock........................ -- (7,469) -- --
Exercise of common stock options.................. 1,977 -- -- --
Capitalization of offering costs.................. -- (35) -- --
-------- --------- -------- ---------
Net cash provided by (used-in) financing
activities.............................. (1,116) (6,174) (230) (254)
Effect of exchange rate changes on cash............. (1,047) 1,305 (1,466) 313
-------- --------- -------- ---------
Net increase (decrease) in cash and cash
equivalents............................. (22,182) (31,676) (20,844) 1,873
Cash and cash equivalents, beginning of period...... 52,572 110,900 73,416 109,027
-------- --------- -------- ---------
Cash and cash equivalents, end of period............ $ 30,390 $ 79,224 $ 52,572 $ 110,900
======== ========= ======== =========
</TABLE>
See accompanying notes to the condensed financial statements.
F-26
<PAGE> 78
SLI, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 GENERAL
The interim condensed consolidated financial statements presented have been
prepared by SLI, Inc. ("Company") without audit and, in the opinion of
management, reflect all adjustments of a normal recurring nature necessary for a
fair presentation of (a) the results of operations and cash flows for the three
months ended April 5, 1998 and April 6, 1997 and for the one month ended January
4, 1998 and January 5, 1997 and, (b) financial position at April 5, 1998.
Interim results are not necessarily indicative of results for a full year. The
interim financial statements are condensed and do not include all the
information and disclosures necessary for a full interim financial statement
presentation.
NOTE 2 INVENTORIES
Inventories are stated at the lower of cost or market and include
materials, labor and overhead. Cost is determined by the first-in, first-out
(FIFO) method. Inventories consist of the following at April 5, 1998 (dollars in
thousands):
<TABLE>
<CAPTION>
APRIL 5,
1998
--------
<S> <C>
Raw Materials............................................... $ 34,045
Work in process............................................. 17,352
Finished Goods.............................................. 79,713
--------
Inventory at FIFO........................................... $131,110
========
</TABLE>
NOTE 3 STOCK SPLIT
On February 11, 1998, the Company approved a three-for-two stock split of
its outstanding common stock to be effected in the form of a 50% stock dividend.
The dividend was paid on March 6, 1998 to shareholders of record February 23,
1998. All share and per share data have been adjusted to reflect this stock
split.
NOTE 4 COMPREHENSIVE INCOME
As of January 5, 1998, the Company adopted Statement 130, Reporting
Comprehensive Income. Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or shareholders'
equity. Statement 130 requires foreign currency translation adjustments, which
prior to adoption were reported separately in shareholders' equity to be
included in other comprehensive income.
During the first quarter of 1998 and 1997 total comprehensive income
amounted to $4.5 million and $5.2 million, respectively. During the 1998 and
1997 one month transition period, total comprehensive income (loss) amounted to
($3.7) million and $359,000, respectively.
NOTE 5 EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants, and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where necessary, restated to
conform to the Statement 128 requirements.
F-27
<PAGE> 79
SLI, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 FISCAL YEAR
In January 1998, the Company changed its financial reporting year-end to
the Sunday nearest to December 31 of each year. Previously, the fiscal year
ended the Sunday nearest December 1. As a result of this change the Company is
disclosing interim financial results for the one month period ended January 4,
1998.
NOTE 7 SEASONALITY
As a result of the acquisition of Sylvania Lighting International (SLI,
B.V.) in September 1997, it is expected that the Company's operations will
experience certain seasonal patterns. Generally, SLI, B.V.'s sales have been
highest in the late fall and winter months due to abbreviated daylight hours and
increased holiday light usage. December is effected by a natural slow down in
the natural trade cycle in the countries where the Company operates due to the
holiday season.
NOTE 8 SUBSEQUENT EVENTS
Effective April 28, 1998 the Company's charter was amended to change the
Company's name to "SLI, Inc." from the former name of "Chicago Miniature Lamp,
Inc."
F-28
<PAGE> 80
AUDITORS' REPORT
To the Shareholder of
CHICAGO MINIATURE LAMP (CANADA) INC.
We have audited the balance sheet of CHICAGO MINIATURE LAMP (CANADA) INC.
as at November 30, 1997 and December 1, 1996 and the statements of income,
retained earnings and cash flows for the years then ended and the 244 days ended
December 3, 1995. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at November 30, 1997 and the
results of its operations and the changes in its financial position for the year
then ended in accordance with generally accepted accounting principles in the
United States.
<TABLE>
<S> <C>
Hards Pearson
Barrie, Ontario Canada, Chartered Accountants
December 31, 1997.
</TABLE>
F-29
<PAGE> 81
CHICAGO MINIATURE LAMP (CANADA) INC.
BALANCE SHEETS
CANADIAN $
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 1,
1997 1996
------------ -----------
<S> <C> <C>
ASSETS
CURRENT
Cash........................................................ $ 1,476,387 $ 985,424
Accounts Receivable......................................... 2,996,235 2,630,575
Inventory [note 3].......................................... 1,360,003 1,661,931
Prepaid expenses............................................ 45,695 31,019
----------- -----------
TOTAL CURRENT ASSETS.............................. 5,878,320 5,308,949
Fixed assets [note 4]....................................... 8,007,320 6,779,361
Goodwill [note 5]........................................... 1,143,277 1,261,167
----------- -----------
$15,028,917 $13,349,477
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT
Accounts payable and accrued charges........................ $ 1,503,962 $ 1,350,297
Income taxes payable........................................ 73,301 614,565
Due to related parties [note 6]............................. 1,684,026 1,824,850
----------- -----------
TOTAL CURRENT LIABILITIES......................... 3,261,289 3,789,712
Accrued start-up costs...................................... -- 333,058
Deferred income taxes....................................... 1,919,672 1,683,081
----------- -----------
TOTAL LIABILITIES................................. 5,180,961 5,805,851
SHAREHOLDER'S EQUITY
Capital stock [note 7]...................................... 5,000,000 5,000,000
Retained earnings........................................... 4,847,956 2,543,626
----------- -----------
TOTAL SHAREHOLDER'S EQUITY........................ 9,847,956 7,543,626
----------- -----------
$15,028,917 $13,349,477
=========== ===========
</TABLE>
See accompanying notes
F-30
<PAGE> 82
CHICAGO MINIATURE LAMP (CANADA) INC.
STATEMENTS OF INCOME
CANADIAN $
<TABLE>
<CAPTION>
YEAR ENDED 244 DAYS
-------------------------- ENDED
NOVEMBER 30, DECEMBER 1, DECEMBER 3,
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
NET SALES................................................ $19,465,058 $16,872,470 $9,491,312
Direct materials and labour.............................. 10,661,542 9,710,805 5,044,746
----------- ----------- ----------
Contributions to overhead................................ 8,803,516 7,161,665 4,446,566
----------- ----------- ----------
OVERHEAD COSTS
Manufacturing expenses................................... 2,686,135 2,557,412 1,800,479
Depreciation and amortization............................ 587,045 491,816 344,552
----------- ----------- ----------
3,273,180 3,049,228 2,145,031
Inventory change and capitalized variances............... 670,242 (290,943) 218,409
----------- ----------- ----------
3,943,422 2,758,285 2,363,440
----------- ----------- ----------
GROSS MARGIN............................................. 4,860,094 4,403,380 2,083,126
Distribution costs....................................... 120,702 117,504 80,258
Tooling income........................................... (3,058) (15,890) (19,024)
----------- ----------- ----------
GROSS PROFIT............................................. 4,742,450 4,301,766 2,021,892
Selling and marketing.................................... -- -- 31,441
Administration........................................... 563,120 647,470 341,705
----------- ----------- ----------
INCOME BEFORE INTEREST, FEES AND INCOME TAXES............ 4,179,330 3,654,296 1,648,746
Interest on long-term debt............................... -- 55,662 84,475
Management fee........................................... 525,000 510,000 680,272
----------- ----------- ----------
Income before provision for income taxes................. 3,654,330 3,088,634 883,999
----------- ----------- ----------
Provision for income taxes
Current................................................ 1,180,000 946,100 188,893
Deferred............................................... 170,000 152,907 141,107
----------- ----------- ----------
1,350,000 1,099,007 330,000
----------- ----------- ----------
NET INCOME FOR THE PERIOD................................ $ 2,304,330 $ 1,989,627 $ 553,999
=========== =========== ==========
</TABLE>
See accompanying notes.
F-31
<PAGE> 83
CHICAGO MINIATURE LAMP (CANADA) INC.
STATEMENTS OF RETAINED EARNINGS
CANADIAN $
<TABLE>
<CAPTION>
YEAR ENDED 244 DAYS
-------------------------- ENDED
NOVEMBER 30, DECEMBER 1, DECEMBER 3,
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
RETAINED EARNINGS, BEGINNING OF PERIOD..................... $2,543,626 $ 553,999 $ --
Net income for the period.................................. 2,304,330 1,989,627 553,999
---------- ---------- --------
RETAINED EARNINGS, END OF PERIOD........................... $4,847,956 $2,543,626 $553,999
========== ========== ========
</TABLE>
See accompanying notes.
F-32
<PAGE> 84
CHICAGO MINIATURE LAMP (CANADA) INC.
STATEMENTS OF CASH FLOWS
CANADIAN $
<TABLE>
<CAPTION>
YEAR ENDED 244 DAYS
-------------------------- ENDED
NOVEMBER 30, DECEMBER 1, DECEMBER 3,
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income for the year................................. $ 2,304,330 $ 1,989,627 $ 553,999
Add charges to income not resulting in a current outlay
of cash
Depreciation and amortization........................... 587,045 494,518 345,406
Deferred income taxes................................... 170,000 152,907 141,107
Net loss on sale of fixed assets........................ 4,975 83,643 1,307,964
----------- ----------- -----------
3,066,350 2,720,695 2,348,476
Net increase (decrease) in accrued start-up costs....... (333,058) (322,871) 655,929
Net change in non-cash working capital balances [note
81]................................................... (466,007) (212,175) (2,146,488)
----------- ----------- -----------
CASH PROVIDED BY OPERATING ACTIVITIES................... 2,267,285 2,185,649 857,917
----------- ----------- -----------
FINANCING ACTIVITIES
Net change in due to related parties.................... (140,824) 89,513 1,735,337
Net change in long-term debt............................ -- (793,400) 793,400
----------- ----------- -----------
CASH USED IN FINANCING ACTIVITIES....................... (140,824) (703,887) 2,528,737
----------- ----------- -----------
INVESTING ACTIVITIES
Adjustment to deferred taxes recorded upon
amalgamation.......................................... 66,591 -- 1,389,067
Proceeds of share capital issuance...................... -- -- 5,000,000
Assets received on amalgamation......................... -- -- (7,403,324)
Goodwill recorded on amalgamation....................... -- -- (1,323,602)
Adjustment to goodwill recorded on amalgamation......... 98,663 -- --
Purchase of fixed assets................................ (1,836,156) (1,645,604) (467,930)
Proceeds on disposal of fixed assets.................... 35,404 234,954 333,447
----------- ----------- -----------
CASH USED IN INVESTING ACTIVITIES....................... (1,635,498) (1,410,650) (2,472,342)
----------- ----------- -----------
NET INCREASE IN CASH DURING THE PERIOD.................. 490,963 71,112 914,312
Cash, beginning of period............................... 985,424 914,312 --
----------- ----------- -----------
CASH, END OF PERIOD..................................... $ 1,476,387 $ 985,424 $ 914,312
=========== =========== ===========
</TABLE>
See accompanying notes.
F-33
<PAGE> 85
CHICAGO MINIATURE LAMP (CANADA) INC.
NOTES TO THE FINANCIAL STATEMENTS
1. OPERATIONS
The company is a manufacturer and supplier of miniature light socket
assemblies to the automotive industry. The assemblies are used primarily for
instrument clusters, warning lights, climate control modules and courtesy
lights.
ARTICLES OF AMENDMENT
On May 9, 1997, the company filed articles of amendment to change its name
to Chicago Miniature Lamp (Canada) Inc. The company was formerly known as
Plastomer Inc.
AMALGAMATION
On March 31, 1995, Industrial Devices Inc., a United States corporation
acquired Plastomer Inc. At that time 1112637 Ontario Inc., 1124655 Ontario Inc.
and Plastomer Inc. were amalgamated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the company have been prepared in accordance
with generally accepted accounting principles, on a basis consistent with that
of the preceding year. The following is a summary of the more significant
accounting policies:
INVENTORY
Inventory is valued at the lower of cost or net realizable value. Cost has
been determined on the first-in, first-out basis. Net realizable value for
finished goods has been defined as standard selling price less normal profit
margin. Net realizable value for raw materials has been defined as net
replacement cost.
FIXED ASSETS
Based on purchase accounting, the fixed assets are stated at the lower of
appraised value, as determined by appraisals dated April 5, 1995 and May 3,
1995, less accumulated depreciation and net recoverable amount. Additions after
these dates are stated at the lower of cost less accumulated depreciation and
net recoverable value. Depreciation is provided on the straight-line basis, with
half rates applied in the year of acquisition, over the following periods:
<TABLE>
<S> <C>
Building.................................................... 35 years
Machinery and equipment..................................... 5-20 years
Moulds and dies............................................. 10 years
Software.................................................... 5 years
</TABLE>
GOODWILL
Goodwill is recorded at cost less accumulated amortization. Amortization is
provided on the straight-line basis over a period of 40 years.
TRANSLATION OF FOREIGN CURRENCY
Transactions arising in foreign currencies [principally United States
dollars and British pounds] have been translated at rates of exchange in effect
at the dates of the transactions. Monetary items denominated in foreign
currencies have been translated at rates of exchange in effect at the balance
sheet date. Gains or losses during the year have been included in net income.
F-34
<PAGE> 86
CHICAGO MINIATURE LAMP (CANADA) INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
3. INVENTORY
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Raw materials............................................... $ 820,977 $1,029,503
Work-in-progress and finished goods......................... 488,337 625,370
Capitalized variances....................................... (49,310) (27,175)
Tooling..................................................... 99,999 34,233
---------- ----------
$1,360,003 $1,661,931
========== ==========
</TABLE>
4. FIXED ASSETS
<TABLE>
<CAPTION>
1997 1996
------------------------- ----------
ACCUMULATED NET BOOK NET BOOK
COST DEPRECIATION VALUE VALUE
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Land............................................ $ 75,000 $ -- $ 75,000 $ 75,000
Buildings....................................... 1,505,615 114,525 1,391,090 1,434,107
Machinery and equipment......................... 5,482,051 840,664 4,641,387 3,475,312
Moulds and dies................................. 1,543,212 282,589 1,260,623 884,760
Software........................................ 62,656 31,301 31,355 42,700
Construction-in-progress........................ 607,865 -- 607,865 867,482
---------- ---------- ---------- ----------
$9,276,399 $1,269,079 $8,007,320 $6,779,361
========== ========== ========== ==========
</TABLE>
5. GOODWILL
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Cost........................................................ $1,224,939 $1,323,602
Less accumulated amortization............................... (81,662) (62,435)
---------- ----------
$1,143,277 $1,261,167
========== ==========
</TABLE>
6. DUE TO RELATED PARTIES
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
CANADIAN DOLLARS
Due from Power Lighting Products, Inc....................... $ (12,625) $ --
BRITISH POUNDS
Due to Badalex Ltd.......................................... 54,320 88,962
Exchange.................................................. 76,048 106,754
UNITED STATES DOLLARS
Chicago Miniature Lamp, Inc................................. 1,062,004 1,206,739
Exchange.................................................. 424,767 410,257
IDI Internacional, S.A. (Costa Rica)........................ 58,558 9,058
Exchange.................................................. 20,954 3,080
---------- ----------
$1,684,026 $1,824,850
========== ==========
</TABLE>
IDI Internacional, S.A. was paid $67,374 to provide sub-assembly services
for the company's LED product line.
The company purchased a piece of production equipment from Badalex Ltd. for
$859,297.
F-35
<PAGE> 87
CHICAGO MINIATURE LAMP (CANADA) INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Both of the above sister corporations deal on terms that are substantially
the same as to independent customers.
Chicago Miniature Lamp, Inc. pays certain expenditures on behalf of the
company and purchases finished goods. They also provide executive, information
system and marketing services for which they receive a yearly management fee.
Finished goods purchased in the year by this company were $154,189.
7. CAPITAL STOCK
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
AUTHORIZED
Unlimited voting, 6% non-cumulative, redeemable, retractable
Class AA special shares...................................
Unlimited common shares.....................................
ISSUED AND FULLY PAID
5,000,000 common shares..................................... 5,000,000 5,000,000
========= =========
</TABLE>
8. NET CHANGE IN NON-CASH WORKING CAPITAL BALANCES
<TABLE>
<CAPTION>
YEAR ENDED 244 DAYS
--------------------------- ENDED
NOVEMBER 30, DECEMBER 1, DECEMBER 3,
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Accounts receivable...................................... $(365,660) $ 10,922 $(2,641,497)
Income taxes receivable.................................. -- 133,139 (136,047)
Inventory................................................ 301,928 (205,552) (1,456,379)
Prepaid expenses......................................... (14,676) 3,637 (34,656)
Accounts payable and accrued charges..................... 153,665 (768,886) 2,122,091
Income taxes payable..................................... (541,264) 614,565 --
--------- --------- -----------
$(466,007) $(212,175) $(2,146,488)
========= ========= ===========
</TABLE>
Decreases in assets and increases in liabilities result in a source of
funds. Increases in assets and decreases in liabilities result in a use of funds
and are indicated by brackets.
9. PENSION PLAN
Prior to July 31, 1997 the company maintained a defined benefit pension
plan of which substantially all employees are members. Current and past service
costs are charged to income as incurred and funded as required by actuarial
valuations.
The most recent triennial actuarial valuation, scheduled for January 1,
1997 is not yet complete. However, the plan's most recent financial statements
as at December 31, 1996 indicate a surplus of $89,335.
The pension expense, all for current service costs, is $62,579
[1996 -- $96,837 and 1995 -- $96,506]. Effective July 1, 1997 the company
introduced a Group Registered Retirement Savings Plan and began the process of
winding-up the defined benefit plan. The accumulated net assets of the defined
benefit plan will be distributed to the members for transfer to a "locked-in"
Registered Retirement Savings Plan.
F-36
<PAGE> 88
CHICAGO MINIATURE LAMP (CANADA) INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
10. OPERATING LEASES
Minimum lease payments over the next four years with respect to vehicle and
office equipment operating leases are as follows:
<TABLE>
<S> <C>
1998........................................................ $20,828
1999........................................................ 14,180
2000........................................................ 9,826
2001........................................................ 6,212
-------
$51,046
=======
</TABLE>
11. CONTINGENT LIABILITY
During the year, the company pledged an unlimited guarantee in favour of
BANKBOSTON, N.A. over the indebtedness of its parent company, Chicago Miniature
Lamp, Inc.
12. COMMITMENTS
The company has committed to $739,500 of capital asset purchases for the
coming year. Progress payments totaling $571,152 have been made to suppliers as
a result of these commitments. These payments are included under
"Construction-in-progress" [Note 4] in the financial statements.
F-37
<PAGE> 89
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
SLI, Inc. (formerly Chicago Miniature Lamp, Inc.)
We have audited the accompanying consolidated balance sheets of Sylvania
Lighting International B.V. and subsidiaries as of August 31, 1997, December 31,
1996 and December 31, 1995, and the related consolidated statements of income,
stockholders' equity, and cash flows for the eight months ended August 31, 1997
and the years ended December 31, 1996 and December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, the financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Sylvania Lighting International B.V. and subsidiaries at August 31,
1997, December 31, 1996 and December 31, 1995, and the consolidated results of
their operations and their cash flows for the eight months ended August 31,
1997, and the years ended December 31, 1996 and December 31, 1995, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
March 20, 1998
F-38
<PAGE> 90
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(L IN THOUSANDS)
<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. L 13,731 L 28,175 L 35,370
Accounts receivable, less allowances for doubtful accounts
of L4,113 in 1997, L4,547 in 1996 and L4,207 in 1995... 55,923 63,477 73,375
Inventories............................................... 55,459 54,239 67,536
Prepaid expenses and other................................ 10,420 10,672 12,758
-------- -------- --------
Total current assets.............................. 135,533 156,563 189,039
Property, plant, and equipment, net......................... 40,266 40,232 41,294
Other assets:
Goodwill, net of accumulated amortization................. 1,059 1,097 237
Other intangible assets, net of accumulated
amortization........................................... 159 162 1,100
Deferred income taxes..................................... 1,557 576 1,433
-------- -------- --------
Total assets...................................... L178,574 L198,630 L233,103
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term notes payable.................................. L 815 L 2,187 L 4,054
Current portion of long-term debt......................... 3,461 4,051 7,831
Accounts payable.......................................... 40,351 53,199 61,975
Accrued expenses.......................................... 37,659 38,608 43,791
Income taxes payable...................................... 2,913 2,115 2,442
-------- -------- --------
Total current liabilities......................... 85,199 100,160 120,093
Long-term debt, less current portion........................ 26,059 23,910 31,812
Other liabilities:
Deferred income taxes..................................... 4,238 3,265 4,025
Negative goodwill, net of accumulated amortization........ 10,699 11,093 953
Other long-term liabilities............................... 14,884 19,274 34,221
-------- -------- --------
Total other liabilities........................... 29,821 33,632 39,199
Commitments and contingencies
Redeemable preference shares................................ 12,595 12,959 8,989
Stockholders' equity:
Ordinary shares -- A, NLG 1.00 par value -- Authorized --
300,000 shares -- Issued and outstanding -- 60,000
shares................................................. 24 24 24
Ordinary shares -- B, NLG .35 par value -- Authorized --
200,000 shares -- Issued and outstanding -- 40,000
shares................................................. 6 6 6
Additional paid-in capital................................ 35 35 35
Retained earnings......................................... 35,907 36,345 34,585
Foreign currency translation adjustment................... (11,072) (8,441) (1,640)
-------- -------- --------
Total stockholders' equity........................ 24,900 27,969 33,010
-------- -------- --------
Total liabilities and stockholders' equity........ L178,574 L198,630 L233,103
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-39
<PAGE> 91
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(L IN THOUSANDS)
<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED YEAR ENDED
------------ ---------------------------
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales................................................ L213,894 L356,732 L370,667
Cost of products sold.................................... 146,330 253,818 250,228
-------- -------- --------
Gross margin............................................. 67,564 102,914 120,439
Selling, general and administrative expenses............. 62,839 94,708 99,452
-------- -------- --------
Operating income......................................... 4,725 8,206 20,987
Other (income) expenses:
Interest expense, net.................................. 1,526 3,644 2,842
Other, net............................................. 611 (415) (11)
-------- -------- --------
Income before income taxes............................... 2,588 4,977 18,156
Income taxes............................................. 1,538 2,254 3,302
-------- -------- --------
Net income............................................... 1,050 2,723 14,854
Dividends on preference shares........................... 1,488 963 861
-------- -------- --------
Net income (loss) attributed to ordinary shareholders.... L (438) L 1,760 L 13,993
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-40
<PAGE> 92
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(L IN THOUSANDS)
<TABLE>
<CAPTION>
ORDINARY SHARES
------------------- FOREIGN
NUMBER ADDITIONAL CURRENCY
OF PAID-IN RETAINED TRANSLATION
SHARES PAR VALUE CAPITAL EARNINGS ADJUSTMENT
------- --------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995..................... 100,000 L30 L35 L20,592 L (1,892)
Net income attributed to ordinary
shareholders................................. -- -- -- 13,993 --
Translation adjustment......................... -- -- -- -- 252
------- --- --- ------- --------
Balance at December 31, 1995................... 100,000 30 35 34,585 (1,640)
Net income attributed to ordinary
shareholders................................. -- -- -- 1,760 --
Translation adjustment......................... -- -- -- -- (6,801)
------- --- --- ------- --------
Balance at December 31, 1996................... 100,000 30 35 36,345 (8,441)
Net loss attributed to ordinary shareholders... -- -- -- (438) --
Translation adjustment......................... -- -- -- -- (2,631)
------- --- --- ------- --------
Balance at August 31, 1997..................... 100,000 L30 L35 L35,907 L(11,072)
======= === === ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE> 93
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(L IN THOUSANDS)
<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED YEAR ENDED
------------ ---------------------------
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................................... L 1,050 L 2,723 L 14,854
Adjustments to reconcile net income to net cash provided
by (used for) operating activities:
Depreciation and amortization.......................... 4,979 4,770 4,051
Amortization of negative goodwill...................... (394) (591) (54)
Deferred income taxes.................................. (9) (16) 2,147
Changes in operating assets and liabilities:
Accounts receivable................................. 636 (1,893) 12,267
Inventories......................................... (4,251) 4,929 (7,128)
Prepaid expenses and other.......................... (407) 54 (7,928)
Accounts payable.................................... (8,471) (32) (4,008)
Accrued expenses.................................... 1,640 (640) (7,704)
Income taxes payable................................ 746 (287) 818
Other long-term liabilities......................... (3,330) 196 (4,358)
-------- -------- --------
Net cash provided by (used for) operating activities..... (7,811) 9,213 2,957
INVESTING ACTIVITIES
Purchases of property, plant, and equipment.............. (6,123) (8,914) (15,715)
Acquisitions, net of cash acquired....................... (1,537) (250)
-------- -------- --------
Net cash used for investing activities................... (6,123) (10,451) (15,965)
FINANCING ACTIVITIES
Net repayments of lines of credit........................ (779) (2,263) (5,363)
Proceeds from borrowings................................. 9,193 7,164 6,472
Payments of long-term debt............................... (5,442) (8,437) (684)
Dividends paid........................................... (1,852) (941) (431)
-------- -------- --------
Net cash provided by (used for) financing activities..... 1,120 (4,477) (6)
Effect of exchange rate changes on cash.................. (1,630) (1,480) 1,482
-------- -------- --------
Net decrease in cash and cash equivalents................ (14,444) (7,195) (11,532)
Cash and cash equivalents, beginning of year............. 28,175 35,370 46,902
-------- -------- --------
Cash and cash equivalents, end of year................... L 13,731 L 28,175 L 35,370
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest............................................... L 1,583 L 3,417 L 3,661
======== ======== ========
Income taxes........................................... L 772 L 1,701 L 926
======== ======== ========
Equipment capitalized under lease agreements............. L -- L 892 L 4,261
======== ======== ========
Shareholder notes converted to redeemable preference
shares................................................. L -- L 5,961 L --
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE> 94
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND ACQUISITIONS
Sylvania Lighting International B.V., (the Company or SLI) was incorporated
in July 1992 and is registered in the Netherlands. Operations commenced in
January 1993 with the acquisition of the international lighting business of GTE
Corporation and GTE International Incorporated (SLI acquisition). The Company
designs, manufactures and sells a complete line of lighting systems which are
comprised of lamps and fixtures. The Company serves a diverse international
customer base and markets, operates primarily in western Europe, Australia and
Latin America and has major plants in 9 countries (outside the United States).
Effective May 1, 1995, the assets of Nijssen Lighting Division B.V. were
acquired for approximately L290,000 in cash.
Effective June 30, 1995, the Company acquired all the assets and assumed
certain liabilities of Lumiance O.Y. for total consideration of L261,000,
including a loan payable of approximately L147,000 (repaid in 1995).
On February 5, 1996, SLI acquired the assets and assumed certain
liabilities of Kliktube Systems of Austrailia Pty. Ltd. and Kliktube Systems
(NZ) Ltd. for approximately L1,537,000.
The above acquisitions were accounted for using the purchase method and the
purchase price was allocated to assets acquired and liabilities assumed based on
the estimated fair market value existing at the date of acquisition. The excess
of purchase price over fair market value of net assets acquired is reflected in
the accompanying consolidated balance sheets as goodwill. Goodwill of L243,000
and L914,000 was recorded in connection with the 1995 and 1996 acquisitions,
respectively. The operating results of the above acquired businesses have been
included in the accompanying statements of operations from the respective
acquisition dates.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated from the consolidated financial statements.
These statements have been prepared in conformity with United States
Generally Accepted Accounting Principles and are presented in pounds sterling
(L).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
F-43
<PAGE> 95
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INVENTORIES
Inventories are stated at the lower cost, determined by the first in, first
out (FIFO) method, or market. Inventories consist of the following (L in
thousands):
<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials....................................... L11,729 L 9,407 L10,373
Work in process..................................... 5,321 5,454 6,795
Finished goods...................................... 38,409 39,378 50,368
------- ------- -------
L55,459 L54,239 L67,536
======= ======= =======
</TABLE>
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. The Company provides for
depreciation using the straight-line method over the following estimated useful
lives:
<TABLE>
<S> <C>
Buildings and improvements.................................. 20-55 years
Machinery and equipment..................................... 10-16 years
Furniture and fixtures...................................... 3-6 years
</TABLE>
Leasehold improvements are amortized on a straight-line basis over the
shorter of the estimated useful lives of the assets or the remaining lease term.
GOODWILL
Goodwill represents the excess of the purchase price over the fair value of
identifiable net assets acquired related to the business acquisitions. The
Company continually evaluates the value and future benefits of its goodwill. The
Company assesses recoverability from future operations using income from
operations of the related acquired business as a measure. Under this approach,
the carrying value of goodwill would be reduced if it becomes probable that the
Company's best estimate for expected undiscounted future cash flows of the
related business would be less than the carrying amount of goodwill over its
remaining amortization period. There have been no adjustments to the carrying
amounts of goodwill resulting from these evaluations. Goodwill is amortized on a
straight-line basis over 20 years. Amortization expense was approximately
L54,000, L38,000, and L6,000 for the eight months ended August 31, 1997 and for
the years ended December 31, 1996 and 1995.
NEGATIVE GOODWILL
Negative goodwill represents the remaining excess of fair value of
identifiable net assets acquired over the purchase price related to the business
acquisition after first reducing the values assigned to noncurrent assets to
zero.
Negative goodwill is amortized on a straight-line basis over 20 years.
Amortization benefit was approximately L394,000, L591,000, and L54,000, for the
eight months ended August 31, 1997 and for the years ended December 31, 1996,
and 1995, respectively.
OTHER INTANGIBLE ASSETS
Other intangible assets include the fair value of trademarks and patents
acquired at the date of acquisition of the international lighting businesses of
GTE Corporation and GTE International Incorporated. The
F-44
<PAGE> 96
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
carrying value of the intangible assets is regularly reviewed by management to
determine if there has been any permanent impairment in value.
FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments to reduce its exposure to
adverse fluctuations in foreign exchange rates. Financial instruments are not
used for trading purposes.
The Company and its subsidiaries utilize forward foreign currency exchange
contracts to minimize the impact of currency movements, principally on
anticipated intercompany inventory purchases and loans denominated in currencies
other than their functional currencies.
REVENUE RECOGNITION
Revenues from product sales are recognized at the time of shipment.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations in the year
incurred and totaled L4,449,000, L6,674,000 and L6,948,000 for the eight months
ended August 31, 1997 and for the years ended December 31, 1996 and 1995,
respectively.
ADVERTISING COSTS
Advertising costs are expensed as incurred and totaled L2,064,000,
L5,053,000 and L7,698,000 for the eight months ended August 31, 1997 and the
years ended December 31, 1996 and 1995, respectively.
INCOME TAXES
Deferred income taxes are recognized based on the expected future tax
consequences of differences between the financial statement and tax bases of
assets and liabilities, calculated using enacted tax rates in effect for the
year in which the differences are expected to be reflected in the tax return.
FOREIGN CURRENCY TRANSLATION
Transactions arising in foreign currencies have been translated at rates of
exchange in effect at the dates of the transactions. Gains or losses during the
year have been included in net income. Assets and liabilities of subsidiaries
not located in the United Kingdom are translated at current exchange rates, and
income statement accounts are translated at the average rates during the period.
Related translation adjustments are reported as a component of stockholders'
equity.
Where the Company operates in countries with hyper-inflationary economies,
adjustments are made to ensure the financial results fairly reflect the
financial position of the foreign operation. The local currency financial
results are recorded in a functional currency, monetary amounts being recorded
at the balance sheet closing rate and non-monetary amount at historical rate
ruling when the transaction occurred. The financial statements remeasured into
the functional currency are then translated into sterling using the method
above.
F-45
<PAGE> 97
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consists of the following:
<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---------- ------------ ------------
(L IN THOUSANDS)
<S> <C> <C> <C>
Buildings and improvements......................... L 7,645 L 7,673 L 7,723
Machinery and equipment............................ 37,714 38,662 30,995
Furniture and fixtures............................. 7,097 3,530 3,282
Construction in progress -- equipment.............. 4,340 1,959 6,305
-------- -------- -------
56,796 51,824 48,305
Less: Accumulated depreciation..................... (16,530) (11,592) (7,011)
-------- -------- -------
L 40,266 L 40,232 L41,294
======== ======== =======
</TABLE>
4. DEBT
DEBT CONSISTS OF THE FOLLOWING:
<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---------- ------------ ------------
(L IN THOUSANDS)
<S> <C> <C> <C>
First German facility, FIBOR plus 1.25%............. L 5,938 L 6,512 L 7,787
Second German facility, FIBOR plus 1.25%............ 6,101 6,691 7,961
Swiss facility, LIBOR plus 1.5%..................... 5,000 -- 7,000
First Belgian facility, LIBOR plus 1%............... 2,738 3,660 2,471
Second Belgian facility, LIBOR plus 1%.............. 3,420 4,231 2,187
Shareholder notes payable........................... -- -- 6,943
All other credit facilities......................... 2,148 4,373 4,448
Capital lease obligations........................... 4,990 4,681 4,900
------- ------- --------
30,335 30,148 43,697
Less: Current portion............................... (4,276) (6,238) (11,885)
------- ------- --------
L26,059 L23,910 L 31,812
======= ======= ========
</TABLE>
Under each of the German facilities, the Company was initially granted five
year credit lines (the "German Credit Lines") of up to DM 25,000,000 (L8,621,000
at the exchange-rate prevailing at August 31, 1997) and a short-term borrowing
facility of DM 10,000,000 (L3,448,000 at the August 31, 1997 exchange rate). The
German Credit Lines decreased during the period of the five year facility to
L7,328,000 each at August 31, 1997. The German credit lines each had an interest
rate of 4.55%, per annum at August 31, 1997.
The Swiss facility initially provided for the Company to borrow up to
L7,000,000 under a revolving facility repayable in full by January 1999. The
facility was amended subsequently to limit the borrowings to L5,000,000. This
facility bears interest at the rate of 8.57% per annum which rate is fixed
through April 1998.
Under the First Belgian facility, the Company was initially granted a
credit line (the "First Belgian Credit Line") of up to Bfr. 240,000,000,
(L4,007,000 at the exchange-rate prevailing at August 31, 1997) and three other
facilities (the "First Belgian Additional Facilities") aggregating Bfr.
200,000,000 (L3,339,000 at the exchange rate prevailing at August 31, 1997).
Under the Second Belgian facility, the Company was initially granted a credit
line (the "Second Belgian Credit Line") of up to Bfr. 260,000,000 (L4,341,000 at
the exchange rate prevailing at August 31, 1997) and three other facilities (the
"Second Belgian Additional Facilities") aggregating Bfr. 160,000,000 (L2,671,000
at the exchange rate prevailing at August 31, 1997). The interest rate on the
First and Second Belgian Credit Line was 4.41% at August 31, 1997. The First and
F-46
<PAGE> 98
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Second Belgian Additional Facilities are available for short-term borrowings or
for guarantees of foreign currency contracts. These facilities have not been
utilized by the Company as of August 31, 1997.
Subsequent to, and as a result of, the acquisition of the Company by
Chicago Miniature Lamp, Inc. (CML) (Note 15), the German Credit Lines, the First
Belgian Credit Line and the Second Belgian Credit Line were terminated and
repaid with the proceeds from intercompany loans from CML.
The classification "All other credit facilities" primarily represents the
borrowings under various local overdraft facilities of other Company locations.
Such borrowings and related covenants are not individually material to the
financial condition or results of operations of the Company. At August 31, 1997,
the Company has available credit under these facilities of approximately
L31,000,000 of which approximately L7,000,000 has been utilized by the Company.
The remaining facilities require the Company to comply with a number of
affirmative and negative covenants including satisfying certain financial tests
and ratios.
In addition, the Company had notes payable to shareholders at December 31,
1995. The original borrowings were made in January 1993 in connection with the
SLI acquisition. Interest was capitalized to the notes until December 31, 1994.
In December 1996, these notes and accrued interest were converted to 80,311
redeemable preference shares (Note 13).
Interest expense was L1,746,000, L4,193,000, and L4,409,000 for the eight
months ended August 31, 1997 and the years ended December 31, 1996 and December
31, 1995, respectively.
5. INCOME TAXES
The following is a summary of the provision for income taxes:
<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED YEAR ENDED
------------ ---------------------------
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
(L IN THOUSANDS)
<S> <C> <C> <C>
Current.......................................... L1,440 L2,245 L1,131
Deferred......................................... 98 9 2,171
------ ------ ------
L1,538 L2,254 L3,302
====== ====== ======
</TABLE>
The Company's effective income tax rate differs from the statutory tax rate
of the United Kingdom of 33% in 1995 and 1996 and from January 1, 1997 to March
31, 1997 (31% thereafter) primarily as a result of the nonrecognition of current
tax losses in certain countries. Additional differences result from the effect
of different income tax rates of other countries, the utilization of tax loss
carryforwards and differences in book and tax bases of noncurrent assets and
liabilities.
F-47
<PAGE> 99
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The significant items comprising deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---------- ------------ ------------
(L IN THOUSANDS)
<S> <C> <C> <C>
Assets:
Net operating loss carryforwards................. L 37,136 L 32,455 L 26,343
Reserves......................................... 576 326 1,532
Other............................................ 1,026 232 264
-------- -------- --------
Total assets............................. 38,738 33,013 28,139
Liabilities:
Differences between book and tax bases of
depreciable assets............................ (11,050) (6,115) (8,806)
Other............................................ (3,624) (2,418) (355)
-------- -------- --------
Total liabilities........................ (14,674) (8,533) (9,161)
-------- -------- --------
24,064 24,480 18,978
Less: Valuation allowance for net operating loss
carryforwards.................................... (26,745) (27,169) (21,570)
-------- -------- --------
Net deferred tax liabilities....................... L (2,681) L (2,689) L (2,592)
======== ======== ========
</TABLE>
As of December 31, 1996, the last complete tax period of the Company, SLI
had estimated loss carryforwards for tax purposes of approximately L91 million.
Approximately 25% of these loss carryforwards relate to operations in France (a
portion of which will expire through 2002), approximately 25% of these loss
carryforwards relate to operations in Belgium (which do not expire) and the
remaining loss carryforwards relate to operations in various other tax
jurisdictions outside the United Kingdom.
6. RESTRUCTURING
The Company approved a restructuring plan as part of the SLI purchase
business combination in fiscal 1993. The purchase liabilities recorded included
approximately L26.7 million for severance and related costs and L13.4 million
for costs associated with the shutdown and consolidation of certain acquired
facilities. During 1996, L10.7 million of provision established in purchase
accounting in connection with the SLI acquisition were reversed and recorded as
negative goodwill, as management determined that these provisions were no longer
necessary. At August 31, 1997, liabilities for approximately L1.0 million in
severance costs and L2.1 million for facility-related costs remained on the
balance sheet.
F-48
<PAGE> 100
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. COMMITMENTS
LEASES
The Company leases certain facilities and equipment under operating lease
and sublease agreements that expire at various dates from the current year to
2015. Certain of the agreements contain options to renew the leases for terms
similar to those currently in effect. The Company also has capital lease
obligations totaling L4,990,000 at August 31, 1997 which expire through December
2015. The current portion of the capital leases at August 31, 1997, is L485,000.
As of August 31, 1997, the aggregate minimum future commitments under operating
leases are as follows:
<TABLE>
<CAPTION>
(L IN THOUSANDS)
----------------
<S> <C>
1998....................................................... L 3,245
1999....................................................... 2,780
2000....................................................... 2,288
2001....................................................... 1,251
2002....................................................... 950
Thereafter................................................. 2,602
-------
L13,116
=======
</TABLE>
Rent expense for the eight months ended August 31, 1997 and the years ended
December 31, 1996 and December 31, 1995, was L4,550,000, L6,194,000 and
L5,703,000, respectively.
CAPITAL EXPENDITURES
The Company has obligations for capital expenditures of approximately
L3,100,000, L3,573,000 and L1,447,000 at August 31, 1997, December 31, 1996 and
December 31, 1995. In addition, the Company has an obligation to buy a plot of
land for DM 2,103,750 at the option of the landowner. This option expires in
2015.
8. CONTINGENCIES
The Company has received amounts from financial institutions secured on
trade receivables with recourse. These transactions have been recorded as a
sale. These amounts totaled L7,194,000, L7,532,000 and L5,437,000 at August 31,
1997, December 31, 1996 and December 31, 1995, respectively.
9. RELATED PARTY TRANSACTION
The Company had a monitoring and service agreement of US$500,000 per year
with CVC Capital Partners Limited, a related party. In connection with the
business combination described in Note 15, the amount accrued at August 31, 1997
(US$583,000) was paid in full and the agreement terminated.
10. CONCENTRATIONS
The Company purchased approximately 90% of its incandescent glass shells
from a single supplier and approximately 80% of its fluorescent glass tubing
from a second supplier, pursuant to long-term agreements.
At August 31, 1997, approximately 46% of the Company's employees were
covered by collective bargaining or similar agreements which expire at various
times. The Company believes it has satisfactory relations with the bargaining
units and therefore anticipates reaching new agreements on satisfactory terms as
existing agreements expire.
F-49
<PAGE> 101
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. STOCK OPTIONS AND RIGHTS
During 1996, the Chief Executive Officer (CEO) exercised his option to
acquire 2,000 "A" ordinary shares and 1,980 preference shares at US$1 per
ordinary share and US$100 per preference share (L0.62 and L62 at August 31,
1997, respectively).
In addition, options had been granted to senior managers to subscribe for
0.25% of the equity of the Company in each class of shares at a price of US$2
per ordinary share and US$200 per preference share (L1.24 and L124, respectively
at August 31, 1997) and, for a group of senior operating managers, 2% of the
equity of the Company in each class of shares at a price of US$900 per ordinary
share and US$100 per preference share (L558 and L62, respectively at August 31,
1997), upon a sale or listing of the Company, as defined in the shareholders'
agreement. Upon exercise, these shares come from existing shareholders, so no
shares had been reserved for issuance under the option plans. No options have
been exercised at August 31, 1997. Effective with the sale of the Company in
September 1997, these options were exercised.
12. EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT PLANS
The Company sponsors separate noncontributory, defined-benefit pension
plans (the Plans) covering eligible employees, including employees in foreign
countries. The principal locations are Germany, France, the United Kingdom, and
Switzerland. Benefits are based on years of service and compensation. The Plans'
August 31, 1997 and December 31, 1996 and 1995 combined funded status (based on
the most recent valuations) and the amounts recognized in the accompanying
consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---------- ------------ ------------
(L IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits................................... L28,078 L28,963 L29,498
Nonvested benefits................................ 1,238 1,276 1,303
------- ------- -------
Accumulated benefit obligation...................... 29,316 30,239 30,801
Effect of future salary increases................... 3,585 3,699 3,767
------- ------- -------
Projected benefit obligation........................ 32,901 33,938 34,568
Plan assets at fair value, primarily common stocks
and fixed income securities....................... 24,640 24,076 24,698
------- ------- -------
Plan assets less than projected benefit
obligation........................................ 8,261 9,862 9,870
Unrecognized transition amount...................... -- 2,609 2,907
Unrecognized net (gain) loss........................ -- (2,276) (1,435)
Unamortized prior service cost...................... -- -- --
------- ------- -------
Accrued pension cost................................ L 8,261 L10,195 L11,342
======= ======= =======
</TABLE>
F-50
<PAGE> 102
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of net periodic pension cost for the significant locations
are as follows:
<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED YEAR ENDED
------------ ---------------------------
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost..................................... L 791 L 1,265 L 1,353
Interest cost on projected benefit obligation.... 1,675 2,532 2,375
Actual return on plan assets..................... (1,218) (1,936) (1,651)
Net amortization and deferral.................... (206) (218) (168)
------- ------- -------
Net pension cost................................. L 1,042 L 1,643 L 1,909
======= ======= =======
</TABLE>
The assumptions used for the significant locations were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------- -------------
<S> <C> <C> <C>
Discount rate used to determine present
value of the projected benefit
obligations.............................. 4.5% to 7.5% 4.5% to 9.0% 4.5% to 9.0%
Expected long-term rate of return on
assets................................... 5.0% to 8.5% 5.0% to 10.0% 5.0% to 10.0%
Assumed rate of increase in future
compensation levels...................... 2.5% to 4.5% 2.5% to 6.0% 2.5% to 6.0%
</TABLE>
DEFINED CONTRIBUTION PLANS
The Company sponsors a number of defined contribution plans. Participation
in these plans is available to employees in various countries. Company
contributions to these plans are based on either a percentage of employee
contributions or on a specified amount per hour based on the provisions of each
plan. The Company's expense under these plans was approximately L927,000,
L1,324,000, and L1,669,000 for the eight months ended August 31, 1997 and the
years ended December 31, 1996 and December 31, 1995, respectively.
13. CAPITAL STOCK
The "A" ordinary shares each carry the right to cast 100 votes, the "B"
ordinary shares each carry the right to cast 35 votes and the redeemable
preference shares each carry the right to cast one vote.
At August 31, 1997, the Company has issued 179,311 preference shares of
which 99,000 were issued in 1993 and 80,311 were issued in December 1996 upon
the conversion of notes payable to shareholders (Note 4).
The preference shares are mandatorily redeemable January 29, 2003, at an
amount equal to the face amount of the shares and any cumulative dividends
(L13.3 million at August 31, 1997). Dividends were 10% in 1995 and in 1996 the
articles of association were amended to fix the dividend rate at 12.5% per year.
The amount of dividends for the period ended August 31, 1997, includes L88,000
representing appreciation to face value.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
FOREIGN EXCHANGE RISK MANAGEMENT
The Company hedges certain foreign currency transactions and firm foreign
currency commitments by entering into forward exchange contracts (forward
contracts). Gains and losses associated with currency rate changes on forward
contracts hedging foreign currency transactions are recorded currently in
income. Gains and losses on forward contracts hedging foreign currency
commitments are deferred off-balance sheet and included as a component of the
related transaction, when recorded; however, a loss is not deferred if deferral
would lead to the recognition of a loss in future periods. The aggregate
realized foreign exchange
F-51
<PAGE> 103
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
gains/(losses) recorded for the eight months ended August 31, 1997 and for the
years ended December 31, 1996 and 1995 were approximately L(201,000), L(420,000)
and L(693,000) , respectively.
The forward contracts have maturities of one to 12 months. The
counterparties to the Company's forward contracts consist of a number of major
international financial institutions. The credit ratings and concentration of
risk of these financial institutions are monitored on a continuing basis and
management believes they present no significant credit risk to the Company.
At August 31, 1997, December 31, 1996 and December 31, 1995, the Company
had foreign currency forward contracts with notional amounts totaling L21.3
million, L28.7 million and L28.0 million, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, accounts receivable,
short-term borrowings, accounts payable, and accruals are a reasonable estimate
of their fair value due to the short-term nature of these instruments. The
Company's long-term borrowings have variable interest rates and carrying value
approximates fair value at August 31, 1997. The fair value of the foreign
currency forward contracts at August 31, 1997 was L21.0 million.
15. SUBSEQUENT EVENTS
Effective September 1, 1997, Chicago Miniature Lamp, Inc. acquired all the
outstanding capital stock of SLI.
F-52
<PAGE> 104
------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING SHAREHOLDER OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 7
Use of Proceeds....................... 10
Price Range of Common Stock........... 11
Dividend Policy....................... 11
Capitalization........................ 12
Pro Forma Consolidated Statement of
Operations Data..................... 13
Selected Condensed Consolidated
Financial Data...................... 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 15
Business.............................. 22
Management............................ 34
Certain Transactions.................. 40
Principal and Selling Shareholders.... 41
Description of Certain Indebtedness... 42
Description of Capital Stock.......... 43
Shares Eligible for Future Sale....... 44
Underwriting.......................... 45
Notice to Canadian Residents.......... 46
Legal Matters......................... 47
Experts............................... 47
Available Information................. 48
Index to Financial Statements......... F-1
</TABLE>
======================================================
[SLI, INC. LOGO]
10,875,000 Shares
Common Stock
(par value $.01 per share)
PROSPECTUS
CREDIT SUISSE FIRST BOSTON
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
SALOMON SMITH BARNEY
MCDONALD & COMPANY
SECURITIES, INC.
------------------------------------------------------
<PAGE> 105
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized statement of expenses of the Company in
connection with the issuance and distribution of the shares of Common Stock
being registered. All but the Securities and Exchange Commission registration
fee and the National Association of Securities Dealers, Inc. filing fee are
estimates.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 140,195
National Association of Securities Dealers, Inc. Filing
Fee....................................................... 30,500
Printing and Engraving...................................... 125,000
Blue Sky Fees and Expenses.................................. 5,000
Legal Fees and Expenses..................................... 200,000
Accounting Fees and Expenses................................ 250,000
Miscellaneous............................................... 49,805
----------
Total............................................. $ 800,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The registrant has authority under applicable provisions of the Oklahoma
Business Corporation Act to indemnify its directors and officers to the extent
provided under such Act. The registrant's Bylaws provide additional
indemnification provisions for the benefit of the registrant's directors and
officers. Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, the Underwriters have agreed to indemnify the directors,
officers and controlling persons of the registrant against certain civil
liabilities that may be incurred in connection with this offering, including
certain liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
(a) On May 30, 1996, the Company issued 225,000 shares of Common Stock to
Mr. Werner Arnold, President of CML-Alba and a director of the Company, in
connection with the acquisition of Alba-USA.
(b) In September 1997, the Company acquired 38% of the outstanding shares
of Common Stock of Alba-CZ, a 60% owned subsidiary of Alba, in consideration of
150,000 DM and 4,500 shares of Common Stock of the Company.
(c) In April 1998, the Company issued 150,000 shares of Common Stock to the
two shareholders of Electro-Mag International, Inc. ("Electro-Mag") as partial
consideration for the remaining 65% of the outstanding shares of common stock of
Electro-Mag. not owned by the Company.
(d) In April 1998, the Company issued 30,000 shares of Common Stock to four
investors in connection with the acquisition of OSA Elektronik GmbH.
The Shares issued in (a), (b), (c) and (d) above were acquired for
investment purposes only and the Company relied upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
a. Exhibits
<TABLE>
<S> <C> <C>
1.1 -- Form of Underwriting Agreement**
3.1(b) -- Amended and Restated Certificate of Incorporation*
3.1(c) -- Amendment to Company's Certificate of Incorporation changing
the name of the Company to SLI, Inc.**
</TABLE>
II-1
<PAGE> 106
<TABLE>
<S> <C> <C>
3.2 -- Bylaws (1)
4.1 -- Reference is made to Exhibits 3.1 and 3.2
4.2 -- Form of Common Stock Certificate (1)
5.1 -- Opinion of Crowe & Dunlevy, P.C.**
10.1 -- Copy of Company's Incentive and Non-Statutory Stock Option
Plan(1)
10.1(a) -- Copy of Amendment to Company's Incentive and Non-Statutory
Stock Option Plan(1)
10.1(b) -- Copy of Amendment to Company's Incentive and Non-Statutory
Stock Option Plan**
10.1(c) -- Copy of Special 1997 Stock Option Plan*
10.2 -- Copy of Share Purchase Agreement by and between Xenell Corp.
and VCH International Limited dated October 1, 1992(1)
10.3 -- Copy of Agreement for the Sale of Assets and Intellectual
Property Rights by and between VCH International Limited,
VCH Limited, Xenell Corp. and CML-Delaware dated October 20,
1992(1)
10.4 -- Copy of Asset Purchase Agreement by and between Glolite
Sales, Ltd. and the Company dated March 1, 1993(1)
10.5 -- Copy of Contract for Purchase and Sale of Stock by and
between the shareholders of Industrial Devices, Inc. and the
Company dated March 31, 1994(1)
10.6 -- Copy of Agreement of Merger by and between Xenell Corp. and
its shareholders and the Company and its shareholders dated
December 15, 1993(1)
10.13 -- Copy of Contract for Purchase and Sale of Stock by and
between the shareholders of Plastomer, Inc. and the Company
dated March 28, 1995(1)
10.17 -- Copy of Contract for Purchase and Sale of Stock by and
between the shareholders of Fredon Development Industries,
Inc. and the Company dated August 11, 1995(2)
10.18 -- Copy of Agreement for purchase of certain assets among STT
Holdings Limited, STT Badalex Limited, STI Lighting Limited,
PRT Shipping Limited, CML-Badalex Limited, PRT Industrial
Holdings Limited and PRT Group Limited dated November 10,
1995(4)
10.19 -- Copy of Contract for Purchase and Sale of stock by and
between the shareholders of Electro Fiberoptics, Inc. and
the Company dated December 1, 1995(2)
10.20 -- Copy of Agreement for purchase of assets of Phoenix Lighting
(UK) Limited by and among Phoenix Lighting (UK) Limited,
Lynn Robert Bailey, Christopher John Barlow and the Company
dated December 18, 1995(3)
10.23 -- Copy of Agreement on the Sale and Transfer of Shares and
Interests in the Alba/Albrecht Group dated May 15, 1996(5)
10.24 -- Copy of Contract for Exchange of Stock by and between Werner
A. Arnold and the Company dated May 15, 1996(5)
10.25 -- Copy of Contract for Purchase and Sale of Stock of Alba
Lamps, Inc. by and between Werner A. Arnold and the Company
dated May 15, 1996(5)
10.26 -- Copy of Contract for Purchase and Sale of Stock of
Alba-Malaysia by and between Werner A. Arnold and the
Company dated May 15, 1996(5)
10.27 -- Copy of Employment Agreement with Werner A. Arnold dated May
30, 1996(5)
10.28 -- Copy of Contract for Purchase and Sale of Stock of Valmont
Electric, Inc. by and between Valmont Industries, Inc. and
the Company dated January 3, 1997(7)
10.29 -- Copy of Joint Venture Agreement by and among Schott
Corporation, CML Fiberoptics, Inc., Electro Fiberoptics
Corp., Schott CML Fiberoptics LLC, and the Company dated
January 28, 1997(8)
</TABLE>
II-2
<PAGE> 107
<TABLE>
<S> <C> <C>
10.30 -- Copy of Stock Purchase Agreement between the Sylvania Lighting International B.V. and the Company dated
September 8, 1997(9)
10.31 -- Asset Purchase and Security Agreement dated November 21, 1997 by and among the Company and Solium, Inc.
and Pacific Scientific Company**
10.32 -- Acquisition Agreement dated January 7, 1997 between Gustav Bauckner GmbH and Alba Speziallampen Holding
GmbH**
10.33 -- Amended and Restated Credit Agreement dated as of October 30, 1997 and amendments thereto*
10.34 -- Framework Agreement for Supply Contracts between Osram GmbH and EDIL International Lighting B.V.**
10.35 -- Amended and Restated Intellectual Property Allocation and License Agreement dated August 6, 1992 among
EDIL International Lighting B.V. and Osram Acquisition Corporation and Osram GmbH*
10.36 -- Supply contract dated February 19, 1985 between Osram and Sylvania**
10.37 -- Purchase Agreement dated March 4, 1996 between Philips Lighting B.V. and Sylvania N.V.**
10.38 -- Settlement Agreement dated August 14, 1997 between Sylvania Lighting International B.V. and Osram GmbH
**
10.39 -- Framework Agreement dated as of January 29, 1997 between Osram Sylvania Products, Inc. and Osram
Sylvania and Sylvania Lighting International B.V.**
10.40 -- Agreement dated June 6, 1982 between Emgo and GTE Sylvania**
10.41 -- Employment agreement between the Company and Mr. Frank Ward**
10.42 -- Employment agreement between the Company and Mr. Richard Parenti**
10.43 -- Service Agreement between Sylvania Lighting, S.A. and Mr. Norman Scoular**
10.44 -- Executor Director's Contract between SLI, B.V. and Mr. Norman Scoular**
10.45 -- Executor Director's Contract between Flowil International Lighting, B.V. and Mr. Norman Scoular**
10.46 -- Amendment agreement dated March 22, 1994**
10.47 -- Second amendment agreement dated February 20, 1996**
16.1 -- Letter from Arthur Andersen LLP regarding change in certified public accountants(6)
21.1 -- List of subsidiaries*
23.1(a) -- Consent of Ernst & Young LLP**
23.1(b) -- Consent of Hards Pearson**
23.2(a) -- Consent of Crowe & Dunlevy, P.C. -- See Exhibit 5.1**
27.1 -- Financial Data Schedule (for SEC use only) November 30, 1997*
Financial Data Schedule -- April 5, 1998(10)
April 6, 1997(10)
January 5, 1997(10)
January 4, 1998(10)
</TABLE>
- ---------------
* Previously filed
** Filed herewith
(1) Incorporated by reference to the Exhibits included in the Company's
Registration Statement on Form S-1, File No. 33-90416.
(2) Incorporated by reference to the Exhibits included in the Company's Form
10-K for the year ended December 3, 1995, File No. 0-25848.
(3) Incorporated by reference to the Exhibits included in the Company's Form
10-Q for the quarter ended March 3, 1996, File No. 0-25848.
II-3
<PAGE> 108
(4) Incorporated by reference to the Exhibits included in the Company's Form 8-K
dated November 10, 1995, File No. 0-25848.
(5) Incorporated by reference to the Exhibits included in the Company's Form 8-K
dated June 14, 1996, File No. 0-25848.
(6) Incorporated by reference to the Exhibits included in the Company's Form
8-K dated November 10, 1995, File No. 0-25848.
(7) Incorporated by reference to the Exhibits included in the Company's Form
8-K dated January 30, 1997, File No. 0-25848.
(8) Incorporated by reference to the Exhibits included in the Company's Form
10-K dated December 1, 1996, File No. 0-25848.
(9) Incorporated by reference to the Exhibits included in the Company's Form
8-K dated September 10, 1997, File No. 0-25848.
(10) Incorporated by reference to the Schedules included in the Company's Form
10-Q Report for the quarter ended April 5, 1998 (File No. 0-25848).
b. Schedules
Schedule II: Valuation and Qualifying Accounts.
All other schedules are omitted as the required information is inapplicable
or is presented in the financial statements or related notes which are
incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the Oklahoma Business
Corporation Act, the Company's Amended and Restated Certificate of Incorporation
and Bylaws, the Underwriting Agreement or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange 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 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 already 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 Act and will be governed by the final
adjudication of such issue.
The undersigned registrant undertakes that, for the purposes of determining
any liability under the Act: (1) 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 Act shall be deemed to be part of the
registration statement as of the time it was declared effective, and (2) 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.
The undersigned further agrees to remove from registration any shares
remaining unsold, by virtue of the over-allotment option, upon the expiration of
this offering.
II-4
<PAGE> 109
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto authorized, in the Town of Canton, Commonwealth of
Massachusetts, on May 19, 1998.
SLI, INC.
By: /s/ FRANK M. WARD
------------------------------------
Frank M. Ward
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
FRANK M. WARD Chief Executive Officer May 19, 1998
- ----------------------------------------------------- and Director
Frank M. Ward
RICHARD F. PARENTI Chief Accounting Officer May 19, 1998
- -----------------------------------------------------
Richard F. Parenti
Director
- -----------------------------------------------------
Werner A. Arnold
*DONALD S. DEWSAP Director May 19, 1998
- -----------------------------------------------------
Donald S. Dewsap
Director
- -----------------------------------------------------
Frederick Howard
*RICHARD INGRAM Director May 19, 1998
- -----------------------------------------------------
Richard Ingram
*NORMAN SCOULAR Director May 19, 1998
- -----------------------------------------------------
Norman Scoular
*By: /s/ FRANK M. WARD May 19, 1998
------------------------------------------------
Frank M. Ward
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 110
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OTHERS PERIOD
----------- ---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Year ended November 30, 1997:
Reserves and allowances deducted from asset
account:
Allowance for uncollectible accounts......... $524 $ 771 $ (367) $ 6,961(1) $ 7,889
Deferred tax asset valuation allowance........... 0 (2,211) 47,038(2) 44,827
Year ended December 1, 1996:
Reserves and allowances deducted from asset
accounts:
Allowance for uncollectible accounts......... 118 105 70 231(3) 524
Year ended December 3, 1995:
Reserves and allowances deducted from asset
accounts:
Allowance for uncollectible accounts......... 358 (268) 28(4) 118
</TABLE>
- ---------------
(1) Represents allowance for doubtful accounts acquired as a result of the 1997
acquisitions of PLP, Bruckner and SLI, B.V., and the currency translation
adjustment in the allowance account during the period.
(2) Represents deferred tax asset valuation allowance included in opening
balance sheet of SLI, B.V., a 1997 business combination.
(3) Represents allowance for doubtful accounts as a result of the 1996
acquisition of Alba.
(4) Represents allowance for doubtful accounts acquired as a result of the 1995
acquisition of CML Canada.
<PAGE> 1
Exhibit 1.1
10,875,000 SHARES
SLI, INC.
(FORMERLY "CHICAGO MINIATURE LAMP, INC.")
COMMON STOCK
UNDERWRITING AGREEMENT
May __, 1998
CREDIT SUISSE FIRST BOSTON CORPORATION
SMITH BARNEY INC.
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS INC.
McDONALD & COMPANY SECURITIES, INC.
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. SLI, Inc. (formerly "Chicago Miniature Lamp, Inc."), an Oklahoma
corporation (the "Company"), proposes to issue and sell 8,250,000 shares of its
Common Stock (the "Securities") and the stockholders listed in Schedule A hereto
(the "Selling Stockholders") propose severally to sell an aggregate of 2,625,000
outstanding shares of the Securities (such 10,875,000 shares of Securities being
hereinafter referred to as the "Firm Securities"). The Company also proposes to
sell to the Underwriters, at the option of the Underwriters, an aggregate of not
more than 1,237,500 additional shares of its Securities, and the Selling
Stockholders also propose to sell to the Underwriters, at the option of the
Underwriters, an aggregate of not more than 393,750 additional outstanding
shares of the Company's Securities, as set forth below (such 1,631,250
additional shares being hereinafter referred to as the "Optional Securities").
The Firm Securities and the Optional Securities are herein collectively called
the "Offered Securities". The Company and the Selling Stockholders hereby agree
with the several Underwriters named in Schedule B hereto ("Underwriters") as
follows:
2. Representations and Warranties of the Company and the Selling
Stockholders. (a) The Company represents and warrants to, and agrees with,
the several Underwriters that:
(i) A registration statement (No. 333-_____) relating to the
Offered Securities, including a form of prospectus, has been filed
with the Securities and Exchange Commission ("Commission") and either
(A) has been declared effective under the Securities Act of 1933, as
amended ("Act") and is not proposed to be amended or (B) is proposed
to be amended by amendment or post-effective amendment. If such
registration statement (the "initial registration statement") has been
declared effective, either (A) an additional registration statement
(the "additional registration statement") relating to the Offered
Securities may have been filed with the Commission pursuant to Rule
462(b) ("Rule 462(b)") under the Act and, if so filed, has become
effective upon filing pursuant to such Rule and the Offered Securities
all have been duly registered under the Act pursuant to the initial
registration statement and, if applicable, the additional registration
statement or (B) such an additional registration statement is proposed
to
<PAGE> 2
2
be filed with the Commission pursuant to Rule 462(b) and will become
effective upon filing pursuant to such Rule and upon such filing the
Offered Securities will all have been duly registered under the Act
pursuant to the initial registration statement and such additional
registration statement. If the Company does not propose to amend the
initial registration statement or if an additional registration
statement has been filed and the Company does not propose to amend it,
and if any post-effective amendment to either such registration
statement has been filed with the Commission prior to the execution
and delivery of this Agreement, the most recent amendment (if any) to
each such registration statement has been declared effective by the
Commission or has become effective upon filing pursuant to Rule 462(c)
("Rule 462(c)") under the Act or, in the case of the additional
registration statement, Rule 462(b). For purposes of this Agreement,
"Effective Time" with respect to the initial registration statement
or, if filed prior to the execution and delivery of this Agreement,
the additional registration statement means (A) if the Company has
advised the Representatives that it does not propose to amend such
registration statement, the date and time as of which such
registration statement, or the most recent post-effective amendment
thereto (if any) filed prior to the execution and delivery of this
Agreement, was declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c), or (B) if the Company
has advised the Representatives that it proposes to file an amendment
or post- effective amendment to such registration statement, the date
and time as of which such registration statement, as amended by such
amendment or post-effective amendment, as the case may be, is declared
effective by the Commission. If an additional registration statement
has not been filed prior to the execution and delivery of this
Agreement but the Company has advised the Representatives that it
proposes to file one, "Effective Time" with respect to such additional
registration statement means the date and time as of which such
registration statement is filed and becomes effective pursuant to Rule
462(b). "Effective Date" with respect to the initial registration
statement or the additional registration statement (if any) means the
date of the Effective Time thereof. The initial registration
statement, as amended at its Effective Time, including all information
contained in the additional registration statement (if any) and deemed
to be a part of the initial registration statement as of the Effective
Time of the additional registration statement pursuant to the General
Instructions of the Form on which it is filed and including all
information (if any) deemed to be a part of the initial registration
statement as of its Effective Time pursuant to Rule 430A(b) ("Rule
430A(b)") under the Act, is hereinafter referred to as the "Initial
Registration Statement". The additional registration statement, as
amended at its Effective Time, including the contents of the initial
registration statement incorporated by reference therein and including
all information (if any) deemed to be a part of the additional
registration statement as of its Effective Time pursuant to Rule
430A(b), is hereinafter referred to as the "Additional Registration
Statement". The Initial Registration Statement and the Additional
Registration Statement are hereinafter referred to collectively as the
"Registration Statements" and individually as a "Registration
Statement". The form of prospectus relating to the Offered Securities,
as first filed with the Commission pursuant to and in accordance with
Rule 424(b) ("Rule 424(b)") under the Act or (if no such filing is
required) as included in a Registration Statement, is hereinafter
referred to as the "Prospectus". No document has been or will be
prepared or distributed in reliance on Rule 434 under the Act.
(ii) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement:
(A) on the Effective Date of the Initial Registration Statement, the
Initial Registration Statement conformed in all respects to the
requirements of the Act and the rules and regulations of the
Commission ("Rules and Regulations") and did not include any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, (B) on the Effective Date of the Additional
Registration Statement (if any), each Registration Statement conformed
or will conform, in all respects to the requirements of the Act and
the Rules and Regulations and did not include, or will not include,
any untrue statement of a material fact and did not omit, or will not
omit, to state any material fact required to be stated therein or
necessary to make the
<PAGE> 3
3
statements therein not misleading, and (C) on the date of this
Agreement, the Initial Registration Statement and, if the Effective
Time of the Additional Registration Statement is prior to the
execution and delivery of this Agreement, the Additional Registration
Statement each conforms, and at the time of filing of the Prospectus
pursuant to Rule 424(b) or (if no such filing is required) at the
Effective Date of the Additional Registration Statement in which the
Prospectus is included, each Registration Statement and the Prospectus
will conform, in all respects to the requirements of the Act and the
Rules and Regulations, and neither of such documents includes, or will
include, any untrue statement of a material fact or omits, or will
omit, to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. If the
Effective Time of the Initial Registration Statement is subsequent to
the execution and delivery of this Agreement: on the Effective Date of
the Initial Registration Statement, the Initial Registration Statement
and the Prospectus will conform in all respects to the requirements of
the Act and the Rules and Regulations, neither of such documents will
include any untrue statement of a material fact or will omit to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading, and no Additional Registration
Statement has been or will be filed. The two preceding sentences do
not apply to statements in or omissions from a Registration Statement
or the Prospectus based upon written information furnished to the
Company by any Underwriter through the Representatives specifically
for use therein, it being understood and agreed that the only such
information is that described as such in Section 7(b) hereof.
(iii) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the state of
Oklahoma, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus;
and the Company is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business requires
such qualification.
(iv) Each subsidiary of the Company has been duly
incorporated and is an existing corporation in good standing under the
laws of the jurisdiction of its incorporation, with power and
authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus; and each subsidiary of the
Company is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification; all of the issued and outstanding capital stock of each
subsidiary of the Company has been duly authorized and validly issued
and is fully paid and nonassessable; and the capital stock of each
subsidiary owned by the Company, directly or through subsidiaries, is
owned free from liens, encumbrances and defects.
(v) The Offered Securities and all other outstanding shares
of capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable and conform to the
description thereof contained in the Prospectus; and the stockholders
of the Company have no preemptive rights with respect to the
Securities.
(vi) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person that would give rise to a valid claim against the Company or
any Underwriter for a brokerage commission, finder's fee or other like
payment in connection with this offering.
(vii) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act
with respect to any securities of the Company owned or to be owned by
such person or to require the Company to include such securities in
the securities registered
<PAGE> 4
4
pursuant to a Registration Statement or in any securities being
registered pursuant to any other registration statement filed by the
Company under the Act.
(viii) The Securities have been approved for listing subject
to notice of issuance on the New York Stock Exchange.
(ix) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required
to be obtained or made by the Company for the consummation of the
transactions contemplated by this Agreement in connection with the
sale of the Offered Securities, except such as have been obtained and
made under the Act and such as may be required under state securities
laws.
(x) The execution, delivery and performance of this
Agreement, and the consummation of the transactions herein
contemplated will not result in a breach or violation of any of the
terms and provisions of, or constitute a default under, any statute,
any rule, regulation or order of any governmental agency or body or
any court, domestic or foreign, having jurisdiction over the Company
or any subsidiary of the Company or any of their properties, or any
agreement or instrument to which the Company or any such subsidiary is
a party or by which the Company or any such subsidiary is bound or to
which any of the properties of the Company or any such subsidiary is
subject, or the charter or by-laws of the Company or any such
subsidiary.
(xi) This Agreement has been duly authorized, executed and
delivered by the Company.
(xii) Except as disclosed in the Prospectus, the Company and
its subsidiaries have good and marketable title to all real properties
and all other properties and assets owned by them, in each case free
from liens, encumbrances and defects that would materially affect the
value thereof or materially interfere with the use made or to be made
thereof by them; and except as disclosed in the Prospectus, the
Company and its subsidiaries hold any leased real or personal property
under valid and enforceable leases with no exceptions that would
materially interfere with the use made or to be made thereof by them.
(xiii) The Company and its subsidiaries possess adequate
certificates, authorities or permits issued by appropriate
governmental agencies or bodies necessary to conduct the business now
operated by them and have not received any notice of proceedings
relating to the revocation or modification of any such certificate,
authority or permit that, if determined adversely to the Company or
any of its subsidiaries, would individually or in the aggregate have a
material adverse effect on the Company and its subsidiaries taken as a
whole.
(xiv) No labor dispute with the employees of the Company or
any subsidiary exists or, to the knowledge of the Company, is imminent
that might have a material adverse effect on the Company and its
subsidiaries taken as a whole.
(xv) The Company and its subsidiaries own, possess or can
acquire on reasonable terms, adequate trademarks, trade names and
other rights to inventions, know-how, patents, copyrights,
confidential information and other intellectual property
(collectively, "intellectual property rights") necessary to conduct
the business now operated by them, or presently employed by them, and
have not received any notice of infringement of or conflict with
asserted rights of others with respect to any intellectual property
rights that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the Company and its subsidiaries taken as a whole.
<PAGE> 5
5
(xvi) Except as disclosed in the Prospectus, neither the
Company nor any of its subsidiaries is in violation of any statute,
any rule, regulation, decision or order of any governmental agency or
body or any court, domestic or foreign, relating to the use, disposal
or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to
hazardous or toxic substances (collectively, "environmental laws"),
owns or operates any real property contaminated with any substance
that is subject to any environmental laws, is liable for any off-site
disposal or contamination pursuant to any environmental laws, or is
subject to any claim relating to any environmental laws, which
violation, contamination, liability or claim would individually or in
the aggregate have a material adverse effect on the Company and its
subsidiaries taken as a whole; and the Company is not aware of any
pending investigation which might lead to such a claim.
(xvii) Except as disclosed in the Prospectus, there are no
pending actions, suits or proceedings against or affecting the
Company, any of its subsidiaries or any of their respective properties
that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the condition (financial or other), business,
properties or results of operations of the Company and its
subsidiaries taken as a whole, or would materially and adversely
affect the ability of the Company to perform its obligations under
this Agreement, or which are otherwise material in the context of the
sale of the Offered Securities; and no such actions, suits or
proceedings are threatened or, to the Company's knowledge,
contemplated.
(xviii) The financial statements included in each
Registration Statement and the Prospectus present fairly the financial
position of (A) the Company and its consolidated subsidiaries, (B)
Sylvania Lighting International, B.V. ("SLI") and (C) Chicago
Miniature Lamp (Canada) Inc. ("CML Canada") as of the dates shown and
their results of operations and cash flows for the periods shown, and
such financial statements have been prepared in conformity with
generally accepted accounting principles in the United States applied
on a consistent basis; the schedules included in each Registration
Statement present fairly the information required to be stated
therein; and the assumptions used in preparing the pro forma financial
statements included in each Registration Statement and the Prospectus
provide a reasonable basis for presenting the significant effects
directly attributable to the transactions or events described therein,
the related pro forma adjustments give appropriate effect to those
assumptions, and the pro forma columns therein reflect the proper
application of those adjustments to the corresponding historical
financial statement amounts.
(xix) Except as disclosed in the Prospectus, since the date
of the latest audited financial statements included in the Prospectus
there has been no material adverse change, nor any development or
event involving a prospective material adverse change, in the
condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries taken as a whole, and,
except as disclosed in or contemplated by the Prospectus, there has
been no dividend or distribution of any kind declared, paid or made by
the Company on any class of its capital stock.
(xx) The Company is not and, after giving effect to the
offering and sale of the Offered Securities and the application of the
proceeds thereof as described in the Prospectus, will not be an
"investment company" as defined in the Investment Company Act of 1940.
(xxi) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida
Statutes and the Company agrees to comply with such Section if prior
to the completion of the distribution of the Offered Securities it
commences doing such business.
<PAGE> 6
6
(b) Each Selling Stockholder severally represents and
warrants to, and agrees with, the several Underwriters that:
(i) Such Selling Stockholder has and on each Closing Date
hereinafter mentioned will have valid and unencumbered title to the
Offered Securities to be delivered by such Selling Stockholder on such
Closing Date and full right, power and authority to enter into this
Agreement and to sell, assign, transfer and deliver the Offered
Securities to be delivered by such Selling Stockholder on such Closing
Date hereunder; and upon the delivery of and payment for the Offered
Securities on each Closing Date hereunder the several Underwriters
will acquire valid and unencumbered title to the Offered Securities to
be delivered by such Selling Stockholder on such Closing Date.
(ii) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement:
(A) on the Effective Date of the Initial Registration Statement, the
Initial Registration Statement conformed in all respects to the
requirements of the Act and the Rules and Regulations and did not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, (B) on the Effective Date of the
Additional Registration Statement (if any), each Registration
Statement conformed, or will conform, in all respects to the
requirements of the Act and the Rules and Regulations did not include,
or will not include, any untrue statement of a material fact and did
not omit, or will not omit, to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, and (C) on the date of this Agreement, the Initial
Registration Statement and, if the Effective Time of the Additional
Registration Statement is prior to the execution and delivery of this
Agreement, the Additional Registration Statement each conforms, and at
the time of filing of the Prospectus pursuant to Rule 424(b) or (if no
such filing is required) at the Effective Date of the Additional
Registration Statement in which the Prospectus is included, each
Registration Statement and the Prospectus will conform, in all
respects to the requirements of the Act and the Rules and Regulations,
and neither of such documents includes, or will include, any untrue
statement of a material fact or omits, or will omit, to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading. If the Effective Time of the
Initial Registration Statement is subsequent to the execution and
delivery of this Agreement: on the Effective Date of the Initial
Registration Statement, the Initial Registration Statement and the
Prospectus will conform in all respects to the requirements of the Act
and the Rules and Regulations, neither of such documents will include
any untrue statement of a material fact or will omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading. The two preceding sentences do not
apply to statements in or omissions from a Registration Statement or
the Prospectus based upon written information furnished to the Company
by any Underwriter through the Representatives specifically for use
therein, it being understood and agreed that the only such information
is that described as such in Section 7(b).
(iii) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between such Selling
Stockholder and any person that would give rise to a valid claim
against such Selling Stockholder or any Underwriter for a brokerage
commission, finder's fee or other like payment in connection with this
offering.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company and each Selling
Stockholder agree, severally and not jointly, to sell to each Underwriter, and
each Underwriter agrees, severally and not jointly, to purchase from the
Company and each Selling Stockholder, at a purchase price of $ per
share, that number of Firm Securities (rounded up or down, as determined by
Credit Suisse First Boston Corporation ("CSFBC") in its discretion, in order to
avoid fractions) obtained by multiplying 8,250,000 Firm Securities in the case
of the Company and the
<PAGE> 7
7
number of Firm Securities set forth opposite the name of such Selling
Stockholder in Schedule A hereto, in the case of a Selling Stockholder, in each
case by a fraction the numerator of which is the number of Firm Securities set
forth opposite the name of such Underwriter in Schedule B hereto and the
denominator of which is the total number of Firm Securities.
Certificates in negotiable form for the Offered Securities to be sold
by the Selling Stockholders have been placed in custody, for delivery under
this Agreement, under Custody Agreements made with ____________________, as
custodian ("Custodian"). Each such Selling Stockholder agrees that the shares
represented by the certificates held in custody for such Selling Stockholder
under such Custody Agreements are subject to the interests of the Underwriters
hereunder, that the arrangements made by such Selling Stockholder for such
custody are to that extent irrevocable, and that the obligations of such
Selling Stockholder hereunder shall not be terminated by operation of law,
whether by the death of any such individual Selling Stockholder or the
occurrence of any other event, or in the case of a trust, by the death of any
trustee or trustees or the termination of such trust. If any such individual
Selling Stockholder or any such trustee or trustees should die, or if any other
such event should occur, or if any of such trusts should terminate, before the
delivery of the Offered Securities hereunder, certificates for such Offered
Securities shall be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such death or other event or termination had
not occurred, regardless of whether or not the Custodian shall have received
notice of such death or other event or termination.
The Company and the Custodian will deliver the Firm Securities to the
Representatives in the forms described below for the accounts of the
Underwriters, against payment of the purchase price in Federal (same day) funds
by official bank check or checks or wire transfer to an account at a bank
acceptable to CSFBC drawn to the order of Chicago Miniature Lamp, Inc., in the
case of the shares of Firm Securities to be sold by the Company and to the
Custodian, in the case of the shares of Firm Securities to be sold by the
Selling Stockholders, at the office of Simpson Thacher & Bartlett, 425
Lexington Avenue, New York, NY, at 9:30 A.M., New York time, on May ___, 1998,
or at such other time not later than seven full business days thereafter as
CSFBC and the Company determine, such time being herein referred to as the
"First Closing Date".
In the case of Firm Securities to be sold by the Company, on the First
Closing Date the transfer agent shall cause such Firm Securities to be
registered in the name of Cede & Co., as nominee of The Depository Trust
Company ("DTC") and shall cause DTC to credit security entitlements with
respect to such Firm Securities by book entry to the securities accounts of
CSFBC at DTC for the accounts of each Underwriter against payment of the
purchase price, paid to the Company as described above.
In the case of Firm Securities to be sold by the Selling Stockholders,
prior to the First Closing Date, the Custodian shall deliver to the Company's
transfer agent certificates representing such Firm Securities to be sold by
such Selling Stockholders, with instructions to cancel such certificates and
register such Firm Securities in the name of Cede & Co., as nominee of DTC, on
the First Closing Date. On the First Closing Date, the transfer agent, upon
instructions from the Custodian, shall cause DTC to credit security
entitlements with respect to such Firm Securities by book entry to the
securities accounts of CSFBC at DTC for the accounts of each Underwriter
against payment of the purchase price, paid to such Selling Stockholders as
described above.
In addition, upon written notice from CSFBC given to the Company and
the Selling Stockholders from time to time not more than 30 days subsequent to
the date of the Prospectus, the Underwriters may purchase all or less than all
of the Optional Securities at the purchase price per Security to be paid for
the Firm Securities. The Company and such Selling Stockholders agree, severally
and not jointly, to sell to the Underwriters the respective numbers of Optional
Securities obtained by multiplying the number of Optional Securities specified
in such notice by a fraction the numerator of which is 1,237,500 in the case of
the Company and which is the number of shares set forth opposite the names of
such Selling Stockholders in Schedule A hereto under the caption "Number of
Optional Securities to be Sold" in the case of such Selling Stockholders and
the denominator of which is the total
<PAGE> 8
8
number of Optional Securities (subject to adjustment by CSFBC to eliminate
fractions). Such Optional Securities shall be purchased from the Company and
each such Selling Stockholder for the account of each Underwriter in the same
proportion as the number of Firm Securities set forth opposite such
Underwriter's name bears to the total number of Firm Securities (subject to
adjustment by CSFBC to eliminate fractions) and may be purchased by the
Underwriters only for the purpose of covering over-allotments made in
connection with the sale of the Firm Securities. No Optional Securities shall
be sold or delivered unless the Firm Securities previously have been, or
simultaneously are, sold and delivered. The right to purchase the Optional
Securities or any portion thereof may be exercised from time to time and to the
extent not previously exercised may be surrendered and terminated at any time
upon notice by CSFBC to the Company and such Selling Stockholders.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "Optional Closing Date", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "Closing Date"), shall be determined by CSFBC
but shall be not later than five full business days after written notice of
election to purchase Optional Securities is given. The Company and the
Custodian will deliver the Optional Securities being purchased on each Optional
Closing Date to the Representatives for the accounts of the several
Underwriters, against payment of the purchase price therefor in Federal (same
day) funds by official bank check or checks or wire transfer to an account at a
bank acceptable to CSFBC drawn to the order of Chicago Miniature Lamp, Inc., in
the case of the Optional Securities to be sold by the Company and to the order
of the Custodian, in the case of the Optional Securities to be sold by the
Selling Stockholders, at the office of Simpson Thacher & Bartlett, 425
Lexington Avenue, New York, NY. The forms in which such Optional Securities
shall be delivered shall be the same in which the Firm Securities shall have
been delivered on the First Closing Date, as applicable.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5. Certain Agreements of the Company and the Selling Stockholders.
The Company agrees with the several Underwriters and the Selling Stockholders
that:
(a) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement,
the Company will file the Prospectus with the Commission pursuant to
and in accordance with subparagraph (1) (or, if applicable and if
consented to by CSFBC, subparagraph (4)) of Rule 424(b) not later than
the earlier of (A) the second business day following the execution and
delivery of this Agreement or (B) the fifteenth business day after the
Effective Date of the Initial Registration Statement. The Company will
advise CSFBC promptly of any such filing pursuant to Rule 424(b). If
the Effective Time of the Initial Registration Statement is prior to
the execution and delivery of this Agreement and an additional
registration statement is necessary to register a portion of the
Offered Securities under the Act but the Effective Time thereof has
not occurred as of such execution and delivery, the Company will file
the additional registration statement or, if filed, will file a
post-effective amendment thereto with the Commission pursuant to and
in accordance with Rule 462(b) on or prior to 10:00 P.M., New York
time, on the date of this Agreement or, if earlier, on or prior to the
time the Prospectus is printed and distributed to any Underwriter, or
will make such filing at such later date as shall have been consented
to by CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to
amend or supplement the initial or any additional registration
statement as filed or the related prospectus or the Initial
Registration Statement, the Additional Registration Statement (if any)
or the Prospectus and will not effect such amendment or
supplementation without CSFBC's consent; and the Company will also
advise CSFBC promptly of the effectiveness of each Registration
Statement (if its Effective Time is subsequent to the execution and
delivery of this Agreement) and of any amendment or supplementation of
a Registration Statement or the Prospectus and of
<PAGE> 9
9
the institution by the Commission of any stop order proceedings in
respect of a Registration Statement and will use its best efforts to
prevent the issuance of any such stop order and to obtain as soon as
possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection
with sales by any Underwriter or dealer, any event occurs as a result
of which the Prospectus as then amended or supplemented would include
an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act,
the Company will promptly notify CSFBC of such event and will promptly
prepare and file with the Commission, at its own expense, an amendment
or supplement which will correct such statement or omission or an
amendment which will effect such compliance. Neither CSFBC's consent
to, nor the Underwriters' delivery of, any such amendment or
supplement shall constitute a waiver of any of the conditions set
forth in Section 6.
(d) As soon as practicable, but not later than the
Availability Date (as defined below), the Company will make generally
available to its security holders an earnings statement covering a
period of at least 12 months beginning after the Effective Date of the
Initial Registration Statement (or, if later, the Effective Date of
the Additional Registration Statement) which will satisfy the
provisions of Section 11(a) of the Act. For the purpose of the
preceding sentence, "Availability Date" means the 45th day after the
end of the fourth fiscal quarter following the fiscal quarter that
includes such Effective Date, except that, if such fourth fiscal
quarter is the last quarter of the Company's fiscal year,
"Availability Date" means the 90th day after the end of such fourth
fiscal quarter.
(e) The Company will furnish to the Representatives copies of
each Registration Statement (three of which will be signed and will
include all exhibits), each related preliminary prospectus, and, so
long as a prospectus relating to the Offered Securities is required to
be delivered under the Act in connection with sales by any Underwriter
or dealer, the Prospectus and all amendments and supplements to such
documents, in each case in such quantities as CSFBC requests. The
Prospectus shall be so furnished on or prior to 3:00 P.M., New York
time, on the business day following the later of the execution and
delivery of this Agreement or the Effective Time of the Initial
Registration Statement. All other such documents shall be so
furnished as soon as available. The Company will pay the expenses of
printing and distributing to the Underwriters all such documents.
(f) The Company will arrange for the qualification of the
Offered Securities for sale under the laws of such jurisdictions as
CSFBC designates and will continue such qualifications in effect so
long as required for the distribution.
(g) During the period of five years hereafter, the Company
will furnish to the Representatives and, upon request, to each of the
other Underwriters, as soon as practicable after the end of each
fiscal year, a copy of its annual report to stockholders for such
year; and the Company will furnish to the Representatives (i) as soon
as available, a copy of each report and any definitive proxy statement
of the Company filed with the Commission under the Securities Exchange
Act of 1934, as amended, or mailed to stockholders, and (ii) from time
to time, such other information concerning the Company as CSFBC may
reasonably request.
(h) For a period of 120 days after the date hereof, the
Company will not offer, sell, contract to sell, pledge, hypothecate,
grant any option to purchase or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under
the Act relating to, any additional shares of its Securities or
securities convertible into or exchangeable or exercisable for any
shares of its Securities, or publicly disclose the intention to make
any
<PAGE> 10
10
such offer, sale, pledge, disposition or filing, without the prior
written consent of CSFBC, except for the issuance of stock options
under the Stock Option plans (as defined in the Offering Document),
the issuance or sale of Securities by the Company upon the exercise of
stock options outstanding on the date hereof and the issuance of no
more than ______shares of unregistered Securities in consideration for
the acquisition of stock or assets of other companies; provided that
the person or entity to whom any such unregistered Securities may be
issued shall agree in writing not to so transfer such Securities until
the expiration of the 120-day period set forth in this Section 5(h).
(i) The Company and each Selling Stockholder agree with the
several Underwriters that the Company will pay all expenses incident
to the performance of the obligations of the Company and such Selling
Stockholder, as the case may be, under this Agreement, for any filing
fees and other expenses (including fees and disbursements of counsel
to the Company and the fees and disbursements of one counsel to the
Selling Stockholders) in connection with qualification of the Offered
Securities for sale under the laws of such jurisdictions as CSFBC
designates and the printing of memoranda relating thereto, for the
filing fee incident to, and the reasonable fees and disbursements of
counsel to the Underwriters in connection with, the review by the
National Association of Securities Dealers, Inc. of the Offered
Securities, for any travel expenses of the Company's officers and
employees and any other expenses of the Company in connection with
attending or hosting meetings with prospective purchasers of the
Offered Securities, and for expenses incurred in distributing
preliminary prospectuses and the Prospectus (including any amendments
and supplements thereto) to the Underwriters, except that each Selling
Stockholder will pay any transfer taxes on the sale by the Selling
Stockholders of the Offered Securities to the Underwriters.
(j) Each Selling Stockholder agrees to deliver to CSFBC,
attention: Transactions Advisory Group on or prior to the First
Closing Date a properly completed and executed United States Treasury
Department Form W-9 (or other applicable form or statement specified
by Treasury Department regulations in lieu thereof).
(k) Each Selling Stockholder agrees, for a period of 120 days
after the date hereof, that such Selling Stockholder will not, without
the prior written consent of CSFBC, offer, sell, contract to sell,
pledge, hypothecate, grant any option to purchase or otherwise dispose
of, directly or indirectly, any additional shares of the Securities of
the Company or securities convertible into or exchangeable or
exercisable for any shares of Securities (including, without
limitation, securities of the Company which may be deemed to be
beneficially owned by such Selling Stockholder in accordance with the
rules and regulations of the Securities and Exchange Commission and
securities which may be issued upon exercise of a stock option or
warrant), or publicly disclose the intention to make any such offer,
sale, pledge, hypothecation, grant or disposal.
(l) Each Selling Stockholder will advise you promptly, and if
requested by you, will confirm such advice in writing, of any change
in condition (financial or other), business, properties or results of
operations of the Company or of any change in information relating to
such Selling Stockholder or the Company or any new information
relating to the Company or relating to any matter stated in the
Prospectus or any amendment or supplement thereto that comes to the
attention of such Selling Stockholder that suggests that any statement
made in the Registration Statement or the Prospectus (as then amended
or supplemented, if amended or supplemented) is or may be untrue in
any material respect or that the Registration Statement or Prospectus
(as then amended or supplemented, if amended or supplemented) omits or
may omit to state a material fact or a fact necessary to be stated
therein in order to make the statements therein not misleading in any
material respect, or of the necessity to amend or supplement the
Prospectus (as then amended or supplemented, if amended or
supplemented) in order to comply with the Act or any other law.
<PAGE> 11
11
6. Conditions of the Obligations of the Underwriters. The obligations
of the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Stockholders herein, to
the accuracy of the statements of Company officers made pursuant to the
provisions hereof, to the performance by the Company and the Selling
Stockholders of their obligations hereunder and to the following additional
conditions precedent:
(a) The Representatives shall have received letters, each
dated the date of delivery thereof (which, if the Effective Time of
the Initial Registration Statement is prior to the execution and
delivery of this Agreement, shall be on or prior to the date of this
Agreement or, if the Effective Time of the Initial Registration
Statement is subsequent to the execution and delivery of this
Agreement, shall be prior to the filing of the amendment or
post-effective amendment to the registration statement to be filed
shortly prior to such Effective Time), (1) from Ernst & Young LLP
confirming that they are independent public accountants to each of the
Company and SLI within the meaning of the Act and the applicable
published Rules and Regulations thereunder and (2) from Hards Pearson
confirming that they are independent public accountants to CML Canada
within the meaning of the Act and the applicable published Rules and
Regulations thereunder, stating to the effect that (as applicable):
(i) in their opinion the financial statements
and schedules examined by them and included in the
Registration Statements comply as to form in all material
respects with the applicable accounting requirements of the
Act and the related published Rules and Regulations;
(ii) they have performed the procedures
specified by the American Institute of Certified Public
Accountants for a review of interim financial information as
described in Statement of Auditing Standards No. 71, Interim
Financial Information, on the unaudited financial statements
included in the Registration Statements;
(iii) on the basis of the review referred to
in clause (ii) above, inquiries of officials of the Company
who have responsibility for financial and accounting matters
and other specified procedures, nothing came to their
attention that caused them to believe that:
(A) the unaudited financial statements
included in the Registration Statements do not comply
as to form in all material respects with the
applicable accounting requirements of the Act and the
related published Rules and Regulations or any
material modifications should be made to such
unaudited financial statements for them to be in
conformity with generally accepted accounting
principles;
(B) the unaudited consolidated net sales, net
operating income, net income and net income per share
amounts for the one month periods ended December 31,
1997 and December 31, 1996 and the three month
periods ended March 31, 1998 and March 31, 1997
included in the Prospectus do not agree with the
amounts set forth in the unaudited consolidated
financial statements for those same periods or were
not determined on a basis substantially consistent
with that of the corresponding amounts in the audited
statements of income;
(C) at the date of the latest available
balance sheet read by such accountants, or at a
subsequent specified date not more than three
business days prior to the date of this Agreement,
there was any change in the capital
<PAGE> 12
12
stock or any increase in short-term indebtedness or
long-term debt of the Company and its consolidated
subsidiaries or, at the date of the latest available
balance sheet read by such accountants, there was any
decrease in consolidated net current assets or net
assets, as compared with amounts shown on the latest
balance sheet included in the Prospectus; or
(D) for the period from the closing date of
the latest statements of operations included in the
Prospectus to the closing date of the latest
available statement read by such accountants there
were any decreases, as compared with the
corresponding period of the previous year, in
consolidated net sales or operating income in the
total or per share amounts of consolidated income or
net income from continuing operations;
except in all cases set forth in clauses (C) and (D) above for
changes, increases or decreases which the Prospectus discloses
have occurred or may occur or which are described in such
letter;
(iv) they have (a) read the unaudited pro
forma statement of operations for the year ended November 30,
1997, the one month ended December 31, 1997 and the three
months ended March 31, 1998 included in the Registration
Statements; (b) inquired of certain officials who have
responsibility for financial and accounting matters about (1)
the basis for their determination of the pro forma adjustments
and (2) whether such unaudited data complies as to form in all
material respects with the applicable accounting requirements
of Rule 11-02 of Regulation S-X; and (c) proved the arithmetic
accuracy of the application of the pro forma adjustments to
the historical amounts in such unaudited pro forma data; and
that nothing has come to their attention or a result of their
procedures that caused them to believe that such data do not
comply as to form in all material respects with Regulation S-X
or that the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of such
statements; and
(v) they have compared specified dollar
amounts (or percentages derived from such dollar amounts) and
other financial information contained in the Registration
Statements (in each case to the extent that such dollar
amounts, percentages and other financial information are
derived from the general accounting records of the Company and
its subsidiaries subject to the internal controls of the
Company's accounting system or are derived directly from such
records by analysis or computation) with the results obtained
from inquiries, a reading of such general accounting records
and other procedures specified in such letter and have found
such dollar amounts, percentages and other financial
information to be in agreement with such results, except as
otherwise specified in such letter.
For purposes of this subsection, (i) if the Effective Time of the
Initial Registration Statements is subsequent to the execution and
delivery of this Agreement, "Registration Statements" shall mean the
initial registration statement as proposed to be amended by the
amendment or post-effective amendment to be filed shortly prior to its
Effective Time, (ii) if the Effective Time of the Initial Registration
Statements is prior to the execution and delivery of this Agreement
but the Effective Time of the Additional Registration Statement is
subsequent to such execution and delivery, "Registration Statements"
shall mean the Initial Registration Statement and the additional
registration statement as proposed to be filed or as proposed to be
amended by the post-effective amendment to be filed shortly prior to
its Effective Time, and (iii) "Prospectus" shall mean the prospectus
included in the Registration Statements.
<PAGE> 13
13
(b) If the Effective Time of the Initial Registration
Statement is not prior to the execution and delivery of this
Agreement, such Effective Time shall have occurred not later than
10:00 P.M., New York time, on the date of this Agreement or such later
date as shall have been consented to by CSFBC. If the Effective Time
of the Additional Registration Statement (if any) is not prior to the
execution and delivery of this Agreement, such Effective Time shall
have occurred not later than 10:00 P.M., New York time, on the date of
this Agreement or, if earlier, the time the Prospectus is printed and
distributed to any Underwriter, or shall have occurred at such later
date as shall have been consented to by CSFBC. If the Effective Time
of the Initial Registration Statement is prior to the execution and
delivery of this Agreement, the Prospectus shall have been filed with
the Commission in accordance with the Rules and Regulations and
Section 5(a) of this Agreement. Prior to such Closing Date, no stop
order suspending the effectiveness of a Registration Statement shall
have been issued and no proceedings for that purpose shall have been
instituted or, to the knowledge of any Selling Stockholder, the
Company or the Representatives, shall be contemplated by the
Commission.
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any
development or event involving a prospective change, in the condition
(financial or other), business, properties or results of operations of
the Company or its subsidiaries which, in the judgment of a majority
in interest of the Underwriters including the Representatives, is
material and adverse and makes it impractical or inadvisable to
proceed with completion of the public offering or the sale of and
payment for the Offered Securities; (ii) any downgrading in the rating
of any debt securities or preferred stock of the Company by any
"nationally recognized statistical rating organization" (as defined
for purposes of Rule 436(g) under the Act), or any public announcement
that any such organization has under surveillance or review its rating
of any debt securities or preferred stock of the Company (other than
an announcement with positive implications of a possible upgrading,
and no implication of a possible downgrading, of such rating); (iii)
any suspension or limitation of trading in securities generally on the
New York Stock Exchange, or any setting of minimum prices for trading
on such exchange, or any suspension of trading of any securities of
the Company on any exchange or in the over-the-counter market; (iv)
any banking moratorium declared by U.S. Federal or New York
authorities; or (v) any outbreak or escalation of major hostilities in
which the United States is involved, any declaration of war by
Congress or any other substantial national or international calamity
or emergency if, in the judgment of a majority in interest of the
Underwriters including the Representatives, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the public
offering or the sale of and payment for the Offered Securities.
(d) The Representatives shall have received the opinions,
dated such Closing Date, of Schifino & Fleischer, P.A. and/or Bingham
Dana LLP, counsel for the Company (which opinions shall be divided
between such counsels in a manner satisfactory to counsel for the
Representatives), to the effect that:
(i) The Company has an authorized capitalization as
set forth in the Registration Statement and the Prospectus;
the Offered Securities delivered on such Closing Date and all
other outstanding shares of the Common Stock of the Company
have been duly authorized and validly issued, are fully paid
and nonassessable and conform to the description thereof
contained in the Prospectus under the caption "Description of
Capital Stock"; and the stockholders of the Company have no
preemptive rights with respect to the Securities;
(ii) This Agreement has been duly authorized,
executed and delivered by the Company;
<PAGE> 14
14
(iii) There are no contracts, agreements or
understandings known to such counsel between the Company and
any person granting such person the right to require the
Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned
by such person or to require the Company to include such
securities in the securities registered pursuant to the
Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the
Company under the Act;
(iv) The Company is not and, after giving effect
to the offering and sale of the Offered Securities and the
application of the proceeds thereof as described in the
Prospectus, will not be an "investment company" as defined in
the Investment Company Act of 1940.
(v) To such counsel's knowledge, neither the
Company nor any of its subsidiaries (A) is in violation of its
charter or by-laws, (B) is in default, and no event has
occurred, which, with notice or lapse of time or both, would
constitute a default, in the due performance or observance of
any term, covenant or condition contained in any agreement or
instrument to which it is a party or by which it is bound or to
which any of its properties or assets is subject or (C) is in
violation of any law, ordinance, governmental rule, regulation
or court decree to which it or its property or assets may be
subject or has failed to obtain any license, permit,
certificate, franchise or other governmental authorization or
permit necessary to the ownership of its property or to the
conduct of its business except, in the case of clauses (B) and
(C), for those defaults, violations or failures which, either
individually or in the aggregate, would not be reasonably
likely to have a material adverse effect on the Company and its
subsidiaries taken as a whole.
(vi) No consent, approval, authorization or order
of, or filing with, any governmental agency or body or any
court is required to be obtained or made by the Company for
the consummation of the transactions contemplated by this
Agreement in connection with the sale of the Offered
Securities, except such as have been obtained and made under
the Act and such as may be required under state securities
laws;
(vii) The execution, delivery and performance of
this Agreement and the consummation of the transactions herein
or therein contemplated will not result in a breach or
violation of (A) any of the terms and provisions of, or
constitute a default under, any statute, any rule, regulation
or order of any governmental agency or body or any court having
jurisdiction over the Company or any subsidiary of the Company
or any of their properties, (B) any agreement or instrument to
which the Company or any such subsidiary is a party or by which
the Company or any such subsidiary is bound or to which any of
the properties of the Company or any such subsidiary is
subject, or (C) the charter or by-laws of the Company or any
such subsidiary;
(viii) To the best of such counsel's knowledge and
other than as set forth in the Registration Statement and the
Prospectus, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a
party or of which any property or asset of the Company or any
of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, might be
reasonably likely to have a material adverse effect on the
condition (financial or otherwise), business, properties or
results of operations of the Company and its subsidiaries taken
as a whole (a "Material Adverse Effect"); and, to the best of
such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by
others;
<PAGE> 15
15
(ix) The Company and each of its subsidiaries have
good and marketable title in fee simple to all real property
owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the
Registration Statement and the Prospectus or such as do not
materially affect the value of such property and do not
materially interfere with the use made and proposed to be made
of such property by the Company and its subsidiaries; and all
real property and buildings held under lease by the Company
and its subsidiaries are held by them under valid, subsisting
and enforceable leases, with such exceptions as are not
material and do not interfere with the use made and proposed
to be made of such property and buildings by the Company and
its subsidiaries;
(x) To such counsel's knowledge and other than as
set forth in the Registration Statement and the Prospectus,
(A) the Company possesses such certificates, authorizations or
permits issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct the
business now operated by it, except where the failure to
possess such certificates, authorizations or permits would not
be reasonably expected to have a Material Adverse Effect, and
(B) the Company has not received any notice of proceedings
relating to the revocation or modification of any such
certificate, authorization or permit which, singularly or in
the aggregate, if the subject of an unfavorable decision,
ruling, or finding, would be reasonably expected to have such
a Material Adverse Effect;
(xi) To such counsel's knowledge and other than as
set forth in the Registration Statement and the Prospectus,
the Company and each of its subsidiaries own or possess
adequate rights to use all material patents, patent
applications, trademarks, service marks, trade names,
trademark registrations, service mark registrations,
copyrights and licenses necessary for the conduct of their
respective businesses and have no reason to believe that the
conduct of their respective businesses will conflict with, and
have not received any notice of any claim of conflict with,
any such rights of others;
(xii) The descriptions in the Registration
Statements and Prospectus of statutes, legal and governmental
proceedings and contracts and other documents are accurate and
fairly present the information required to be shown; and such
counsel do not know of any legal or governmental proceedings
required to be described in a Registration Statement or the
Prospectus which are not described as required or of any
contracts or documents of a character required to be described
in a Registration Statement or the Prospectus or to be filed
as exhibits to a Registration Statement which are not
described and filed as required;
(xiii) The Initial Registration Statement was
declared effective under the Act as of the date and time
specified in such opinion, the Additional Registration
Statement (if any) was filed and became effective under the
Act as of the date and time (if determinable) specified in
such opinion, the Prospectus either was filed with the
Commission pursuant to the subparagraph of Rule 424(b)
specified in such opinion on the date specified therein or was
included in the Initial Registration Statement or the
Additional Registration Statement (as the case may be), and,
to the best of the knowledge of such counsel, no stop order
suspending the effectiveness of a Registration Statement or
any part thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated
under the Act, and each Registration Statement and the
Prospectus, and each amendment or supplement thereto, as of
their respective effective or issue dates, complied as to form
in all material respects with the requirements of the Act and
the Rules and Regulations; such counsel have no reason to
believe that any part of a Registration Statement or any
amendment
<PAGE> 16
16
thereto, as of its effective date or as of such Closing Date,
contained or contains any untrue statement of a material fact
or omitted or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading; or that the Prospectus or any amendment or
supplement thereto, as of its issue date or as of such Closing
Date, contained or contains any untrue statement of a material
fact or omitted or omits 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; it
being understood that such counsel need express no opinion as
to the financial statements or other financial data contained
in the Registration Statements or the Prospectus; and
In rendering their opinions as aforesaid, counsel may rely upon an
opinion or opinions, each dated such Closing Date, of other counsel
retained by them or the Company as to laws of any jurisdiction other
than the United States or the State of Florida or the Commonwealth of
Massachusetts, as the case may be, provided that (x) each such local
counsel is acceptable to counsel for the Representatives, (y) such
reliance is expressly authorized by each opinion so relied upon and a
copy of each such opinion is delivered to the Representatives and is,
in form and substance satisfactory to them and their counsel, and (z)
counsel shall state in their opinion that they believe that they and
the Underwriters are justified in relying thereon.
(e) The Representatives shall have received an opinion, dated
such Closing Date, of Crowe & Dunlevy P.C., Oklahoma counsel for the
Company, to the effect that:
(i) The Company has been duly incorporated and is a
corporation validly existing under the laws of the State of
Oklahoma, with corporate power and authority to own its
properties and conduct its business as described in the
Prospectus; and the Company is duly qualified to do business
as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or
the conduct of its business requires such qualification;
(ii) The Company has an authorized capitalization as
set forth in the Registration Statement and the Prospectus;
the Offered Securities delivered on such Closing Date and all
other outstanding shares of the Common Stock of the Company
have been duly authorized and validly issued, are fully paid
and nonassessable and conform to the description thereof
contained in the Prospectus under the caption "Description of
Capital Stock"; and the stockholders of the Company have no
preemptive rights with respect to the Securities;
(iii) This Agreement has been duly authorized,
executed and delivered by the Company;
(iv) The form of certificates for the Securities
conforms to the requirements of the Oklahoma Business
Corporation Act;
(v) To such counsel's knowledge, the Company (A) is
not in violation of its charter or by- laws, (B) is not in
default, and no event has occurred, which, with notice or
lapse of time or both, would constitute a default, in the due
performance or observance of any term, covenant or condition
contained in any agreement or instrument to which it is a
party or by which it is bound or to which any of its
properties or assets is subject or (C) is not in violation of
any Oklahoma law, ordinance, governmental rule, regulation or
court decree to which it or its property or assets may be
subject or has failed to obtain any license, permit,
certificate, franchise or other governmental authorization or
permit necessary to the ownership of its property or to the
conduct of its business except, in the case of clauses (B) and
(C),
<PAGE> 17
17
for those defaults, violations or failures which, either
individually or in the aggregate, would not be reasonably
likely to have a material adverse effect on the Company and
its subsidiaries taken as a whole;
(vi) No consent, approval, authorization or order
of, or filing with, any Oklahoma governmental agency or body
or any Oklahoma court is required to be obtained or made by
the Company for the consummation of the transactions
contemplated by this Agreement in connection with the sale of
the Offered Securities, except such as have been obtained and
made and such as may be required under Oklahoma state
securities laws;
(vii) The execution, delivery and performance of
this Agreement and the consummation of the transactions herein
or therein contemplated will not result in a breach or
violation of (A) any of the terms and provisions of, or
constitute a default under, any Oklahoma statute, any rule,
regulation or order of any Oklahoma governmental agency or
body or any Oklahoma court having jurisdiction over the
Company or any of its properties, (B) any agreement or
instrument to which the Company is a party or by which the
Company is bound or to which any of the properties of the
Company is subject, or (C) the charter or by-laws of the
Company;
(f) The Representatives shall have received opinions, dated
such Closing Date, of such counsel to each Significant Subsidiary of
the Company (as defined in Rule 1-02(w) of Regulation S-X) as may be
reasonably satisfactory to the Representatives, to the effect that:
(i) such Significant Subsidiary has been duly
incorporated or organized and is validly existing as a
corporation in good standing under the laws of its
jurisdiction of incorporation, and such Significant Subsidiary
has full corporate power and authority to conduct its business
as described in the Registration Statement and the Prospectus;
(ii) all of the issued shares of capital stock of
such Significant Subsidiary have been duly and validly
authorized and issued, are fully paid and nonassessable, and
(except for directors' qualifying shares) all such shares are
owned of record by the Company and/or a subsidiary of the
Company, free and clear of all liens, encumbrances, equities
or claims;
(iii) to such counsel's knowledge, such Significant
Subsidiary (A) is not in violation of its charter or by-laws,
(B) is not in default, and no event has occurred, which, with
notice or lapse of time or both, would constitute a default,
in the due performance or observance of any term, covenant or
condition contained in any agreement or instrument to which it
is a party or by which it is bound or to which any of its
properties or assets is subject or (C) is not in violation of
any law, ordinance, governmental rule, regulation or court
decree to which it or its property or assets may be subject or
has failed to obtain any license, permit, certificate,
franchise or other governmental authorization or permit
necessary to the ownership of its property or to the conduct
of its business except, in the case of clauses (B) and (C),
for those defaults, violations or failures which, either
individually or in the aggregate, would not be reasonably
likely to have a material adverse effect on the Company and
its subsidiaries taken as a whole;
(iv) No consent, approval, authorization or order
of, or filing with, any [local] governmental agency or body or
any [local] court is required to be obtained or made by such
Significant Subsidiary for the consummation of the
transactions contemplated by this Agreement in connection with
the sale of the Offered Securities,
<PAGE> 18
18
except such as have been obtained and made and such as
may be required under state securities laws; and
(v) the execution, delivery and performance of this
Agreement and the consummation of the transactions herein or
therein contemplated will not result in a breach or violation
of (A) any of the terms and provisions of, or constitute a
default under, any statute, any rule, regulation or order of
any governmental agency or body or any court having
jurisdiction over such Significant Subsidiary or any of its
properties, (B) any agreement or instrument to which such
Significant Subsidiary is a party or by which such Significant
Subsidiary is bound or to which any of its properties is
subject, or (C) the charter or by-laws of such Significant
Subsidiary.
(g) The Representatives shall have received an executed copy
of the opinion contemplated by the Power of Attorney executed and
delivered by or on behalf of each Selling Stockholder party to the
Custody Agreement to the effect that:
(i) Each Selling Stockholder has the legal capacity,
power and authority to sell the Offered Securities to be sold
by it;
(ii) Each such Selling Stockholder is the sole
registered owner of the Offered Securities to be sold by it;
and upon payment and transfer as contemplated by the
Underwriting Agreement, the Underwriters will acquire a
security entitlement with respect to such Offered Securities
and no action based on an adverse claim (within the meaning of
the New York UCC) to such security entitlement may be asserted
against the Underwriters (this opinion may be based on the
following assumptions: (A) The Depository Trust Company
("DTC") is a "clearing corporation" and, consequently, a
"securities intermediary," as defined in Section 8-102 of the
Uniform Commercial Code as in effect in the State of New York
(the "New York UCC"), (B) such Offered Securities are
registered at the closing in the name of DTC or its nominee,
and DTC or another person on behalf of DTC maintains
possession of certificates representing such Offered
Securities, (C) DTC indicates by book entry that security
entitlements with respect to such Offered Securities have been
credited at the closing to the Underwriters' securities
accounts at DTC and (D) the Underwriters acquire such security
entitlements without notice of any adverse claim);
(iii) No consent, approval, authorization or order
of, or filing with, any governmental agency or body or any
court is required to be obtained or made by such Selling
Stockholder for the consummation of the transactions
contemplated by this Agreement or the Custody Agreement in
connection with the sale of the Offered Securities sold by
such Selling Stockholder, except such as have been obtained
and made under the Act and such as may be required under state
securities laws;
(iv) The execution, delivery and performance of this
Agreement and the Custody Agreement and the consummation of
the transactions therein and herein contemplated will not
result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, any
rule, regulation or order of any governmental agency or body
or any court having jurisdiction over such Selling Stockholder
or any of its properties or any agreement or instrument to
which such Selling Stockholder is a party or by which such
Selling Stockholder is bound or to which any of the properties
of such Selling Stockholder is subject, or the charter or
by-laws of such Selling Stockholder which is a corporation;
(v) The Power of Attorney and related Custody
Agreement with respect to each Selling Stockholder has been
duly authorized, executed and delivered by such
<PAGE> 19
19
Selling Stockholder and constitute valid and legally binding
obligations of each such Selling Stockholder enforceable in
accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles;
and
(vi) This Agreement has been duly authorized,
executed and delivered by such Selling Stockholder.
(h) The Representatives shall have received from Simpson
Thacher & Bartlett, counsel for the Underwriters, such opinion or
opinions, dated such Closing Date, with respect to the incorporation
of the Company, the validity of the Offered Securities delivered on
such Closing Date, the Registration Statements, the Prospectus and
other related matters as the Representatives may require, and the
Selling Stockholders and the Company shall have furnished to such
counsel such documents as they request for the purpose of enabling
them to pass upon such matters. In rendering such opinion, Simpson
Thacher & Bartlett may rely as to the incorporation of the Company and
all other matters governed by Oklahoma law upon the opinions of
Schifino & Fleischer, P.A. and Crowe & Dunlevy P.C. referred to above.
(i) The Representatives shall have received a certificate,
dated such Closing Date, of the President or any Vice President and a
principal financial or accounting officer of the Company in which such
officers, to the best of their knowledge after reasonable
investigation, shall state that: the representations and warranties of
the Company in this Agreement are true and correct; the Company has
complied with all agreements and satisfied all conditions on its part
to be performed or satisfied hereunder at or prior to such Closing
Date; no stop order suspending the effectiveness of any Registration
Statement has been issued and no proceedings for that purpose have
been instituted or are contemplated by the Commission; the Additional
Registration Statement (if any) satisfying the requirements of
subparagraphs (1) and (3) of Rule 462(b) was filed pursuant to Rule
462(b), including payment of the applicable filing fee in accordance
with Rule 111(a) or (b) under the Act, prior to the time the
Prospectus was printed and distributed to any Underwriter; and,
subsequent to the date of the most recent financial statements in the
Prospectus, there has been no material adverse change, nor any
development or event involving a prospective material adverse change,
in the condition (financial or other), business, properties or results
of operations of the Company and its subsidiaries taken as a whole
except as set forth in or contemplated by the Prospectus or as
described in such certificate.
(j) The Representatives shall have received a letter, dated
such Closing Date, from each of Ernst & Young LLP and Hards Pearson
which meets the requirements of subsection (a) of this Section, except
that the specified date referred to in such subsection will be a date
not more than three business days prior to such Closing Date for the
purposes of this subsection.
(k) The Representatives shall have received a "lock-up"
letter to the effect set forth in Section 5(k) from Mr. Norman
Scoular.
(l) The Securities shall have been listed or approved for
listing, subject to official notice of issuance, on the New York Stock
Exchange.
The Selling Stockholders and the Company will furnish the Representatives with
such conformed copies of such opinions, certificates, letters and documents as
the Representatives reasonably request. CSFBC may in its sole discretion waive
on behalf of the Underwriters compliance with any conditions to the obligations
of the Underwriters hereunder, whether in respect of an Optional Closing Date
or otherwise.
<PAGE> 20
20
7. Indemnification and Contribution. (a) The Company and the
Selling Stockholders, jointly and severally, will indemnify and hold harmless
each Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement, the Prospectus, or any amendment or supplement thereto, or any
related preliminary prospectus, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company and the Selling Stockholders will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through the Representatives specifically for use
therein, it being understood and agreed that the only such information
furnished by any Underwriter consists of the information described as such in
subsection (b) below; provided that the liability of each Selling Stockholder
under the foregoing indemnity agreement shall be limited to an amount equal to
the initial public offering price of the Securities sold by such Selling
Stockholder, less the underwriting discount as set forth on the cover page of
the Prospectus.
(b) Each Underwriter will severally and not jointly indemnify and
hold harmless the Company and each Selling Stockholder against any losses,
claims, damages or liabilities to which the Company or such Selling Stockholder
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement, the Prospectus, or any amendment
or supplement thereto, or any related preliminary prospectus, or arise out of
or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through the Representatives
specifically for use therein, and will reimburse any legal or other expenses
reasonably incurred by the Company and each Selling Stockholder in connection
with investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred, it being understood and agreed that the
only such information furnished by any Underwriter consists of the following
information in the Prospectus furnished on behalf of each Underwriter: the last
paragraph at the bottom of the cover page concerning the terms of the offering
by the Underwriters, the legend concerning over-allotments, stabilizing and
passive market making on the inside front cover page and the concession,
reallowance figures appearing in the fourth paragraph under the caption
"Underwriting" and the seventh paragraph under such caption.
(c) Promptly after receipt by an indemnified party under this Section
or Section 9 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party under subsection (a) or (b) above or Section 9, notify the indemnifying
party of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than under subsection (a) or (b) above or
Section 9. In case any such action is brought against any indemnified party
and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party
under this Section or Section 9, as the case may be, for any legal or other
expenses subsequently incurred by
<PAGE> 21
21
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on any claims that are the subject
matter of such action.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Stockholders on the one hand and the
Underwriters on the other from the offering of the Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Selling Stockholders on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company and the Selling
Stockholders bear to the total underwriting discounts and commissions received
by the Underwriters. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Selling Stockholders or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this subsection (d) shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint. The liability of each Selling Stockholder for
contribution hereunder shall be limited to an aggregate amount equal to the
initial public offering price of the Securities sold by such Selling
Stockholder, less the underwriting discount, as set forth on the front cover
page of the Prospectus.
(e) The obligations of the Company and the Selling Stockholders under
this Section or Section 9 shall be in addition to any liability which the
Company and the Selling Stockholders may otherwise have and shall extend, upon
the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each director of the Company, to each officer of the
Company who has signed a Registration Statement and to each person, if any, who
controls the Company within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters
default in their obligations to purchase Offered Securities hereunder on either
the First or any Optional Closing Date and the aggregate number of shares of
Offered Securities that such defaulting Underwriter or Underwriters agreed but
failed to purchase does not exceed 10% of the total number of shares of Offered
Securities
<PAGE> 22
22
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company and the Selling Stockholders for
the purchase of such Offered Securities by other persons, including any of the
Underwriters, but if no such arrangements are made by such Closing Date, the
non-defaulting Underwriters shall be obligated severally, in proportion to
their respective commitments hereunder, to purchase the Offered Securities that
such defaulting Underwriters agreed but failed to purchase on such Closing
Date. If any Underwriter or Underwriters so default and the aggregate number of
shares of Offered Securities with respect to which such default or defaults
occur exceeds 10% of the total number of shares of Offered Securities that the
Underwriters are obligated to purchase on such Closing Date and arrangements
satisfactory to CSFBC, the Company and the Selling Stockholders for the
purchase of such Offered Securities by other persons are not made within 36
hours after such default, this Agreement will terminate without liability on
the part of any non-defaulting Underwriter, the Company or the Selling
Stockholders, except as provided in Section 9 (provided that if such default
occurs with respect to Optional Securities after the First Closing Date, this
Agreement will not terminate as to the Firm Securities or any Optional
Securities purchased prior to such termination). As used in this Agreement, the
term "Underwriter" includes any person substituted for an Underwriter under
this Section. Nothing herein will relieve a defaulting Underwriter from
liability for its default.
9. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of the Selling Stockholders, of the Company or its officers and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation, or statement
as to the results thereof, made by or on behalf of any Underwriter, any Selling
Stockholder, the Company or any of their respective representatives, officers
or directors or any controlling person, and will survive delivery of and
payment for the Offered Securities. If this Agreement is terminated pursuant to
Section 8 or if for any reason the purchase of the Offered Securities by the
Underwriters is not consummated, the Company and the Selling Stockholders shall
remain responsible for the expenses to be paid or reimbursed by them pursuant
to Section 5 and the respective obligations of the Company, the Selling
Stockholders, and the Underwriters pursuant to Section 7 shall remain in
effect, and if any Offered Securities have been purchased hereunder the
representations and warranties in Section 2 and all obligations under Section 5
shall also remain in effect. If the purchase of the Offered Securities by the
Underwriters is not consummated for any reason other than solely because of the
termination of this Agreement pursuant to Section 8 or the occurrence of any
event specified in clause (iii), (iv) or (v) of Section 6(c), the Company and
the Selling Stockholders will, severally, reimburse the Underwriters for all
out-of-pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telecopied and confirmed
to the Representatives, c/o Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department - Transactions Advisory Group, or, if sent to the Company, will be
mailed, delivered or telecopied and confirmed to it at Chicago Miniature Lamp,
Inc., 500 Chapman Street, Canton, MA 02021, Attention: _____________, or, if
sent to the Selling Stockholders, will be mailed, delivered or telecopied and
confirmed to the address set forth in each Custody Agreement; provided,
however, that any notice to an Underwriter pursuant to Section 7 will be
mailed, delivered or telecopied and confirmed to such Underwriter.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective personal representatives
and successors and the officers and directors and controlling persons referred
to in Section 7, and no other person will have any right or obligation
hereunder.
12. Representation. The Representatives will act for the several
Underwriters in connection with the transactions contemplated by this
Agreement, and any action under this Agreement taken by the Representatives
jointly or by CSFBC will be binding upon all the Underwriters. The
Attorneys-in-Fact
<PAGE> 23
23
under the Power of Attorney will act for the Selling Stockholders party to the
Custody Agreement in connection with such transactions, and any action under or
in respect of this Agreement taken by such Attorneys-in-Fact will be binding
upon those Selling Stockholders party to the Custody Agreement.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
<PAGE> 24
24
If the foregoing is in accordance with the Representatives'
understanding of our agreement, kindly sign and return to the Company one of
the counterparts hereof, whereupon it will become a binding agreement among the
Selling Stockholders, the Company and the several Underwriters in accordance
with its terms.
Very truly yours,
CHICAGO MINIATURE LAMP, INC.
By
-------------------------------
Name:
Title:
PATRICK J. COX AND MARIANNE CONNAUGHTON,
TRUSTEES OF TRUSTS ESTABLISHED FOR THE
CHILDREN OF FRANK M. WARD
By
----------------------------------
FRANK M. WARD GRAT TRUST
By
----------------------------------
FRANK M. WARD
WERNER A. ARNOLD
By
-----------------------------------
Attorney-in-Fact
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
SMITH BARNEY INC.
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS INC.
McDONALD & COMPANY SECURITIES, INC.
Acting on behalf of themselves and as the
Representatives of the several Underwriters.
By CREDIT SUISSE FIRST BOSTON CORPORATION
By
-----------------------------
<PAGE> 25
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF OPTIONAL
FIRM SECURITIES SECURITIES TO
SELLING STOCKHOLDER TO BE SOLD BE SOLD
------------------- --------------- -------------
<S> <C> <C>
PATRICK J. COX AND MARIANNE CONNAUGHTON,
TRUSTEES OF TRUSTS ESTABLISHED FOR THE
CHILDREN OF FRANK M. WARD 1,125,000
FRANK M. WARD 1,125,000
FRANK M. WARD GRAT TRUST 225,000
WERNER A. ARNOLD 150,000 --
--------- ---------
Total ......................................... 2,625,000 393,750
========= =========
</TABLE>
<PAGE> 26
SCHEDULE B
<TABLE>
<CAPTION>
NUMBER OF
FIRM SECURITIES
UNDERWRITER TO BE PURCHASED
----------- ---------------
<S> <C>
Credit Suisse First Boston Corporation . . . . . . . . . . . . . . . . .
Smith Barney Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bear Stearns & Co. Inc. . . . . . . . . . . . . . . . . . . . . . . . . .
Lehman Brothers Inc. . . . . . . . . . . . . . . . . . . . . . . . . . .
McDonald & Company Securities, Inc. . . . . . . . . . . . . . . . . . . .
-----------------
Total . . . . . . . . . . 10,875,000
=================
</TABLE>
<PAGE> 1
EXHIBIT 3.1(c)
AMENDMENT TO THE AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION
OF
CHICAGO MINIATURE LAMP, INC.
We, the undersigned officers of Chicago Miniature Lamp, Inc., an
Oklahoma corporation, do hereby file this Amendment to the Amended and Restated
Certificate of Incorporation, to reflect an amendment to the Amended and
Restated Certificate of Incorporation filed with the Oklahoma Secretary of State
on December 30, 1996, which amendment is set forth below:
Article I of the Amended and Restated Certificate of Incorporation is
hereby amended to read in its entirety as follows:
ARTICLE I
NAME
The name of the Corporation is SLI, Inc.
The foregoing amendment was adopted in accordance with the procedures
set forth in Section 1077 of the Oklahoma General Corporation Act.
IN WITNESS WHEREOF, the Corporation has caused this amendment to be
signed by its President and attested by its Secretary, this 27th day of April,
1998.
CHICAGO MINIATURE LAMP, INC.
By /s/ Frank M. Ward
-----------------------------------
Frank M. Ward, President
ATTEST:
/s/ Richard F. Parenti
- -------------------------------
Richard F. Parenti, Secretary
<PAGE> 1
Exhibit 5.1
[Letterhead of Crowe & Dunlevy, a Professional Corporation]
May 19, 1998
SLI, Inc.
500 Chapman Street
Canton, Massachusetts 02021
Schifino & Fleischer, P.A.
201 N. Franklin Street, Suite 2700
Tampa, Florida 33602
Re: SLI, Inc.
Gentlemen:
This opinion is rendered in connection with the filing by SLI, Inc.,
an Oklahoma corporation (the "Company"), with the Securities and Exchange
Commission of a Registration Statement on Form S-1 (the "Registration
Statement") in connection with the registration under the Securities Act of
1933, as amended, of 10,875,000 shares of common stock ("Common Stock") of the
Company, 8,250,000 of which are being sold by the Company (the "Company
Shares") and 2,625,000 of which are being sold by certain selling shareholders
(the "Selling Shareholders") named in the Registration Statement (the "Selling
Shareholders' Shares"). In addition, the Company will grant to the
underwriters an option to purchase up to an additional 1,237,500 shares of
Common Stock and the Selling Shareholders will grant to the underwriters an
option to purchase up to an additional 393,750 shares of Common Stock to cover
over-allotments, if any (collectively the "Option Shares"). The Company
Shares, the Selling Shareholders' Shares and the Option Shares are hereinafter
collectively referred to as the "Shares."
We have examined such corporate records and documents as we have
deemed relevant and necessary as the basis for this opinion, and we are
familiar with or have reviewed the actions taken by the Company in connection
with the authorization, registration, issuance and sale of the Shares.
We are members of the Oklahoma Bar and do not express any opinion
herein concerning any law other than the laws of the State of Oklahoma.
Based upon the foregoing, we are of the opinion that the Selling
Shareholders' Shares and the Selling Shareholders' shares underlying the Option
Shares are, and the Company Shares and the Company's shares underlying the
Option Shares when issued and delivered in accordance with the Registration
Statement will be, duly authorized and validly issued, fully paid and
nonassessable under the Oklahoma General Corporation Act as in effect on this
date.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in section entitled
"Legal Matters."
Very truly yours,
CROWE & DUNLEVY,
a Professional Corporation
By /s/ Gary H. Baker
---------------------------------
Gary H. Baker
<PAGE> 1
EXHIBIT 10.1(b)
AMENDMENT TO
CHICAGO MINIATURE LAMP, INC
1995 INCENTIVE AND
NON-STATUTORY STOCK OPTION PLAN
The Board of Directors of Chicago Miniature Lamp, Inc. (the "Company")
approved the amendment of the Company's 1995 Incentive and Non-Statutory Stock
Option Plan (the "Plan") to increase the number of shares of Common Stock
available for grant under the Plan from 1,500,000 to 3,000,000, an increase of
1,500,000 shares of Common Stock. The amendment will cause Section 3.1 of the
Plan to be replaced with the following revised Section 3.1.
3.1 Shares Subject to Plan. The stock subject to the options granted
under the Plan shall be shares of the Company's authorized buy
unissued common stock, par value $.01 per share ("Common Stock"). The
total of shares that may be issued pursuant to options granted under
the Plan shall not exceed 3,000,000 shares of Common Stock.
Dated: April 27, 1998
<PAGE> 1
EXHIBIT 10.31
ASSET PURCHASE AND SECURITY AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
this 21st day of November, 1997 by and among CHICAGO MINIATURE LAMP, INC., a
corporation ("Purchaser"), and SOLIUM, INC., a Massachusetts corporation
("Solium") and PACIFIC SCIENTIFIC COMPANY, a California corporation ("Pacific
Scientific") (Solium and Pacific Scientific are sometimes collectively referred
to herein as "Seller").
RECITALS
Seller is engaged in the business of designing, manufacturing and
distributing the electronic ballasts described more fully on Exhibit A (such
business now being conducted by Solium is known as the "Solium Product Line"
and is referred to herein in its entirety as the "Business"). In accordance
with this Agreement, Purchaser desires to purchase, and Seller desires to sell,
the "Assets" described herein.
NOW, THEREFORE, in consideration of the foregoing and the provisions
set forth in this Agreement, the parties hereby agree as follows:
ARTICLE 1: SALE OF ASSETS
1.1 Purchase and Sale of Assets. Subject to the terms and
conditions set forth in this Agreement, at the Closing (as defined in Section
3.1) Seller shall sell to Purchaser, and Purchaser shall purchase and acquire
from Seller, all of Seller's right, title and interest in and to the following
assets (collectively, the "Assets"):
(a) The machinery, fixtures, tools, equipment and other
tangible personal property used in the Business listed on Schedule 1.1(a) (the
"Equipment"); and
(b) Copies of the technical data, specifications, test
procedures, drawings, models, prototypes, manuals, documentation, and other
information relating to the manufacturing and production of the Solium Product
Line listed on Schedule 1.1(b) (the "Materials").
1.2 Excluded Assets: Taxes. All books, records, office furniture,
rights, assets or properties of Seller not specifically listed in Section 1.1
above shall be excluded from the definition of Assets and shall not be acquired
by Purchaser pursuant to this Agreement. Purchaser agrees to pay all sales
taxes, transfer taxes, and similar taxes or charges relating to the sale of the
Assets, but will not be responsible for taxes or other governmental charges
based on the Seller's income or gain from the sale of the Assets.
1.3 No Assumed Liabilities. Purchaser is not assuming any
obligations or liabilities of Seller in connection with the transactions
contemplated hereby, except as expressly set forth in this Agreement. Purchaser
shall assume and perform all obligations arising out of or in connection with
the Assets and any products sold by Purchaser after the Closing.
1.4 Archival and Use of the Materials. Prior to the Closing,
Seller has the right to copy and retain copies of the Materials in any form it
deems necessary (the "Archived Materials"). After the Closing, Seller may copy,
use, distribute, sell, revise, or otherwise utilize the Archived Materials: (a)
in accordance with the terms of the License Agreement; (b) upon the occurrence
of an Event of
<PAGE> 2
Default (as defined in Section 10.3); and (c) in the manner Seller deems
necessary if it or any of its representatives or affiliates become legally
compelled (by oral questions, interrogatories, requests for information or
documents, document production, subpoena, civil or criminal investigative
demand, or similar process) or required by any authority or regulatory body to
make any disclosure concerning the information contained in the Archived
Materials.
1.5 Purchase Price. The purchase price to be paid by Purchaser
for the Assets shall be Two Million Five Hundred Thousand ($2,500,000) (the
"Assets Purchase Price").
ARTICLE 2: CLOSING
2.1 Closing. Subject to fulfillment of all conditions precedent,
the consummation of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Solium located at 41 Pacella
Park, Randolph, Massachusetts on November 24, 1997 at 10:00 A.M., local time,
or at such other time, date or place as Purchaser and Seller mutually may agree
upon (the "Closing Date"). All transactions at the Closing shall be deemed to
take place simultaneously and no transaction at the Closing shall be deemed to
have been completed until all documents set forth in this Article 3 have been
delivered by the parties hereto.
2.2 Obligations of Seller. At the Closing, Seller shall deliver
to Purchaser:
(a) The License Agreement substantially in the form
attached hereto as Exhibit B (the "License
Agreement"), executed by Seller;
(b) The Inventory schedule required by Section 3.1
below; and
(c) Such other documents as may be reasonably requested
by Purchaser to convey the Assets to Purchaser in
accordance with the provisions of this Agreement.
2.3 Obligations of Purchaser. At the Closing, Purchaser shall
deliver to Seller:
(a) The Assets Purchase Price, payable by wire transfer
or bank or certified check;
(b) The License Agreement, executed by Purchaser;
(c) The Inventory Purchase Order required by Section 3.1
below, executed by Purchaser;
(d) The financing statements and other filings required
by Section 10.5 below, executed by Purchaser; and
(e) Such other instruments and documents as may be
reasonably requested by Seller to fully and
effectively evidence the obligations of Purchaser
pursuant hereto.
ARTICLE 3: INVENTORIES AND WARRANTY REPAIRS
3.1 Purchase of Inventory. Approximately twenty-four hours prior
to the Closing, Seller shall prepare a schedule listing all inventory in stock
on such date used in connection with the production and repair of the current
models of the Solium Product Line (the "Inventory"). At the Closing, Purchaser
shall issue to Seller a purchase order (the "Inventory Purchase Order")
purchasing all the Inventory listed on the schedule prepared by Purchaser in
the previous sentence. The purchase price for the Inventory shall be equal to
fifty percent of Seller's cost of the Inventory as set forth on the schedule
and shall be payable in four equal quarterly installments on February 28, 1998,
May 31, 1998, August 31, 1998, and November 30, 1998. Purchaser shall be
responsible for all costs of shipment of the Inventory.
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3.2 Warranty Repair. For a period of sixty (60) months after the Closing,
Purchaser shall agree to perform on behalf of Seller all warranty work relating
to any products sold in connection with the Business by Seller prior to the
Closing Date. Notwithstanding the foregoing, Purchaser is not assuming any
warranty obligation relating to any products sold in connection with the
Business by Seller prior to the Closing Date. All such warranty work and
repairs shall be conducted in a professional, prompt and workmanlike manner,
and in accordance with the terms of the original warranties for such products
provided by Seller. Purchaser shall charge Seller for such warranty work and
repairs in accordance with Schedule 3.2 attached hereto.
ARTICLE 4: REPRESENTATIONS AND WARRANTIES
4.1 Mutual Representations. Each of the parties hereto represents and
warrants as follows:
(a) It has the requisite power and full legal rights to execute and
deliver this Agreement, consummate the transactions contemplated hereby, and
perform its obligations hereunder in accordance with the terms hereof:
(b) This Agreement and the transactions contemplated hereby have
been duly approved and authorized by all requisite corporate action on its part
and this Agreement has been duly executed and delivered by it and constitutes
its legal, valid and binding obligation, enforceable against it in accordance
with its terms; and
(c) Its execution, delivery and performance of this Agreement and its
consummation of the transactions contemplated hereby will not result in (with or
without the giving of notice or lapse of time or both) any conflict, violation,
breach or default or the creation of any lien, or the termination, acceleration,
vesting or modification of any right or obligation, under or in respect of its
charter documents or bylaws, that any judgement, order, decree, statute, rule or
regulation binding on it or applicable to it, or any agreement or instrument to
which it is a party or which it or any of its assets are bound.
4.2 By Seller. Seller represents and warrants to Purchaser that Seller
has good and marketable title to the Assets owned by it and the Assets are
owned free and clear of all liens, claims, and encumbrances, except for liens
of current taxes not yet due or payable. Seller is selling the Assets and the
Inventory strictly on an "AS-IS" basis.
4.3 By Purchaser. Purchaser represents and warrants to Seller that it is
familiar with the condition of the Assets and the Inventory, the business and
the Solium Product Line and acknowledges that neither Seller nor any agent,
representative or employee of Seller has made any representations or warranties
regarding the condition of the Assets, except as set forth expressly in the
previous paragraphs.
4.4 Disclaimer of Other Warranties. EXCEPT AS EXPRESSLY SET FORTH ABOVE
IN THIS ARTICLE 4, NONE OF THE PARTIES HERETO MAKES ANY OTHER REPRESENTATIONS
OR WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY
WARRANTIES AS TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.
ARTICLE 5: ADDITIONAL COVENANTS AND AGREEMENTS
5.1 Training. For a period of 90 days following the Closing Date, Seller
shall provide, at mutually convenient times, up to 500 man-hours of training
and assistance to Purchaser in the use and
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maintenance of the Equipment. Seller and Purchaser shall mutually cooperate in
connection with the scheduling of such training and assistance. Purchaser shall
reimburse Seller for all out-of-pocket costs incurred in connection with the
training and assistance. Neither Seller nor any of its employees or
representatives shall be liable for any actions or omissions with respect to the
training.
5.2 Seller's Name. As promptly as practicable after the Closing Date,
Purchaser shall remove the "Pacific Scientific" name and trademark from all
Assets and Inventory transferred under this Agreement. Within a reasonable
time after the Closing, Solium shall change its name to a name not utilizing
"Solium."
5.3 Payments Received. Purchaser agrees that after the Closing, Purchaser
will hold and promptly transfer and deliver to Seller, from time to time as and
when received by Purchaser, any cash, checks with appropriate endorsements
(using their best efforts not to convert such checks into cash), or other
property that Purchaser may receive on or after the Closing which properly
belongs to Seller and will account to Seller for all such receipts. Purchaser
agrees to cooperate with Seller in a reasonable manner in order to assist Seller
to collect any accounts receivable outstanding as of the Closing.
5.4 No Public Announcement. Neither of the parties hereto shall, without
the approval of the other party (which may not unreasonably withheld), make any
press release or other public announcement concerning the transactions
contemplated by this Agreement, except as and to the extent that such party
shall determine is required by law or the rules and regulations of any exchange
upon which a party's securities are traded (which determination shall be made
by such party based upon the advice of its counsel), in which case the other
party shall be advised in advance and the parties shall use their best efforts
to cause a mutually agreeable release or public announcement regarding the
consummation of the transactions contemplated hereby.
5.5 Custody and Removal of Assets. All title and risk of loss to the
Assets and the Inventory will vest in Buyer effective as of the Closing.
Notwithstanding the foregoing, the parties agree that one full and complete
production line currently at Solium's premises which constitutes part of the
Equipment and which is currently used by Seller shall remain intact at its
current location and may be used exclusively by Seller without cost until
December 31, 1997. After December 31, 1997 and before February 28, 1998,
Purchaser shall remove such production line from Solium's premises. During
Seller's use of this production line, Seller shall be responsible for all
routine maintenance and repairs relating to such equipment. The second full
production line which constitutes part of the Equipment shall be removed by
Purchaser at any time after the Closing Date and prior to February 28, 1998. All
costs and expenses associated with removal of the Assets shall be borne by
Purchaser.
ARTICLE 6: CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
The obligation of Purchaser to purchase the Assets and to carry out its
other obligations under this Agreement shall be subject to the fulfillment of
the following express conditions precedent on or before the Closing, unless
waived in writing by Purchaser or as a otherwise provided herein:
6.1 Absence of Litigation. No action or proceeding shall have been
instituted and remain pending before a court or other governmental body by any
applicable government agency thereof of any person to restrain or prohibit the
consummation of the transactions contemplated by this Agreement.
6.2 Deliveries. Seller shall have executed and delivered to Purchaser the
documents and agreements required to be delivered by Seller to Purchaser at the
Closing in accordance with Section 2.2 above.
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ARTICLE 7: CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The obligations of Seller to transfer and deliver to Purchaser all of
Seller's rights, title, and interest in and to the Assets and to carry out its
other obligations under this Agreement shall be subject to the fulfillment of
the following express conditions precedent on or before the Closing, unless
waived in writing by Seller:
7.1 ABSENCE OF LITIGATION. No action or proceeding shall have been
instituted and remain pending before a court or other applicable governmental
body or agency thereof or any person to restrain or prohibit the consummation
of the transactions contemplated by this Agreement.
7.2 DELIVERIES. Seller shall have received payment of the Assets
Purchase Price and Purchaser shall have executed and delivered to Seller the
documents and agreements required to be delivered by Purchaser to Seller at the
Closing in accordance with Section 2.3 above.
ARTICLE 8: SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATIONS
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and covenants made in this Agreement or in any certificate or other
document delivered pursuant hereto or in connection herewith shall survive the
Closing Date.
8.2 INDEMNIFICATION BY SELLER. Seller hereby agrees to indemnify, defend
and hold harmless Purchaser and its agents, directors, officers, employees,
consultants and shareholders from and against any and all claims, liabilities,
losses, fines, penalties, costs and expenses including, without limitation,
reasonable attorneys' fees (singularly, a "Liability," and collectively,
"Liabilities"), that arise out of or relate to (a) any breach of, or failure by
Seller to perform any of its representations, warranties or covenants contained
in the Transaction Documents (as defined in Section 10.2 below) or in any other
instrument or document furnished by Seller pursuant to the Transaction
Documents or (b) the operation of the Business or the Assets prior to the
Closing.
8.3 INDEMNIFICATION BY PURCHASER. Purchaser hereby agrees to indemnify,
defend and hold harmless Seller and its agents, directors, officers, employees,
consultants and shareholders from and against any and all Liabilities that
arise out of or relate to (a) any breach of, or failure by Purchaser to perform
any of its representations, warranties or covenants contained in the
Transaction Documents or in any other instrument or document furnished or to be
furnished by Purchaser pursuant to the Transaction Documents or (b) the
operation of the Business or the Assets on or after the Closing.
8.4 LIMITATION ON INDEMNIFICATION. Notwithstanding anything contained
this Article 8 to the contrary, neither Seller nor Purchaser shall be obligated
to indemnify the other unless the amount of any Liability incurred or suffered
by Purchaser or Seller, as the case may be, exceeds $25,000 on per item basis
and then only to the extent that the amount of such Liability exceeds $25,000
(any per item amount which equals or is under $25,000 is hereinafter referred
to as a "Non-Indemnified Loss"). At such time as the aggregate amount of all
Non-Indemnified Losses incurred by any one party exceeds $100,000, then the
party incurring such Non-Indemnifiable Losses shall be entitled to
indemnification by the other party for the full amount of all Liabilities first
incurred or suffered by such party. The maximum amount of liability which
either Seller or Purchaser may be subject to under the indemnification provided
for in this Section 8 shall not exceed $2,500,000.
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ARTICLE 9: TERMINATION
9.1 TERMINATION. This Agreement may be terminated prior to Closing:
(a) By mutual consent of Purchaser and Seller; or
(b) By written notice from Seller, if the conditions in Article 7 of
this Agreement have not been satisfied by the Closing Date; or
(c) By written notice from the Purchaser, if the conditions in
Article 6 of this Agreement have not been satisfied by the Closing Date; or
(d) By either Purchaser or Seller in accordance with Section 9.2
below; or
(e) By written notice from either Purchaser or Seller if the Closing
does not occur on or prior to November 24, 1997.
The earlier of the events listed in subclauses (a) through (e) above to
occur is referred to herein as the "Termination Date." In the event that this
Agreement is terminated pursuant to the provisions of this Section 9.1, this
Agreement shall become null and void and shall have no further effect, and no
party shall have any liability with respect thereto except to the extent that
such termination results from the willful breach by a party hereto of any of
its representations, warranties, covenants or agreements set forth in this
Agreement.
ARTICLE 10: GRANT OF SECURITY INTEREST
10.1 GRANT OF SECURITY INTEREST. Purchaser hereby grants to Seller a
continuing security interest in all of the Assets sold to Purchaser pursuant to
this Agreement, together with all present and future accessories, additions,
attachments, proceeds, products, improvements, replacements and substitutions
of or to any of the foregoing (collectively the "Collateral").
10.2 OBLIGATIONS SECURED. The security interest created by this
Agreement is given for the purpose of securing (a) all obligations under this
Agreement and the License Agreement (collectively the "Transaction Documents"),
and (b) any and all amendments, modifications, renewals and/or extensions to
any of the Transaction Documents (collectively the "Obligations").
10.3 EVENTS OF DEFAULT. Each of the following shall constitute an event
of default ("Event of Default") under this Agreement:
(a) Purchaser shall fail to pay when due the payment obligations due
under the Transaction Documents or Purchaser breaches or fails to perform any
other covenant set forth in the Transaction Documents; or
(b) Any representation or warranty made by Purchaser in the
Transaction Documents is false, misleading or incomplete in any material
respect; or
(c) Purchaser commences a voluntary case or proceeding seeking
liquidation, relief or reorganization under any bankruptcy, insolvency or
similar law or seeks the appointment of a trustee, receiver, liquidator or
other similar official or any involuntary case or other proceeding shall be
commenced against Purchaser seeking liquidation, reorganization or other relief
with respect to its debts.
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<PAGE> 7
If an Event of Default shall occur, the unpaid portion of any payment due under
any Transaction Documents shall be immediately due and payable without
presentment, demand, protest or further notice of any kind. If any payment is
not made when due, the unpaid portion thereof, to the extent permitted by law,
shall bear interest at the rate of ten percent (10%) per annum, payable upon
demand of Seller until such unpaid amount is paid in full.
10.4 REMEDIES. Upon the occurrence and during the continuance of an Event
of Default, Seller shall have the following rights:
(a) All the rights and remedies of a secured party under the
Massachusetts Uniform Commercial Code or other similar law;
(b) The right to enter the premises of Purchaser where the
Collateral is located and kept, and remove the Collateral therefrom to the
premises of Seller or any agent of Seller and to require Purchaser to assemble
the Collateral and make it available to Seller at a place designated by Seller;
(c) To do all acts and things, in Seller's sold discretion, to
fulfill Purchaser's obligations under this Agreement, including endorsing the
name of the Purchaser on any documents, instruments, bills of lading or other
documents relating to the Collateral and using the information recorded on or
contained in any data processing equipment and computer hardware and software
relating to the Collateral; and
(d) Sell or otherwise dispose of all or any of the Collateral at a
private or public sale, in lots or in bulk, all as Seller may in its sole
discretion deem advisable.
The proceeds realized from any sale of Collateral shall be applied first to the
costs, expenses and attorneys' fees incurred by Seller for collection and for
acquisition, protection, storage and sale and delivery of the Collateral;
second to interest due on any of the Obligations, and third to the principal of
the Obligations. If any deficiency shall arise, Purchaser shall remain liable
to Seller therefor.
10.5 INITIAL COVENANTS. Purchaser agrees to execute such documents
(including UCC financing statements) and take such other actions as Seller
deems necessary or desirable to create and perfect a security interest in the
Collateral and not to move the Collateral without twenty (20) days prior notice
to Seller. Seller shall maintain in good condition and repair the Collateral
and discharge all taxes and liens on the Collateral prior to delinquency.
Seller shall insure the Collateral against loss or damage, theft and other
insurable risks in a commercially reasonable manner.
ARTICLE 11: MISCELLANEOUS
11.1 EXPENSES. Each party to this Agreement shall bear and pay its own
costs and expenses incurred in connection with the preparation, execution, and
delivery of this Agreement and the transactions contemplated by this Agreement.
11.2 NOTICES. All notices, claims, certificates, requests, demands and
other communications under this Agreement shall be made in writing and shall be
delivered by hand or sent by prepaid telecopy, or sent, postage prepaid, by
registered, certified or express mail, or reputable overnight courier service,
and shall be deemed given when so delivered by hand, or telecopied, or if
mailed, three (3) days after mailing (one (1) business day in the case of
express mail or overnight courier service) to the parties at the addresses
specified on the Signature Page of this Agreement, or at such other address for
a party as shall be specified by like notice.
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11.3 NO FINDER OR BROKER. Each of Purchaser and Seller represent and
warrant to the other that neither has paid or has become obligated to pay any
fee or commission to any broker or finder in connection with the transactions
contemplated by the Transaction Documents.
11.4 NO ASSIGNMENT. The rights and obligations of each party under this
Agreement shall not be assignable prior to, on or after the Closing without the
written consent of the other party hereto, which consent shall not be
unreasonable withheld. The obligations of Seller and Purchaser hereunder shall
be binding upon their respective successors and permitted assigns. Any
assignment in contravention of the foregoing shall be void and of no further
force or effect.
11.5 BENEFITS. Nothing expressed or referred to in this Agreement is
intended or shall be construed to give any person or entity, other than the
parties to this Agreement, or their respective successors and assigns, any
legal or equitable right, remedy or claim under or in respect thereof or any
provision contained herein, it being the intention of the parties that this
Agreement is for the sole and exclusive benefit of such parties, and such
successors and assign of this Agreement and for the benefit of no other person
or entity.
11.6 AMENDMENTS; HEADINGS. This Agreement may be amended or modified
only by a written instrument executed by the parties to this Agreement. The
paragraph and other headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
11.7 ENTIRE AGREEMENT; COUNTERPARTS. This Agreement and the exhibits
hereto, and the other letters, schedules and documents referred to herein or
exchanged contemporaneously between the parties hereto constitutes the entire
agreement of the parties with respect to the subject matter of this Agreement
and supersedes all prior agreements, understandings, or representations
relating to the subject matter of this Agreement. This Agreement may be
executed in counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same agreement.
11.8 SEVERABILITY. If any provision of this Agreement, or any covenant,
obligation or agreement contained herein is determined by a court to be invalid
or unenforceable, such determination shall not affect any other provision,
covenant, obligation or agreement, each of which shall be construed and enforced
as, if such invalid or unenforceable provision were not contained herein. Such
invalidity or unenforceability shall not affect any valid and enforceable
application thereof and each such provision, covenant, obligation or agreement
shall be deemed to be effective, operative, made, entered into or taken in the
matter and to the full extent permitted by law.
11.9 GOVERNING LAWS; ARBITRATION. This Agreement shall be construed in
accordance with, and governed by, the internal laws of the State of California
(and not the laws of conflict of law). All controversies, disputes or claims
arising out of or in connection with this Agreement shall be resolved by
submission to binding arbitration in the offices in Orange County, California,
of J.A.M.S./ENDISPUTE("J.A.M.S.") or its successor. Either party may commence
the arbitration by filing a written demand for arbitration with J.A.M.S., with
a copy to the other party. The notice sent by the aggrieved party initiating
the arbitration shall describe the dispute amount involved and the remedy
sought. The parties may agree on a single arbitrator form a panel of potential
arbitrators provided by J.A.M.S. If the parties are unable to agree, J.A.M.S.
will provide a list of three arbitrators, Seller and Purchaser may each strike
one name from the list and the remaining arbitrator shall serve as the
arbitrator. The parties agree to participate in the arbitration in good faith
and shall share equally it costs. Nothing in this paragraph shall obligate the
parties to arbitrate any of the provisions of the License Agreement.
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IN WITNESS WHEREOF, Seller and Purchaser have caused their respective duly
authorized officers to execute this Asset Purchase Agreement as of the day and
year first above written.
PURCHASER: SELLER:
CHICAGO MINIATURE LAMP, INC. PACIFIC SCIENTIFIC COMPANY, a
California corporation
By: /s/F.M. Ward By: /s/
------------------------------- ----------------------------------
Title: Chairman, CEO Title: President - Solium Inc.
By: SOLIUM, INC., a Massachusetts corporation
-------------------------------
Title:
----------------------------
By: /s/
----------------------------------
Title: Chairman
-------------------------------
ADDRESS FOR NOTICES: ADDRESS FOR NOTICES:
Pacific Scientist Company
500 Chapman Street 620 Newport Center Drive, Suite 700
Canton, Massachusetts 02021 Newport Beach, CA 92658
Attention: Frank Wood Attention: Chief Executive Officer
<PAGE> 10
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (this "Agreement") is made and entered into as of
November 21, 1997, by and among PACIFIC SCIENTIFIC COMPANY, a California
corporation ("PSC"), SOLIUM, INC., a Massachusetts corporation and wholly-owned
subsidiary of PSC ("Solium") (PSC and Solium are sometimes collectively
referred to herein as "Licensor"), and CHICAGO MINIATURE LAMP, INC., an
Oklahoma corporation ("Licensee").
A. Solium is the owner of (1) certain technology, known-how and trade
secrets (the "Technology") relating to electronic ballasts and lighting controls
for fluorescent lamps, as more particularly described on Exhibit A attached
hereto, (2) the United States Patents and patent applications, and their
counterpart patents and patent applications in other countries, all as set forth
on Exhibit B attached hereto (collectively, the "Patents"), and all rights
thereunder, all rights under any extensions, reissues, renewals, continuations,
continuations in part, or divisions thereof, all rights to make, have made, use,
develop and commercialize the inventions or processes described therein, all
rights to sue and recover damages for any past, present or future infringement
thereof, and any and all proprietary or other rights secured thereby or
comprised therein (collectively, the "Patent Rights"), and (3) the entire right,
title and interest in and to the "SOLIUM" and "SENSE-A-VOLT" trademarks,
together with the goodwill associated therewith (collectively, the
"Trademarks"), the uniqueness of which is hereby acknowledged by Licensee.
B. Pursuant to the terms of the Asset Purchase Agreement between Licensor
and Licensee dated as of the date hereof (the "Asset Agreement"), Licensor has
transferred and assigned to Licensee certain assets relating to electronic
ballasts and lighting controls for fluorescent lamps.
C. Licensee desires to secure from Licensor, and Licensor desires to
grant to Licensee, a license to use the Technology, Patents, Patent Rights and
Trademarks (the "Rights") subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
contained herein, and other good and valuable consideration, the parties agree
as follows:
1. DEFINITIONS. Unless otherwise defined herein, the capitalized terms used
in this Agreement shall have the meanings assigned to them in this Section 1.
"AFFILIATE" shall mean, with respect to any party, any officer, director,
shareholder, employee, representative, or agent of such party, or any entity
directly or indirectly controlling, controlled by or under common control with
such party.
"CONFIDENTIAL INFORMATION" shall mean all secret, confidential and
proprietary information, including without limitation all trade secrets,
relating to the Rights. Confidential Information shall include, by way of
example and not of limitation, all things, ideas, models, devices, plans,
specifications, drawings, documents, notes, sales and marketing information,
<PAGE> 11
manufacturing procedures, testing procedures, products, materials, processes,
computer source code, computer object code, computer programs, business and
marketing plans, tooling and equipment which are trade secrets or which include
proprietary know-how or information.
"Copyrights" include any copyrightable subject matter included in the
Technology.
"Products" shall mean (i) a product that is covered in whole or in
part by, or is manufactured using a process that is covered in whole or in part
by, a Patent or Patent Right or (ii) a product that unless made, used or sold
pursuant to this Agreement, would infringe a Patent or Patent Right.
2. License. Subject to the remaining provisions of this Agreement,
Licensor hereby grants to Licensee an exclusive and non-transferable license
(the "License") to use and practice the Rights in connection with the design,
manufacture, production, advertisement, promotion, sale and distribution of the
Products throughout the world. Nothing in this Section 2 or otherwise in this
Agreement shall be construed as conferring any right to use in any manner any
name, trademark, service mark, logo or trade name of Licensor other than the
Trademarks. Licensee shall have no right to sublicense any of its rights or
obligations under the License to any third party without the prior written
consent of Licensor.
3. Obligations of Licensee.
3.1 Compliance With Laws. During the term of this Agreement,
Licensee shall use the Rights, shall manufacture, advertise, sell and
distribute the Products, and shall otherwise conduct its business in compliance
with all applicable laws, statutes, rules and regulations.
3.2 Intellectual Property.
3.2.1 Execution of Documents. Licensee shall make all
necessary disclosures, execute, acknowledge and deliver all instruments and
perform all acts requested by Licensor to secure and maintain in the name of
Licensor, or its designee, patent and other intellectual property protection
for the Rights. In the event Licensor is unable, for any reason whatsoever, to
obtain the signature of Licensee to any document or instrument necessary or
desirable to obtain ownership of, apply for protection of, or enforce any
action with respect to, any patent, copyright, trade secret or other
intellectual property right, Licensee hereby irrevocably designates and
appoints Licensor, and its duly authorized officers and agents, as Licensee's
agent and attorney-in-fact, whose power is expressly coupled with an interest,
to act for and on behalf of Licensee, to execute such documents and to take all
of the lawfully permitted actions to protect Licensor's interest in any patent,
copyright, trade secret or other intellectual property right with the same
legal force and effect as if executed by Licensee.
3.2.2 Marking of Products. Licensee shall mark all
Products with such patent and/or trademark legends as Licensor may from time
to time prescribe in writing in such manner and form as Licensor may require
from time to time.
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<PAGE> 12
3.2.3 Use of the Trademarks. Licensee acknowledges that
the maintenance of the high quality of the Products is a material condition of
this Agreement. Accordingly, Licensor shall have the right to receive, at no
cost to Licensor, and test for approval purposes samples of all Products
incorporating the Trademarks, prior the sale, use or distribution of any such
Products. In addition, all advertising, promotional materials, packaging and
other materials containing or displaying any of the Trademarks shall be
forwarded to Licensor for its written approval prior to any use thereof by
Licensee. Licensee shall not sell, use or distribute any Product or material
disapproved by Licensor. Licensor acknowledges and agrees that Licensor is the
sole and exclusive owner of the Trademarks, and Licensee shall obtain no right
or interest in the Trademarks by virtue of its use thereof (all use of the
Trademarks by Licensee inuring to benefit of Licensor). Licensor shall not take
any action which is inconsistent with Licensor's exclusive ownership of and use
of the Trademarks, except as expressly provided herein.
3.3 Confidentiality. During the term of this Agreement and
thereafter, Licensee (a) shall not directly or indirectly use, communicate or
divulge or enable another to use, communicate or divulge any Confidential
Information, and (b) shall not divulge to Licensor confidential information of
any other party the use, communication or disclosure of which is protected by
comparable confidentiality commitments, except as expressly permitted by this
Agreement.
3.4 Best Efforts. Licensee shall at all times at its own cost and
expense use its best efforts and all due diligence energetically and
aggressively to develop the market for the Products throughout the world, to
promote the sale, distribution and use of the Products therein, and to enhance
the reputation and goodwill associated with the Products and the Trademarks.
See Rider 3.4 which is incorporated herein.
3.5 Reasonable Restrictions. Licensee acknowledges and agrees
that (a) the provisions of Sections 3.2 and 3.3 hereof are reasonable and
necessary to protect the legitimate interests of Licensor, (b) the restrictions
contained in Sections 3.2 and 3.3 will not prevent Licensee from earning or
seeking a livelihood, (c) the restrictions contained in Sections 3.2 and 3.3
shall apply in all areas where such application is permitted by law, and (d)
any violation of this Agreement by Licensee would result in irreparable harm to
Licensor. Accordingly, Licensee consents and agrees that, if it violates any of
the provisions of this Agreement, Licensor shall be entitled to, in addition to
other remedies available to it, an injunction to be issued by any court of
competent jurisdiction restraining Licensee from committing or continuing any
violation of this Agreement, without being required to post a bond or other
security, or any other undertaking. In the event that the whole or any part of
any provision of Sections 3.2 or 3.3 hereof shall be determined to be invalid
by reason of the extent, duration, scope or other provision set forth therein,
the extent, duration, scope or other provision of that section shall be reduced
so as to cure such invalidity and in its reduced from the provisions of
Sections 3.2 and 3.3 shall be enforceable in the manner contemplated hereby.
3.6 Inspection. Upon reasonable advance notice to Licensee, Licensee
shall permit Licensor and Licensor's employees or representatives to enter and
examine Licensee's facility and places of business and to inspect the Products,
its inventories of the Products, service records and other relevant documents
related to the Products and any components thereof.
-3-
<PAGE> 13
4. License Consideration.
4.1 License Royalty Fee. Licensee shall pay to Licensor a royalty
fee equal to two percent (2%) of all gross sales of the Products (other than
Products sold more than 3 years after the date hereof which are covered solely
by a patent application; provided that such royalty fee shall not be less than
the guaranteed minimum royalty fee for each calendar quarter, as set forth
below; provided further that if the cumulative amount of royalty fees paid by
Licensee exceeds the guaranteed minimum cumulative royalty fee for such
calendar quarter, as set forth below, Licensee shall not be required to pay the
guaranteed minimum royalty fee for such calendar quarter. In no event shall the
foregoing proviso be deemed to release Licensee from its obligations to pay
Licensor the royalty fees as described above. If Licensee fails to pay the
guaranteed minimum royalty fee for any calendar quarter for a period of more
than 10 days following receipt of notice by Licensee of such failure, then in
addition to the right to demand and collect the guaranteed minimum royalty,
Licensor may declare the License to be non-exclusive. Upon such declaration,
Licensor shall be entitled, without liability or charge, to use, copy, promote,
distribute, sell, encumber, create derivative works of, revise and modify,
license, develop, manufacture, advertise, sale, distribute, or exploit, in any
manner, any or all of the Rights.
<TABLE>
<CAPTION>
Guaranteed Guaranteed Minimum
Minimum Cumulative
Date Quarterly Royalty Payments Royalty Payments
---- -------------------------- ------------------
<S> <C> <C>
June 30, 1998 $ 10,000 $ 10,000
September 30, 1998 $ 30,000 $ 40,000
December 31, 1998 $ 60,000 $ 100,000
March 31, 1998 $100,000 $ 200,000
June 30, 1998 $200,000 $ 400,000
September 30, 1998 $300,000 $ 700,000
December 31, 1998 $300,000 $1,000,000
</TABLE>
4.2 Payment of Royalty Fees. The royalty fees due hereunder shall
be paid by Licensee to Licensor within twenty (20) days after the close of each
calendar quarter. Time is of the essence with respect to all provisions of this
Agreement relating to the payment of money. A failure by Licensee to make any
payment required hereunder in a timely fashion shall constitute a material
breach of this Agreement. All payments to Licensor hereunder shall be in U.S.
dollars by bank transfer to such bank account as Licensor may from time to time
designate in writing and shall be accompanied by a remittance advice
identifying the specific payments made. In the event of any underpayment or
late payment of any royalty fee payable hereunder, Licensee shall immediately
remit to Licensor the full amount owed, together with a late payment charge
calculated at a rate of one and one-half percent (1 1/2%) per month, compounded
on a monthly basis, or maximum rate permitted by law, whichever is less. In
addition, if the amount of such underpayment is in excess of two percent (2%)
of the amount properly payable by Licensee, Licensee shall promptly reimburse
Licensor for the cost of any examination or audit.
4.3 Accounting and Reporting.
-4-
<PAGE> 14
4.3.1 Records and Inspection. Licensee shall keep accurate
books of account, records and invoices concerning its business consistent with
generally accepted accounting principles. Said books, records and invoices
shall be maintained for a period of at least three (3) years after termination
or expiration of this Agreement and shall be available for inspection and
copying by Licensor or its duly appointed representative during regular
business hours and upon reasonable notice. Licensee shall cooperate fully with
Licensor in conducting such inspection.
4.3.2 Reporting. On or before the date specified in
Section 4.2 above for each quarterly payment of the royalty, Licensee shall
submit to Licensor a statement setting forth all sales of the Products (by
product category, style, units, dollars, and customer names and telephone
numbers), Licensee's aggregate gross revenues during such calendar quarter, the
total amount of the royalty fee payable to Licensor and the difference between
the quarterly royalty and the monthly royalty fee payable to Licensor pursuant
to Section 4.1, or a statement that no sales of the Products were made during
such month. Each quarterly statement shall be accompanied by a written
certification from the chief financial officer of Licensee that the statement
is correct and complete and prepared in compliance with this Agreement. Within
ninety (90) days after the end of each calendar year of this Agreement,
Licensee shall submit to Licensor, at Licensee's sole expense, an audited
financial statement for the preceding calendar year (by independent public
accountants acceptable to Licensor), and setting forth the aggregate royalty
fee for the preceding calendar year and the basis of calculation. Licensee
shall submit to Licensor within ninety (90) days after termination or
expiration of this Agreement a written statement certified by Licensee's chief
financial officer identifying all revenues upon which the royalty fee is
payable hereunder but which were not previously reported.
5. Term and Termination.
5.1 Term and Termination. Subject to the remaining provisions of
this Section 5, the term of this Agreement shall commence as of the date hereof
and shall terminate upon the expiration of the last of the Patents to expire
(as the life of such Patent may be extended or prolonged by any extensions,
renewals, continuations, continuations in part, or divisions thereof). This
Agreement may be terminated by Licensor immediately upon notice to Licensee
upon the occurrence of an "Event of Default" as defined in Section 10.1 of the
Asset Agreement or in the event that Licensee does any of the following: (a)
files a petition in bankruptcy or is adjudicated bankrupt or insolvent, or
makes an assignment for the benefit of creditors, or an arrangement pursuant to
any bankruptcy law, or if a receiver is appointed for Licensee or for
Licensee's business and such receiver is not discharged within thirty (30)
days, provided that the bankruptcy laws permit such Action by Licensor, (b)
fails to continue its business in the manner now conducted, (c) is late more
than 10 days in making its royalty payments or providing its royalty statements
more than twice during any one (1) calendar year, (d) attempts to sublicense or
assign any of its rights or obligations under this Agreement without Licensor's
prior written approval, (e) fails to make any guaranteed minimum royalty
payment for a period of 180 or more days, (f) fails to obtain or maintain
insurance in the amount and of the type provided for herein, (g) engages in any
conduct or practice which in Licensor's judgment is detrimental to the good
name, goodwill or reputation of Licensor, any Affiliate of Licensor or the
Trademarks, or (h) directly or indirectly,
-5-
<PAGE> 15
contests, opposes, or challenges any of the Rights, attempts to obtain
ownership of the Rights in any country, or assists any third party with
respect to the foregoing.
5.2 Consequences of Termination or Expiration. Upon termination or
expiration of this Agreement for any reason, (a) the License granted hereunder
shall immediately terminate, (b) Licensee shall immediately and forever cease
from using the Rights, (c) Licensee shall immediately pay to Licensor all
amounts due to Licensor pursuant to Section 4 hereof for all Products sold
prior to the date of termination or expiration of this Agreement and any
guaranteed minimum royalty payments then due, (d) Licensor shall be entitled,
without liability or charge, to use, copy, promote, distribute, sell, encumber,
create derivative works of, revise and modify, license, develop, manufacture,
advertise, sale, distribute, or exploit, in any manner, any or all of the
Rights, and (e) Licenesee shall promptly return to Licensor all documents in
its possession or under its control relating to the Rights or to the rights
assigned in Subsection 3.2.2, together with any and all copies thereof. The
provisions of this Section 5.2, as well the provisions of Sections 3.2, 3.3,
3.4, 3.5, 4, 6 and 8, shall survive the expiration or termination of this
Agreement, irrespective of the reason therefor.
6. Warranties: Disclaimers. Licensee acknowledges and agrees that the Rights
are being licensed to Licensee "AS IS," with absolutely no warranties of any
kind. Licensee further acknowledges that John Ossenmacher ("Ossenmacher"), an
officer of Licensee, was formerly president of Solium and, therefore, is
intimately familiar with the Rights. Moreover, with the assistance of
Ossenmacher, Licensee has evaluated for itself the Rights, their actual and
potential applications and their actual and potential commercial value and
viability. Licensor shall have no obligation to obtain or maintain Patent
protection for the Rights in any nation, provided that if LICENSOR elects not
to obtain or maintain any issued patent(s) or patent application(s) Licensee
may authorized and reimburse Licensor for the costs and attorney fees for
maintaining such patent(s) or patent application(s). Licensee is aware that
Licensor intends to abandon a significant number of its pending patent
applications unless Licensee elects to pay for the prosecution of such
applications. Without limiting the generality of the foregoing, LICENSOR (A)
SPECIFICALLY DISCLAIMS ALL WARRANTIES OF ANY KIND REGARDING THE RIGHTS,
INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, (B) MAKES NO REPRESENTATIONS OR WARRANTIES REGARDING THE SUITABILITY
OF THE RIGHTS FOR LICENSEE'S OR ANY THIRD PARTY'S ACTUAL OR INTENDED USES, AND
(C) NO REPRESENTATIONS OR WARRANTIES AS TO WHETHER THE RIGHTS INFRINGE ON THE
PATENT, TRADEMARK OR OTHER PROPRIETARY RIGHT OF ANY THIRD PARTY. IN NO EVENT
SHALL THE LICENSOR (OR ANY AFFILIATE OF LICENSOR) BE LIABLE TO LICENSEE OR ANY
THIRD PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES
RESULTING FROM THE USE, OR INABILITY TO USE, THE RIGHTS, OR OTHERWISE ARISING
OUT OF THIS AGREEMENT.
7. Infringement. In the event that Licensee or Licensor learns of any
infringement by any third party of any of the Rights, it shall promptly notify
the other party in writing. At any time after any such notice, Licensor shall
have the exclusive right but not the obligation, at Licensor's expense, to
commence legal action against such infringer and may settle or compromise any
such
-6-
<PAGE> 16
action. Licensor shall be entitled to all payments recovered in connection with
such action, to the exclusion of Licensee. Licensee may not commence any such
action without the prior written consent of Licensor. In the event any third
party commences a legal action, suit or proceeding against Licensee alleging
that its use of the Rights infringe or violate any right of such third party,
Licensee shall promptly notify Licensor in writing. At any time after any such
notice, Licensor shall have the first right but not the obligation, at
Licensor's cost and expense, assume the defense of such action and, in
connection therewith, settle or compromise any such action. If Licensor does
not assume the defense of such action within thirty (30) days of such notice,
Licensee may, at Licensee's sole cost and expense, defend itself in such
action; provided that Licensee shall not settle any action without the prior
written consent of Licensor. Licensee and Licensor shall assist and cooperate
fully with each other in connection with any legal action.
8. Indemnification and Insurance. Licensor shall have no liability to Licensee
or any third party with respect to the use of the Rights or in connection with
the design, manufacture, production, advertisement, promotion, sale and
distribution of the Products throughout the world pursuant to this Agreement.
Licensee shall indemnify, defend, and hold harmless Licensor and Licensor's
Affiliates from and against any and all claims, suits, losses, damages, fees and
expenses, including without limitation attorneys' fees and costs, arising out of
or relating to the design, manufacture, production, advertisement, promotion,
sale and distribution of the Products, all components thereof and Licensee's use
of the Rights, in any country or subdivision thereof, including, without
limitation any claims by third parties that the Rights infringe on the rights of
any third parties. During the term of this Agreement, Licensee shall obtain and
maintain employer's liability, workers' compensation, comprehensive general
liability, and product and completed operations insurance, with limits of
liability and issued by insurers approved in writing by Licensor, and shall
furnish Licensor with a certificate of insurance naming Licensor as an
additional insured, providing for such insurance and requiring sixty (60) days'
prior written notice to Licensor of any cancellation or modification of such
insurance. In no event shall Licensee sell, distribute or advertise the Products
prior to obtaining the insurance provided above.
9. Miscellaneous.
9.1 Assignability. Licensee shall not, without the prior written consent
of Licensor, assign, transfer, sell or encumber, by operation of law or
otherwise, this Agreement or any of its rights or obligations hereunder. Subject
to the foregoing, this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. Nothing
expressed or implied in this Agreement is intended or shall be construed to
confer upon or give to any person, other than the parties to this Agreement, any
right, remedy or claim under or by reason of this Agreement or of any term,
covenant or condition of this Agreement, including, without limitation, any
claims by third parties that the Rights infringe on the rights of any Third
Parties.
9.2 Notices. All notices, requests or consents required or permitted
under this Agreement shall be made in writing and shall be given to the other
party by personal delivery, overnight air courier (with receipt signature) or
facsimile transmission (with "answerback" confirmation of transmission), sent
to such party's address or facsimile number as are set forth
-7-
<PAGE> 17
below such party's signature to this Agreement, or such other address or
facsimile number of which such party has given notice pursuant to this
Subsection 9.2. Each such notice, request or consent shall be deemed effective
upon the date of actual receipt, receipt signature or confirmation of
transmission, as applicable, except as may otherwise be expressly provided for
herein.
9.3 Amendments; Waivers; Severability. This Agreement may be amended,
modified, superseded, canceled, renewed or extended and the terms or covenants
of this Agreement may be waived only by a written instrument executed by the
parties to this Agreement or, in the case of a waiver, by the party waiving
compliance. The failure of any party at any time or times to require
performance of any provision of this Agreement shall in no manner affect the
right at a later time to enforce the same. No waiver by any party of the breach
of any term or provision contained in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such breach, or a waiver of the
breach of any other term or covenant contained in this Agreement. Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
9.4 Relationship of Parties. Licensor and Licensee are and intend to
remain independent parties. Nothing contained in this Agreement shall be deemed
or construed to create the relationship of principal and agent or of
partnership or joint venture, and neither party shall hold itself out as an
agent, legal representative, partner, subsidiary, joint venturer, servant or
employee of the other. Neither party nor any officer or employee thereof shall,
in any event, have any right collectively or individually, to bind the other
party, to make any representations or warranties, to accept service of process,
to receive notice or to perform any act or thing on behalf of the other party,
except as authorized in writing by such other party in its sole discretion.
9.5 Controversies; Venue. This Agreement shall be governed by and
construed and enforced in accordance with the internal substantive laws of the
State of California. Licensor and Licensee hereby consent to the exclusive
jurisdiction of the courts of the State of California and the United States
courts located in the County of Los Angeles, State of California, in
connection with any lawsuit, action or proceeding arising out of or relating to
this Agreement, and such courts shall be the only courts having jurisdiction of
any such controversies. Both parties hereby waive any defense of lack of in
personam jurisdiction, improper venue and forum non conveniens, and agree that
service of process of such court may be made upon each of them by personal
delivery or by mailing certified or registered mail, return receipt requested,
to the other party at the address referenced in Section 9.2 above. If any legal
action or other proceeding is brought by any party for the enforcement of this
Agreement because of any alleged breach, default, or misrepresentation in
connection with any of the provisions of this Agreement, the prevailing party
shall be entitled to recover from the non-prevailing party its attorney's fees
and other costs and expenses incurred in connection therewith, in addition to
any other relief to which it might be entitled. Unless expressly set forth
herein to the contrary, all remedies set forth herein are cumulative and are in
addition to any and all remedies provided either party at law or in equity.
-8-
<PAGE> 18
9.6 Entire Agreement. This Agreement constitutes the whole agreement of
the parties hereto in reference to any of the matters of things herein provided
for, all prior agreements, promises, representations and understandings
relative thereto being herein merged.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
SOLIUM, INC.
By: /s/ Kenneth Owens
---------------------------------------------
Name: Kenneth Owens
-------------------------------------------
Title: President - Solium, Inc.
------------------------------------------
Address: c/o Pacific Scientific
620 Newport Center Drive, Seventh Floor
Newport Beach, California 92660
Facsimile: (714) 720-1714
PACIFIC SCIENTIFIC COMPANY
By: /s/ Lester Hill
---------------------------------------------
Name: Lester Hill
-------------------------------------------
Title: Chairman
------------------------------------------
Address: 620 Newport Center Drive, Seventh Floor
Newport Beach, California 92660
Facsimile: (714) 720-1714
With a copy to: Paul, Hastings, Janofsky & Walker LLP
695 Town Center Drive, 17th Floor
Costa Mesa, California 92626-1924
Attention: William J. Simpson, Esq.
Facsimile: (714) 979-1921
CHICAGO MINIATURE LAMP, INC.
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
Address:
----------------------------------------
----------------------------------------
Facsimile:
--------------------------------------
-9-
<PAGE> 19
EXHIBIT A
The Technology:
A. Electronic ballasts for the control of fluorescent lighting that operate
fluorescent lamps across a range of input voltages. This technology is
trade marked as Sense-A-Volt.
Major design elements include:
- Variable Voltage Input
- Expanded Power Factor Correction
- Thermal Protection
- Lamp Length Compensation
- Lamp Quantity Compensation
- End of Life Protection
- Low Stress Starting Methodology
- Complex Resonating Circuit
B. Electronic ballasts for the control of fluorescent lighting that dim
fluorescent lamps across a range of light output from 20-100% of lamp
capability.
Major design elements include:
- SCR Dimming
- Boost Circuit
- Deep Dimming Stability Circuit
- Programmed Start
- End of Life Protection
- Complex Resonating Circuit
- Lamp Starting Near End of Life
- Inherent Thermal Protection
- Starting With Dimmer Preset at Low
C. Electronic ballasts for the control of fluorescent lighting that dim
fluorescent lamps using a standard "3-Way" incandescent switched socket.
Major design elements include:
- 3-Way Step Dimming
- Use of Opto Coupler
- Inherent Thermal Compensation
- Rapid Start Operation
- End of Life Protection
- Power Factor Correction
D. Electronic ballasts for the fluorescent lighting that are standard
non-featured "on-off" products incorporating design features listed in A
through C as above.
<PAGE> 20
EXHIBIT B
The "Patents"
<TABLE>
<CAPTION>
Patents:
- --------
Patent Number Issue Date
------------- ----------
<S> <C>
5,596,247 01/21/97
<CAPTION>
Patent Application:
- -------------------
Application Number Filing Date
------------------ -----------
<S> <C>
08/316395 09/30/94
08/488387 06/06/95
08/723289 09/30/96
08/786037 01/21/97
08/725914 10/04/96
60/005033 10/06/95
29/045040 10/06/95
29/045246 10/13/95
08/625629 02/29/96
08/300423 09/01/94
08/647030 05/09/96
08/761658 12/06/96
08/749106 11/14/96
08/768508 12/18/96
08/690456 08/08/96
08/872957 06/11/97
08/873274 06/11/97
60/044259 04/24/97
60/044929 04/25/97
Not Available 07/25/97
Not Available 08/01/97
</TABLE>
-12-
<PAGE> 21
RIDER 3.4
Every 24 months the parties shall confer regarding Licensee's compliance with
the terms of the preceding sentence (the "Requirements"). In the event
Licensor concurs that Licensee has complied with the Requirements, Licensor
shall put such concurrence in writing, which shall be deemed to constitute a
waiver of any claims of Licensor with respect to Licensee's compliance with the
Requirements for the immediately receding 24 months period. Notwithstanding
any terms of the Asset Agreement, a default of Licensee with respect to the
Requirements shall not constitute a default by Licensee under the Asset
Agreement or otherwise adversely affect Licensee's rights under the Asset
Agreement.
APPROVED:
SOLIUM, INC.
By: /s/ Kenneth Owens
----------------------------------
Name: Kenneth Owens
--------------------------------
PACIFIC SCIENTIFIC COMPANY
By: /s/ Kenneth Owens
----------------------------------
Name: Kenneth Owens
--------------------------------
CHICAGO MINIATURE LAMP, INC.
By:
----------------------------------
Name:
--------------------------------
<PAGE> 1
EXHIBIT 10.32
Document no. /1997
- --------------------------
ACQUISITION AGREEMENT
Occurring January 1997
January nineteen hundred ninety-seven-
Before me, notary
there appears:
Mr.
acting here not his own behalf rather - subject to submission of authorization -
for
1. Mr. Juegen Brueckner,
residing at
in turn acting in his own name as well as the individual with the sole
power to represent, under release of the restrictions of section 181
German Civil Code
1.1 Gustav Brueckner GmbH
with its statutory seat in Coburg,
1.2 Brueckner Beteiligungs-GmbH i.G.
with its statutory seat in Coburg,
an acting as the personally liable shareholder with sole power of
representation of
Gustav Brueckner Verwaltungs GmbH & Co. KG
with its statutory seat in Coburg,
<PAGE> 2
-2-
2. Mr. Werner A. Arnold, diplomat engineer, residing at Wildensorger
Hauptststrasse 8, 96049 Bamberg,
himself acting not in his own name rather as the managing director with
sole power of representation of
ALBA Speziallampen Holding GmbH
with its statutory seat in Bamberg,
3. The firm
Chicago Miniature Lamp, Inc.
with its statutory seat in Canton, Massachusetts.
The notary certifies the powers of attorney based on
The person appearing identifies himself by , deposing and
declaring with his request for notarization as follows:
<PAGE> 3
-3-
ACQUISITION AGREEMENT
A. RECITALS
(1) Mr. Jurgen Bruckner is a shareholder in
Gustav Bruckner GmbH
with its statutory seat in Coburg
- hereinafter "Corporation" -
with the following shares:
1. Share with a par value of DM 195,000,--
2. Share with a par value of DM 105,000,--
--------------
SHARE CAPITAL DM 300,000,--
The shares are fully paid in.
(2) Mr. Jurgen Bruckner is the owner of all shares in Bruckner
Beteiligungs-GmbH i.G. and the single limited partner of Gustav Bruckner
Verwaltungs GmbH & Co. KG. Bruckner Beteiligungs-GmbH i.G. is the single
personally liable shareholder of Gustav Bruckner Verwaltungs GmbH & Co. KG
(hereinafter "KG"). All assets of the prior enterprise Gustav Bruckner
Verwaltungs KG, owner Jurgen Bruckner (hereinafter "KG (alt)") were
contributed to the KG in December of 1996.
(3) Mr. Jurgen Bruckner intends to sell all shares in the corporation and the
KG intends to sell of its movable property (with the exception of office
furniture) to ALBA Speziallampen Holding GmbH (hereinafter "ALBA"). ALBA
intends to acquire the same shares and properties.
(4) The KG intends to lease the prior production and office building in
accordance with the planned diagram (an attachment to the Lease Agreement)
to ALBA. ALBA intends to lease the same from the KG.
<PAGE> 4
-4-
(5) Mr. Jurgen Bruckner intends to continue to work for the corporation as the
managing director. ALBA is very interested in the continuing activity of
Mr. Bruckner.
(6) With this in mind, the parties close the following Acquisition Agreement.
<PAGE> 5
-5-
B. ACQUISITION AGREEMENT
SS. 1
PARTIES AND OBJECTIVE OF THE AGREEMENT
(1) Mr. Jurgen Bruckner sells and transfers herewith all shares in the
corporation with par values of DM 195.000,-- and DM 105.000,-- to
ALBA. ALBA accepts such sale and transfer.
(2) Mr. Bruckner consents to the sale and transfer in his capacity as
managing director of the corporation. Sale and transfer are reported
to the corporation in accordance with section 16 para. 1 Limited
Liability Company's Law (GmbHGesetz).
(3) The KG sells herewith its movable properties with exception of office
furniture. Included herewith are especially the objects listed in the
attachment to section 1 para. 3. ALBA accepts the sale. The parties
agree on the transfer of ownership in the above-referenced objects.
The transfer shall occur on the instruction of Mr. Werner Arnold as
managing director of ALBA.
Should the transfer or ownership in a particular case be dependent
upon the consent of third parties or other transactions, the parties
shall promptly engage in all transactions required for such transfer
of ownership. Should such be temporarily not possible, the KG shall
put ALBA in a position as if ALBA were the owner.
<PAGE> 6
-6-
SS. 2
PURCHASE PRICE
(1) The purchase price for all shares of the corporation and the movable
property sold shall be
DM 400.000,--
(i.w. four hundred thousand German Marks).
(2) The purchase price is due immediately.
SS. 3
WARRANTIES
(1) Mr. Jurgen Bruckner warrants (sichert zu), that the shares sold are
his property, are fully paid and non-assessable.
(2) Mr. Bruckner and the KG warrant (sichern zu), that the property sold
by the KG is the property of the KG, is not encumbered with the rights
of third parties, and is not subject to any limitation whatsoever,
furthermore, that in the fiscal year 1996 and through this date, no
property belonging to the KG (alt) and the KG have been lost and the
KG is the unrestricted owner of all property belonging to the KG (alt).
(3) Otherwise, every other warranty is excluded, insofar as no particular
provision is included in this Agreement.
<PAGE> 7
- 7 -
SS. 4
TAKE-OVER DATE, DIVIDENDS
Take-over date is today. Dividends on the sold shares, which are to be
distributed after the take-over date shall be paid to ALBA. Before the
take-over date no dividends were distributed.
SS. 5
BANK SURETY
(1) ALBA issued the exemption declarations listed in the attachment to section
5 para. 1.
(2) The parties shall endeavour to obtain the declarations of exemption with
the content of all contents similar to that in the attachment to section 5
para. 2 from the Commerzbank AG, Coburg, Deutsche Bank AG, Coburg, and
Bayerische Hypotheken- und Wechselbank, Coburg. Should this be temporarily
not possible, ALBA shall exempt Mr. Bruckner as against ALBA itself.
SS. 6
LOANS OF THE KG, LIFE INSURANCE
(1) The corporation will promptly repay the loan that the KG made to the
corporation up to the following maximum amount. The maximum amount is
DM 2,400,000.-- minus the bank debts of the corporation through December
16, 1996.
(2) Furthermore, the remaining amount of the loan claim shall be extinguished
by the transfer of the life insurance PAX as redemption value to the KG
with all
<PAGE> 8
- 8 -
rights and duties. The corporation and the KG agree on the transfer of all
rights and duties from this life insurance contract and will make all
declarations necessary as against third parties to the effectiveness of
this transfer.
(3) The KG and Mr. Jurgen Bruckner waive any remaining claim on the loan, as
against the corporation after reduction by the redemption value of the
life insurance. The corporation accepts this waiver.
SS. 7
RENTAL RELATIONSHIP
The corporation and the KG conclude herewith a rental agreement with the
content determinable from the attachment to section 7.
SS. 8
EMPLOYMENT AGREEMENT
The corporation and Mr. Bruckner conclude herewith an employment agreement with
the content determinable from the attachment to section 8.
SS. 9
NON-COMPETITION AGREEMENT
(1) For the period of five years after the termination of Mr. Bruckner's
activities as managing director for the corporation or for another
enterprise of the Chicago Miniature Lamp, Inc. enterprise group, Mr.
Bruckner and the KG may do no
<PAGE> 9
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business for their own benefit or for the benefit of third parties in
the branch of business of the corporation as well as related branches
as they existed the time of the termination of the employment
agreement in accordance with section 8. Without explicit consent,
they are also forbidden to participate, directly or indirectly, in
other enterprise which are active in these branches to be employed by
or in any other way to promote the interests of such enterprises. The
ban on competition also includes a ban on the active recruitment of
employees of the corporation and the enterprise group Chicago
Miniature Lamp.
(2) For every case of a breach of this non-competition agreement, Mr.
Bruckner shall pay the corporation a contractual penalty of DM
200,000.--. The contractual penalty arises in addition to other
claims of ALBA and the corporation. In the case of a continuing
breach, each thirty days shall be considered an independent breach in
the sense of sentence 1 of this paragraph.
SS. 10
Taxes and Cost
(1) Taxes incurred by Mr. Jurgen Bruckner because of the sale of his
shares and by the KG because of the sale of its assets, are to be paid
by them.
(2) The costs of this contract and its fulfillment shall be borne by
ALBA. The costs of counsel shall be borne by each party itself.
SS. 11
Closing Provisions
(1) German law is applicable to this contract.
<PAGE> 10
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(2) Place for the fulfillment of the contract and venue is, as far as
legally permissible, Bamberg.
(3) Should particular provisions of this Agreement be or become invalid,
the validity of the remainder of the content of this Agreement shall
not be affected thereby. The invalid provision shall be replaced by a
provision which most nearly effects the economic intent of the
invalid provision.
* * * *
The person appearing requests the distribution of duplicates of this
document as follows:
a) for each party
one duplicate original,
b) for Dr. Lothar Herer,
Bahnhofstrasse 19, 96450 Coburg,
one certified copy,
c) for Dr. Michael Oltmanns, Attorney-at-law,
Mittlerer Pfad 15, 70499 Stuttgart,
one certified copy.
The notary has made the declaration required by the Notarization Law.
This document together with attachments was read to the
persons appearing by the notary, approved by them, and
signed by all in their own hands:
<PAGE> 1
EXHIBIT 10.34
DATED 29TH JANUARY 1993
(1) OSRAM GMBH
and
(2) EDIL INTERNATIONAL LIGHTING B.V.
-------------------------------
FRAMEWORK AGREEMENT FOR
SUPPLY CONTRACTS
-------------------------------
Clifford Chance
200 Aldersgate Street
London EC1A 4JJ
Tel: 071 600 1000
Fax: 071 600 5555
Ref: MS/C0791/04338/JBW
(Document ref: AJQM248D.50)
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
CLAUSE PAGE
<S> <C>
ARTICLE I
Definitions
ARTICLE II
SUPPLY OF LAMP MATERIALS BY OSRAM TO EDIL AND BY EDIL TO OSRAM
SECTION 2.1 Scope of Article II ............................ 5
SECTION 2.2 Long-term Supply Agreements .................... 5
SECTION 2.3 Terms and Conditions ........................... 6
SECTION 2.4 Equal Treatment ................................ 16
ARTICLE III
CONTINUATION OF CERTAIN SUPPLY AGREEMENTS BETWEEN OSRAM
GROUP AND IL
SECTION 3.1 Lynx-L Compact Fluorescent Lamps ............... 17
SECTION 3.2 Supply Agreement for Bulbs between GTE Sylvania
S.A. and EMGO ......................................... 17
SECTION 3.3 The supply agreement between OSRAM GmbH and SABA
Schwaraweider ........................................ 18
SECTION 3.4 The Supply Agreement Between GTE de Brasil S/A
Industria e Comerco and OSRAM de Brazil Compantia de
Lampadas Eletricas for the supply of bulbs and tubes
("the Brazilian Glass Contract") ...................... 20
SECTION 3.5 Equipment for the Double Twin Compact
Fluorescent Line at Shipley, United Kingdom ........... 21
ARTICLE IV
CONTINUATION OF SUPPLY ARRANGEMENTS FOR FINISHED LAMPS
BETWEEN OSRAM, NAL AND IL
SECTION 4.1 Scope of Article IV ............................ 21
SECTION 4.2 Long-term Supply and Purchase Contracts ........ 21
SECTION 4.3 Terms and Conditions ........................... 22
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V
SUPPLY OF MANUFACTURING APPARATUS
ARTICLE VI
SECTION 5.1 Governing Law ................................. 33
SECTION 5.2 Arbitration ................................... 33
SECTION 5.3 Amendments .................................... 33
SECTION 5.4 Assignment .................................... 34
SECTION 5.5 Notices ....................................... 34
SECTION 5.6 Waiver ........................................ 35
SECTION 5.7 Severability .................................. 35
SECTION 5.8 Entire Agreement .............................. 36
SECTION 5.9 Counterparts .................................. 36
SECTION 5.10 Headings ...................................... 36
SECTION 5.11 Confidentiality ............................... 36
SECTION 5.12 U.N. Convention ............................... 36
SECTION 5.13 Inconsistent terms ............................ 36
</TABLE>
<PAGE> 4
FRAMEWORK AGREEMENT FOR SUPPLY CONTRACTS
This Framework Agreement for supply contracts is made on the 29th day of
January, 1993, between OSRAM GmbH, a company incorporated in Munich, Germany,
with a principal place of business at Hellabrunner Strasse 1 D-8000, Munich 90,
Germany ("OSRAM") and EDIL International Lighting B.V., a private limited
liability company (beslotenvensootschap met beperlcte aansparkelijkheid)
incorporated under the laws of the Netherlands and established in Amsterdam,
the Netherlands, whose registered office is at Appollolaan 171, 1077 A.S,
Amsterdam, The Netherlands ("EDIL").
Whereas, Siemens Aktiengesellschaft, ("Siemens") OSRAM, EDIL, and Citicorp
Capital Investors Europe Limited entered into a Master Agreement on August 6th
1992 whereby EDIL and OSRAM agreed to procure that the relevant members of their
respective groups enter into supply agreements corresponding to the terms set
forth in Supply Agreement Term Sheets attached in form to be aforesaid Master
Agreement.
Whereas, certain existing supply arrangements between OSRAM GmbH, NAL and IL
are to be continued.
Whereas, within twelve months of Closing, the parties shall, in good faith,
negotiate long-term supply agreements in respect of the most significant Lamp
Materials and Lamps to be supplied by OSRAM Group to EDIL Group and by EDIL
Group to OSRAM Group Provided that unless and until such long-term supply
agreements are concluded, Lamp Materials and Lamps shall be supplied by OSRAM
Group to EDIL Group, and by EDIL Group to OSRAM Group on the terms and
conditions of this Framework Agreement.
Therefore, the Parties hereto agree, for themselves and for and on behalf of
their respective Subsidiaries, as follows:
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<PAGE> 5
ARTICLE I
1. Definitions
For the purposes of this Agreement, the following terms shall have the
meanings set forth below:
"Accessories" means any device designed or adapted for mounting or
supporting Lamps or for controlling the light thereof, together with
parts, materials and components for such devices, other than fixtures.
"Best Efforts" means serious and reasonable endeavours but not including
any unreasonable act or money payment.
"Buying Party" means in respect of each transaction hereunder either the
member of the EDIL Group which is purchasing Lamp Materials or Lamps from
a member of the OSRAM Group OR the member of the OSRAM Group which is
purchasing Lamp Materials or Lamps from a member of the EDIL Group.
"Buying Party Group" means whichever of the OSRAM Group or EDIL Group the
Buying Party belongs.
"Calendar Quarter Start Day" means either 1st January, 1st April, 1st July
or 1st October.
"Closing" means "Initial Closing" as defined in the IL Purchase Agreements
and "Closing" as defined in the NAL Purchase Agreements.
"Europe" means Portugal, Spain, Republic of Ireland, France, United
Kingdom, Germany, Italy, Belgium, Luxenbourg, the Netherlands, Denmark,
Greece, Sweden, Norway, Switzerland, Austria, Finland, Liechtenstein,
Poland, Hungary, Czech Republic, Rumania, Cyprus, Malta, Turkey,
Yugoslavia (as formerly constituted (including Croatia, Bosnia Herc),
Macedonia, Albania, Slovenia, Bulgaria, Russia, Ukraine and all other
former members of the Soviet Union (including the members of the CIS and
Baltic states).
"EDIL Group" means EDIL and any Subsidiaries of EDIL (including IL).
-2-
<PAGE> 6
"IL" means that part of GTE Electrical Products Group lighting business
(principally excluding North America) purchased by EDIL pursuant to the
terms and conditions of the IL Purchase Agreements.
"IL Purchase Agreements" means the Amended and Restated Stock Purchase
Agreement and the related agreements for the sale and purchase of IL
between EDIL and GTE Corporation, GTE Products of Connecticut Corporation
and GTE International Incorporated dated 6th August 1992, as amended and
restated by the IL Supplemental Stock Purchase Agreement and Amended and
Restated IL Intellectual Property Non-competition, Environmental and
Assurance Agreements dated 29th January 1993.
"Lamps" means any device which in operation emits ultraviolet, visible
and/or infra-red radiation of between 100 angstroms and 1,000,000 angstroms
in wavelength, including, without limitation, incandescent lamps,
photoflash products (including photoflash lamps), fluorescent lamps
(including sub-miniature fluorescent lamps), high intensity discharge
lamps, and other gaseous discharge lamps but shall not include devices
designed primarily for display of variable images, or for light storage or
intensification or conversion or for processing information bearing signals
or infra-red radiators and other heating devices which do not operate in a
hermetically sealed container or which are provided with a sealed metal
envelope, unless such infra-red radiators and other heating devices are
designed for use in connection with Lamps, Lamp Parts, Accessories or Power
Sources.
"Lamp Competitor" means any corporation (together with its Subsidiaries)
(excluding Siemens and its Subsidiaries) which during the calendar year
immediately preceding the relevant date of the determination of its status
as a Lamp Competitor manufactured Lamps and had aggregate worldwide sales
of Lamps, Lamp Parts, Accessories and Power Sources exceeding:
(i) in the case of corporations and their Subsidiaries whose ultimate
holding company is incorporated in Japan, Taiwan, Singapore, North
Korea, South Korea or China, twenty million United States dollars
(US$20,000,000); and
(ii) in the case of any other corporation and their Subsidiaries, fifty
million United States dollars (US$50,000,000).
"Lamp Materials" means all or any of Lamp Parts, Accessories, Power
Sources, globottles and starters;
-3-
<PAGE> 7
"Lamp Parts" means all of the components, materials and parts from which
Lamps are assembled and the materials used in the production of such
components and parts.
"NAL" means that part of GTE Electrical Products Group lighting business
(principally the North American business) purchased by OSRAM Acquisition
Corporation pursuant to the terms and conditions of the NAL Purchase
Agreements.
"NAL Purchase Agreements" means the stock purchase agreement and the asset
purchase agreement for the sale and purchase of NAL between OSRAM
Acquisition Corporation and Siemens Corporation and GTE Corporation. GTE
Products of Connecticut Corporation and GTE International Incorporated
dated 6th August 1992.
"North America" means the United States of America and Canada.
"OSRAM" means OSRAM GmbH and its Subsidiaries (including NAL and its
Subsidiaries) and any successors thereto in the lamp and lighting business
or Persons within the Siemens Group who after the date hereof carry out
any of the Lamp, Lamp Part, Accessory, Power Source or Manufacturing
Apparatus research and development, production engineering, manufacturing
activities and other operations and business currently conducted by OSRAM
and any of its Subsidiaries (including NAL and its Subsidiaries).
"Person" means an association, a corporation, an individual, a
partnership, a university, and bank, a trust, or any other entity or
organisation.
"Power Sources" means apparatus having an operating frequency (including
carrier or modulation frequencies) between 0 hertz and 500 megahertz
(including starting, operating or control circuits)for energising and
operating Lamps, together with parts and components for such apparatus.
"Preferred Supplier" means that the parties hereto shall purchase Lamp
Materials and Lamps from each other in preference to other suppliers.
Provided that the terms on which such Lamp Materials or Lamps and Similar
Products are offered (including, without limitation, price, quantity,
delivery terms, specification and quality) are at least equal to the terms
offered by other suppliers of such Lamp Materials or Lamps or Similar
Products.
-4-
<PAGE> 8
"Research and Development and Engineering Support Agreement" means the
Research and Development and Engineering Support Agreement between OSRAM
GmbH and EDIL entered into at Closing.
"Selling Party" means in respect of each transaction hereunder either the
member of the OSRAM Group which is obliged to supply Lamp Materials or
Lamps to a member of the EDIL GROUP OR the member of the EDIL Group which
is obliged to supply Lamp Materials or Lamps to a member of the OSRAM
Group.
"Selling Party Group" means whichever of the OSRAM Group or EDIL Group the
Selling Party belongs.
"Signing" means August 6, 1992.
"Similar Product" means, in relation to a Lamp, Lamp Part, Accessory or
Power Source, a product which is of the same or similar type which means
that it is not materially different from such Lamp, Lamp Part, Accessory or
Power Source.
"Subsidiaries" means with respect to any Person, any other Person in which
such Person has a direct or indirect voting equity or voting ownership
interest in excess of 50% or is entitled to vote for the election of the
majority of directors or persons performing similar functions in such
Person.
ARTICLE II
SUPPLY OF LAMP MATERIALS BY OSRAM TO EDIL AND BY EDIL TO OSRAM
SECTION 2.1 Scope of Article II
Subject to Section 2.2 below, this Article II sets out the terms and conditions
upon which Lamp Materials which were supplied by NAL to IL, and by IL to NAL,
in the twelve (12) months prior to Closing (including those types of Lamp
Materials listed in the attached parts I and II of Schedule A) or Similar
Products shall be supplied by OSRAM Group to EDIL Group, and by EDIL Group to
OSRAM Group, for the period set out in Section 2.3k) in respect of UV Phosphors
and for a period until 31 December 2003 following Closing for all other Lamp
Materials.
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<PAGE> 9
For the avoidance of doubt, the terms on which Lamp Materials are to be supplied
pursuant to this Article II shall not apply to Lamp Materials to be supplied
pursuant to supply agreements referred to in Article III which, save as amended
in Article III, shall continue on their terms.
SECTION 2.2 Long-term Supply Agreements
a) Within twelve (12) months of Closing the parties shall, in good faith,
negotiate long-term supply agreements for the most significant Lamp
Materials to be supplied by OSRAM Group to EDIL Group, and by EDIL Group
to OSRAM Group hereunder which agreements shall unless otherwise agreed
incorporate the terms and conditions set out in Section 2.3 and provide
for a commitment to purchase on the part of the purchaser (including
minimum quantities where appropriate) and fixed prices for such Lamp
Materials calculated in accordance with Section 2.3 c).
b) In the event that the parties agree and sign a long-term supply
agreement for a Lamp Material(s), the terms on which such Lamp Material(s)
shall be supplied thereafter will be as set out in such long-term supply
agreement and, for the avoidance of doubt, the terms of this Framework
Agreement shall thenceforth not apply to the supply of such Lamp Materials.
c) Notwithstanding the above, the parties shall be committed to supply or
procure the supply of Lamp Materials to the other party and its
Subsidiaries pursuant to its commitment in Section 2.3 a) unless and until
the parties agree that such commitment is replaced in respect of certain
Lamp Materials by a long term supply agreement.
SECTION 2.3. Terms and Conditions
a) Supply Commitments
OSRAM hereby agrees to itself and to procure that relevant members of the
OSRAM Group shall supply Lamp Materials (excluding Lamp Materials for sale
as lamp parts for, or for use in, motor vehicle lamps) which were supplied
by NAL to IL in the twelve months prior to Closing or Similar Products to
EDIL Group on the terms and conditions set out below, and EDIL hereby
agrees to itself and to procure that relevant members of the EDIL Group
shall supply starters and globottles which are supplied by IL to NAL in the
twelve months prior to Closing or Similar Products to OSRAM Group on the
terms and conditions set out below.
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<PAGE> 10
For the avoidance of doubt, neither party shall be obliged to purchase
Lamp Materials from the other, other than in accordance with the rolling
forecast and firm orders mechanism set out in sub-section 2.3 e) below,
save that for the first 12 months following Closing, OSRAM Group and EDIL
Group shall be each other's Preferred Supplier of Lamp Materials or
Similar Products with NAL and IL supplied to each other in the 12 months
prior to Closing.
b) Duration
OSRAM and EDIL's respective supply commitments hereunder shall commence on
the date of Closing and shall continue for the period set out in Section
2.3k in respect of UV Phosphors and in respect of all other Lamp Materials
for a period of ____________ from Closing and such commitments shall not be
terminated prior to such date unless the parties shall have mutually agreed
in writing.
c) Prices
1) The prices for Lamp Materials or Similar Products to be supplied
hereunder shall be the prices charged by NAL to IL and by IL to NAL
prior to Closing (unless such prices have been increased since
Signing by an amount in excess of what can be justified under
paragraph 2 below in which case the prices shall be those charged
prior to the Signing) for the period of one year following the date
of Closing and thereafter unless and until such prices have been
charged pursuant to this section 2.3 c). The parties currently
believe that such prices are correctly set out in Parts I and II of
Schedule A.
2) Following the first anniversary of this Agreement and upon the
provision of six months' notice to the Buying Party, the Selling
Party may only change the prices for the Lamp Materials supplied
hereunder (see Parts I and II of Schedule A) if such change can be
justified by the Selling Party by reference to a corresponding change
(a) in the Selling Party's cost of labour, materials or energy used
in the production of such Lamp Materials; (b) in the reasonable costs
of environmental protection measures undertaken by the Selling Party
in connection with the facilities used in the production of such Lamp
Materials; (c) in the Selling Party's productivity in connection with
such Lamp Materials; and (d) in the cost of transportation of such
Lamp Materials from the Selling Party to the relevant port or Buying
Party facility where delivery is FOB, FAS, CIF or C&F (INCOTERMS
1990).
-7-
<PAGE> 11
3) Notwithstanding the above, the parties each undertake that the price
charged by it or any of its Subsidiaries for a Lamp Material supplied
to the other party and its Subsidiaries hereunder shall not on average
exceed the price charged by it or its Subsidiaries to other
manufacturers (including original lighting manufacturers) for such
Lamp Material at arm's length in the ordinary course of business
having regard to quantity, quality, delivery, payment and
transportation terms.
d) Payment Terms
The payment terms for the supply of Lamp materials the subject of this
Article shall be the same as applied between NAL and IL prior to Closing
(believed to be correctly set out in Parts I and II of Schedule A). The
date of invoice shall be the date of shipment or any date thereafter. The
method of payment shall be as the Selling Party shall reasonably specify
from time to time.
e) Rolling Forecasts and Firm Orders
The parties shall implement the following forecasts and firm orders
mechanism:
1) For the period from Closing to July 1st 1993, the parties will have
placed legally binding firm orders for Lamp Materials with each other
as set out in Part I of Schedule B and it is agreed that such orders
will be fulfilled in accordance with the terms of such orders as
set out in Part I of Schedule B.
2) The Buying Party shall within two weeks of Closing submit to the
Selling Party in writing its bona fide estimate of its requirements
for Lamp Materials for the 12 month period commencing on 1st April
1993 and shall thereafter submit, at least six weeks before each
Calendar Quarter Start Day, its bona fide best estimate of its
requirements for Lamp Materials for the twelve commencing months on
such Calendar Quarter Start Day.
3) Each such twelve month estimate shall show the Buying Party's
anticipated requirements in the first and second calendar quarters
separately (broken down by month) and the third and forth calendar
quarters together.
4) At the same time as the aforesaid twelve month estimate is submitted
to the Selling Party (except the first such estimate), the Buying
Party shall procure that it and its Subsidiaries
-8-
<PAGE> 12
submit legally binding firm orders to the Selling Party for Lamp
Materials for the first quarter (the "Committed Quarter") of such
estimate. All such firm orders shall be sent to the Selling Party's
head office in the country from where Lamp Materials are to be
supplied and a copy of orders and acceptances shall be sent to the
parties' nominated representatives.
5) The Buying Party's actual requirements for each Lamp Material in the
Committed Quarter shall not vary by more than 10 per cent from the
previous forecast for such quarter unless, after the Buying Party had
submitted its forecast for such quarter, the Selling Party has
altered the terms on which such Lamp Material(s) will be supplied.
6) Subject to sub-section 2.3f) below, OSRAM shall ensure that the
relevant member of the OSRAM Group shall accept EDIL Group's orders
for the Committed Quarter and that such relevant member of the OSRAM
Group shall confirm receipt and acceptance of EDIL Group's orders in
writing within 14 days of receipt.
7) Subject to sub-section 2.3f below, EDIL shall ensure that the
relevant member of the EDIL Group shall accept OSRAM Group's orders
for the Committed Quarter and that such relevant member of the EDIL
Group shall confirm receipt and acceptance of OSRAM Group orders in
writing within 14 days of receipt.
8) OSRAM and EDIL shall each nominate a representative to manage this
rolling forecast and firm orders procedure. Such nominated
representatives shall act as the point of first contact in the event
of supply difficulties and shall, in good faith, seek to resolve any
disputes which may arise. Any dispute relating to this rolling
forecast and firm orders procedure which cannot be resolved by the
nominated representatives shall be referred to a senior executive of
each of the parties, currently Mr. Swaanen for EDIL Group and Mr.
Waaser for OSRAM Group. Either party shall give the other at least
14 days' notice of any change in its nominees from time to time.
f) Quantity
Subject to sub-section 2.3 q) below, OSRAM hereby agrees to itself and to
procure that OSRAM Group supply to EDIL Group all its requirements for
each Lamp Material of the type supplied by NAL to IL in the twelve months
prior to Closing or Similar Products thereto in the quantities ordered by
EDIL Group pursuant to sub-section 2.3 e) above and EDIL hereby agrees to
supply
-9-
<PAGE> 13
OSRAM Group with all its requirements for globottles and starters in the
quantities ordered by OSRAM Group pursuant to sub-section 2.3 e) above
Provided that in the event that the Selling Party notifies the Buying
Party on 6 months notice that Supplying Party has no capacity to
manufacture Lamp Materials or Similar Products or within 14 days of such
firm order that there is a reasonable shortage in production of such Lamp
Material, then the Selling Party shall only be obliged to supply to the
Buying Party the Lamp Material ordered for any quarter up to the greater
of:
1) the quantity of such Lamp Material or Similar Product supplied by the
Selling Party's Group to the Buying Party's Group in the relevant
quarter of the twelve month period prior to Closing or such date; or
2) a pro-rata share of the Selling Party's Group total available supplies
of such Lamp Material having regard to the Buying Party's Group orders
or purchases of such Lamp Material or Similar Product from the Selling
Party's Group and the purchases of such Lamp Material or Similar
Product by other customers of the Selling Party Group in the relevant
quarter of the twelve month period prior to Closing or such date,
and for the purposes of this sub-section f), where the Selling Party or
Buying Party is a member of the OSRAM Group, supplies to or from NAL or
for OSRAM Group's own use shall be included in such calculation, and where
the Selling Party or Buying Party is a member of the EDIL Group, supplies
to or from IL or for EDIL Group's own use shall be included in such
calculation.
g) Short Orders
1) In addition to the rolling forecasts and firm orders procedure set
out in sub-section e) above, and the supply obligations set out in
sub-section f) above, the Buying Party may from time to time order
Lamp Materials from the Selling Party to meet its unanticipated
requirements for such Lamp Materials.
2) The Selling Party shall supply such Lamp Materials within 14 days of
receipt of the Buying Party's order in respect of any Lamp Materials
which are in the Selling Party Groups stock and not assigned to any
customer or to the Selling Party's own factories at the time of order
and the relevant party hereto agrees to use reasonable efforts in all
-10-
<PAGE> 14
other circumstances to manufacture and deliver such Lamp Materials to
the Buying Party as soon as possible.
h) Quality
The quality of the Lamp Materials to be supplied by OSRAM Group or EDIL
Group to members of the other party's group pursuant to this Article II
shall equal the quality of such Lamp Materials supplied by OSRAM Group or
EDIL Group (as appropriate) to its own lamp manufacturing facilities or,
if not so supplied, the quality of similar lamp materials supplied to its
own lamp manufacturing facilities.
i) Amendment of Terms
1) The Selling Party may not amend specifications of Lamp Materials the
bulk of the Buying Party's requirements for which are purchased at
the time of such proposed amendment from the Selling Party and which
will affect the Buying Party's production of Lamps incorporating such
Lamp Materials, unless the Buying Party shall have consented in
writing to such amendments (such consent not to be unreasonably
withheld).
2) The Buying Party may from time to time with 6 month's prior written
notice require the Selling Party to reasonably amend the
specifications of Lamp Materials and the relevant party hereto shall
ensure that the Selling Party shall comply with such request unless
in the Selling Party's sole discretion said amendment has an adverse
affect on the Selling Party's production costs or schedule or
manufacturing process. In the event that the Selling Party amends
the specifications of a Lamp Material at the Buying Party's request,
the Selling Party may alter the price or schedule at which such Lamp
Material is supplied to the Buying Party to reflect any additional
production expenses or time delays reasonably caused to the Selling
Party as a result of such amendment.
3) The Selling Party may only amend terms relating to the availability
of Lamp Materials in the event that the Selling Party Group
permanently ceases production of such Lamp Materials or Similar
Products and the Buying Party Group has been given six months' notice
of such change.
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<PAGE> 15
4) The Selling Party may only amend terms relating to quality if:
a) the same amendments have been made to the terms on which Lamp
Materials are supplied to the Selling Party's Group own lamp
manufacturing facilities; and
b) the Buying Party's Group has been given six months' notice of
such change.
j) Assignment
Without prejudice to OSRAM's commitment to supply Lamp Materials to EDIL Group,
in the event of a sale by EDIL or any of its Subsidiaries of a company or of the
whole or part of its business from time to time to any Person OSRAM shall enter
into a new supply contract for the duration of the unexpired term of this
Agreement at such time with the purchaser of such company or business on the
same terms as set out in this Article II in respect of the type of Lamp
Materials purchased by such company or business at the time of such sale
(including as to price, quantity, quality, delivery and payment terms.)
K) Exclusivity
1) Except as provided in sub-section 2) and 3) below, the Selling Party
shall supply Lamp Materials to the Buying Party hereunder on a
non-exclusive basis.
2) For a period of 7 years OSRAM hereby appoint the EDIL Group as the
OSRAM Group's exclusive distributor in Europe for suntanning and
therapeutic Lamps manufactured using UV phosphors (including UV
phosphors set out in paragraph 3 below) manufactured and/or supplied
by NAL and OSRAM shall not and shall ensure that no member of the
OSRAM Group shall itself distribute or appoint any third party to
distribute suntanning and therapeutic Lamps in Europe which
incorporate UV phosphors manufactured and/or supplied by NAL. For the
avoidance of doubt OSRAM amy source UV phosphors from third parties or
manufacture such UV phosphors by itself but OSRAM shall not be
entitled to source UV phosphors from NAL.
3) Without prejudice to the above, for the duration of the supply
contract dated March 12th 1992 and amended July 8th 1992 between GTE
Licht GmbH and Kosmedico Kosmetische und Medizmische Lampan GmbH,
however, in no case longer than until December 31 2001 OSRAM shall
procure that OSRAM Group shall supply to EDIL Group on an exclusive
basis in Europe the following phosphors (currently) manufactured in
Towanda
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<PAGE> 16
Pennsylvania) for use by EDIL Group in the manufacture of sun-tanning
and therapeutic lamps and the sale of such lamps in Europe through the
aforesaid distributor:
UV Phosphor No. 2090
UV Phosphor No. 2091
UV Phosphor No. GS 2011
UV Phosphor No. 2093
UV Phosphor No. 2094
UV Phosphor No. 2096
UV Phosphor No. 2097
For the duration of the aforesaid contract OSRAM shall not and shall ensure
that no member of the OSRAM Group shall manufacture or supply sun-tanning
or therapeutic Lamps incorporating the aforesaid phosphors in Europe, and
shall ensure that no member of the OSRAM Group shall supply such phosphors
for use by third parties in the manufacture of sun-tanning or therapeutic
Lamps for sale in Europe provided that EDIL Group purchase from OSRAM Group
a minimum quantity of the aforesaid phosphors needed for the manufacture of
two and a half (2.5) million items in the first and subsequent years of
this Agreement.
l) Delivery
1) Lamp Materials shall be delivered on the terms set out in Parts I and
II of Schedule A and for the avoidance of doubt any terms used shall
be INCOTERMS 1990.
2) In the event that the Selling Party fails to deliver Lamp Materials
to the Buying Party in the week stipulated by the Buying Party, the
Selling Party shall use all reasonable efforts to deliver such Lamp
Materials to the Buying Party as soon as practicable thereafter.
m) Warranty
1) The parties each undertake that it and the relevant members of the
Selling Party Group shall in respect of Lamp Materials supplied by it
and/or its Subsidiaries to a member of the Buying Party Group warrant
such Lamp Materials shall (a) be free from defects in material and
workmanship; (b) comply with the agreed functional and performance
specifications for that type of Lamp Material; and (c) equal the
quality of the same or
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<PAGE> 17
similar type of Lamp Materials supplied to the Selling Party Group's
own manufacturing facilities.
Except as set out above, there are no other warranties express or
implied, including the warranties of merchantability and of fitness
for a particular purpose with respect to the Lamp Materials to be
supplied under this Article.
2) The Buying Party may within thirty days of the date of delivery,
reject delivered Lamp Materials which do not comply with the above
warranty by notifying the Selling Party in writing and the Selling
Party shall, at the Buying Party's option, either replace such Lamp
Materials within thirty days from the date of the Buying Party's
notice of rejection or issue a credit note for the respective invoice
amount and freight. The Selling Party shall be responsible for the
costs of re-transportation of rejected Lamp Materials back to the
Selling Party and delivery by air freight (if reasonably required by
the Buying Party) of any replacement Lamp Materials and, if necessary,
in order to effect such replacement as soon as possible the Selling
Party Group shall reschedule production and do everything in its power
to give the re-supply of Lamp Materials to the Buying Party the
highest priority.
3) The Selling Party shall not be liable for consequential, indirect,
special or incidental damages.
n) Taxes
Prices for Lamp Materials listed in Schedule A are exclusive of all taxes,
tariffs, duties and other charges whatsoever unless otherwise stated in
Schedule A.
o) Patents
1) Each party hereby warrants and represents to the best of its
knowledge and belief that the sale or use of Lamp Materials supplied
by it or any of its Subsidiaries to the Buying Party Group hereunder
shall not infringe the patent or other intellectual property rights of
a third party, and such party shall notify the Buying Party (in the
form of a patent infringement study to the extent available and to be
kept strictly confidential) of the existence or possibility of the use
or sale of such Lamp Material (whether as part of a
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<PAGE> 18
Lamp or otherwise) infringing the patent or other intellectual
property rights of a third party.
2) Each party hereby undertakes to indemnify and hold harmless the other
party and its Subsidiaries from and against any and all losses,
damages or expenses, suffered or incurred by such other party and its
Subsidiaries arising from any claim by a third party that the use or
sale of Lamp Materials (whether as part of a Lamp or otherwise)
supplied by it or any of its Subsidiaries infringes such third parties
patents or other intellectual property rights.
3) Where a Lamp Material has been supplied to the Buying Party, and the
Buying Party's use or sale of such Lamp Material would constitute or
has constituted an infringement of the patent or other intellectual
property rights of a third party, the Selling Party shall issue a
credit note in return for such Lamp Materials equal to the respective
invoice amount for such Lamp Material and costs of freight.
4) Neither party shall be liable to the other party for consequential,
indirect, special or incidental damages.
5) Neither party shall be obliged to deliver Lamp Materials to the other
party in the event that it reasonably considers that the sale or use
of such Lamp Materials would infringe the patent or other intellectual
property rights of a third party.
p) Labelling and Packaging
1) The Lamp Materials (including packaging supplied hereunder) shall bear
such trade marks as the Buying Party may request. Such application of
the Buying Party's requested trade marks is made at the sole and
exclusive risk of the Buying Party regarding the validity or
infringement of any trade mark or other intellectual property right
and the Buying Party expressly undertakes to indemnify and hold the
Selling Party harmless from and against any and all claims, damages or
expenses which may arise by reason of applying trade marks, labels or
inscriptions to Lamp Materials at the instruction of the Buying Party.
2) The interior and exterior packaging of Lamp Materials supplied by the
Selling Party to the Buying Party under this Article II shall be the
packaging existing at the date of
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<PAGE> 19
Closing, and any changes thereto which will or are likely to adversely
affect the Buying Party, require the Buying Party's prior written
consent, such consent not to be unreasonably withheld.
3) The labeling of Lamp Materials supplied by the Selling Party to the
Buying Party under this Article II shall be the labeling existing at
the date of Closing (except that the use of the trade mark "GTE" shall
be phased out) and any changes thereto require the Buying Party's
prior written consent, such consent not to be unreasonably withheld.
4) Any costs incurred by the Selling Party in making changes to the
packaging and labelling of Lamp Materials requested by the Buying
Party shall be for the Buying Party's account, except any changes
required as a consequence of the IL Purchase Agreements. All other
changes to labelling and packaging (including all costs connected with
removing the "GTE" and other trade marks associated with GTE
Corporation and its Subsidiaries) shall be made at the Selling Party's
cost and shall not increase the price of Lamp Materials supplied
hereunder.
q) Force Majeure
The Selling Party shall not be liable for failure to fulfil the orders of
the Buying Party where such failure or delay is due to force majeure
including, without limitation, fire; act of God; acts, restrictions or
failure to act of any government authority, domestic or foreign; strikes or
labour disputes; equipment failure; shortages of materials in the market
which were unforeseeable and which a prudent manufacturing company could
not reasonably have avoided; war or civil commotion; delays in
transportation or any other cause beyond its reasonable control, Provided,
however, that in such event the Selling Party shall use reasonable efforts
to fulfil the Buying Party's orders insofar as practicable and shall at
least supply to the Buying Party the quantity of Lamp Materials or Similar
Products equal to the percentage of the Selling Party's capacity to supply
such Lamp Materials at that time, such percentage to be determined by the
ratio of the Buying Party's firm orders to the Selling Party's sales to all
its customers and its own use of such Lamp Material, for the twelve (12)
month period preceding the force majeure event, for the duration of the
event constituting force majeure.
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<PAGE> 20
4) CONFIDENTIALITY
The parties undertake to, and shall procure that their respective
Subsidiaries shall hold, so far as reasonably possible, the terms of any
supply arrangement to which this Article is applicable in confidence.
Neither EDIL nor OSRAM nor their respective Subsidiaries shall make any
reference to the origin of Lamp Materials supplied hereunder in their sales
promotion.
5) MINOR PRODUCT LINES
The parties shall within 12 months of Closing consider the continued
viability and practicality of each party supplying the other with small
quantities of Lamp Materials and in the event that the parties agree that
the Selling Party's costs of manufacturing such small quantities outweigh
the commercial benefits to the Buying Party of being supplied the same on
the terms and conditions set out herein then the Selling Party's
obligations to supply the Buying Party with such type of Lamp Materials
hereunder may be terminated by agreement.
SECTION 2.4 EQUAL TREATMENT
1) Upon request by EDIL, OSRAM agrees to authorise and consent to third
party suppliers using OSRAM Group's intellectual property rights,
tooling and manufacturing apparatus to make and sell Lamp Materials
(which are the same as or similar to those supplied by such third party
to OSRAM Group) to EDIL Group on the same terms and conditions as OSRAM
Group receives the same Provided that where OSRAM Group has financed the
tooling or manufacturing apparatus used by a third party, the price
charged to EDIL Group may reflect the cost of the OSRAM Group
investment.
2) OSRAM shall use its Best Efforts to ensure that any future joint
venture between OSRAM or any member of the OSRAM Group and a third
party agrees to supply Lamp Materials to EDIL Group on favourable terms
(including price) in a manner similar to that in which IL is currently
supplied with Lamp Materials from Eurospace maatschappij voor fabricage
en verkoop van gloeilam penonderdelen ("EMGO") including, but without
limitation, the price which shall be the same price as that paid by the
shareholders plus three and a half percent. Provided that EDIL Group
undertakes to purchase the bulk of its requirements from the said joint
venture.
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<PAGE> 21
ARTICLE III
CONTINUATION OF CERTAIN SUPPLY AGREEMENTS BETWEEN OSRAM GROUP AND IL
SECTION 3.1 LYNX-L COMPACT FLOURESCENT LAMPS
The parties hereto shall, within 2 months of Closing, procure that the first
paragraph of Section 11.1 of the Supply Agreement between OSRAM GmbH and GTE
Sylvania S.A. dated March 31, 1992, regarding the supply of Lynx-L Compact
Flourescent Lamps shall be amended to read as follows:
"The Agreement comes into force on January 1, 1992, and will remain in full
force and effect until December 31, 1996, when it shall automatically terminate
unless otherwise agreed upon by the parties in writing."
SECTION 3.2 SUPPLY AGREEMENT FOR BULBS BETWEEN GTE SYLVANIA S.A. AND EMGO
a) EDIL will promptly approach Europese maatschappij voor fabricage en verkoop
van gloeilampenonderdelen of Lommel, Belgium ("EMGO") and propose the
amendment of the existing supply agreement dated December 6, 1982, between
GTE Sylvania S.A. and EMGO on the following terms:
1) the term of the agreement shall be extended for ten years after
signing;
2) a firm order for 120 million light bulbs for the first year is to be
given by EDIL on behalf of its Subsidiaries, and thereafter EDIL is
to acquire the bulk of its European light bulb requirements from EMGO;
3) the price to be charged to EDIL Group is to be 3 1/2% above the price
charged for such light bulbs by EMGO to EMGO's shareholders, with GTE
Sylvania S.A. to have the right to verify such price through audits.
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<PAGE> 22
b) OSRAM will itself and procure that its trustees recommend to its joint
venture partner in EMGO that EMGO accept a proposal made by EDIL in
accordance with the terms set forth in the foregoing subparagraphs.
SECTION 3.3 The supply agreement between OSRAM GmbH and SABA Schwarzwalder
Apparate-Bau-Anstalt August Schwer Sohne GmbH ("GTE Licht") dated November 11,
1978, for the supply of glass for fluorescent lamps ("German Glass Contract").
a) The parties hereby agree that the German Glass Contract shall be amended
as follows:
1) Add the following recitals:
WHEREAS pursuant to Heads of Agreement dated 6 June 1992 and a Master
Agreement between Siemens Aktiengesellschaft, OSRAM GmbH ("OSRAM"),
Citicorp Capital Investors Europe Limited and Edil International
Lighting B.V. ("Edil") dated 6 August 1992 Edil agreed to purchase the
International Lighting Division including GTE Licht GmbH ("GTE"
Licht") from GTE Corporation and GTE International Incorporated on
condition, inter alia, that OSRAM agree to continue to supply GTE
Licht or its successors with glass and such party agrees to source
glass for flourescent lamps on the terms of the agreement between
OSRAM and GTE Licht originally concluded on 30 October 1978 as amended
by an amendment dated 19 February 1985 (the "Agreement") for as long
as the Erlangen plant continues its production of fluorescent lamps.
AND WHEREAS the parties to this Agreement wish to amend the Agreement
to ensure that OSRAM will supply and GTE Licht or its successors will
source the same glass for fluorescent lamps on the terms of the
Agreement for as long as the Erlangen plant continues its production
of fluorescent lamps.
It is now hereby agreed that:
2) Clause 1 (last paragraph) to be amended to read as follows:
"OSRAM undertakes to orientate its capacity at its plant at Augsburg
such that all the requirements of GTE Licht, as projected twelve
months in advance, can be met. The foregoing is subject to the
reservation that the obligation of OSRAM to supply all GTE
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<PAGE> 23
Licht requirements shall not extend beyond 90 million units per
annum. Notwithstanding such capacity limitation, in the event that
the OSRAM Group extends the capacity for such glass at such plant or
at any other OSRAM Group plant in the future OSRAM hereby agree to
favourably consider an increase in supplies beyond 90 million units
per annum to GTE Licht on the same terms and conditions of this
Agreement.
3) Clause 14 to be replaced by the following clause:
"Clause 14 Term of Agreement, Termination
This Agreement shall run indefinitely. It will terminate, however,
if the production of bulbs for linear and ring lamps at the Erlangen
plant of GTE Licht is finally discontinued. It may also be
terminated by either party by giving at least 24 months' notice to
the end of the calendar year in writing to the other party, such
termination, however, not to take effect before 31 December 2005.
The right to terminate the Agreement for good cause remains
unaffected by the above."
4) New Clause 14A Assignment to include the following right:
GTE Licht may at any time assign all its rights and obligations under
this Agreement to EDIL International Lighting B.V. or any of its
Subsidiaries from time to time and OSRAM hereby assents to such
assignments.
b) The parties hereby agree that if the German Glass Contract is terminated
by OSRAM for any reason whatsoever except for a material breach by GTE
Light thereunder OSRAM shall immediatetely enter into a new agreement for
the supply of glass for fluorescent lamps on the same terms as the German
Glass Contract (as amended herein), save that the term of the renewed
agreement shall be for so long as the Erlangen plant continues production
of fluorescent lamps of, if less, 15 years.
c) EDIL may, at any time, assign the right to require OSRAM to enter into a
new agreement pursuant to subparagraph 3.3 b) above to any of its
Subsidiaries from time to time, and OSRAM hereby assents to such
assignment. Furthermore, EDIL may assign such right and the German Glass
Contract or any replacement thereof to the purchaser of a portion of whole
of
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<PAGE> 24
EDIL's business making use of the light bulbs delivered or to be delivered
thereunder Provided the the purchaser of such business is not a Lamp
Competitor.
SECTION 3.4 The Supply Agreement between GTE do Brasil S/A Industria e Comerco
and OSRAM do Brasil Compantia de Limpadas Eletricas for the supply of bulbs and
tubes ("the Brazilian Glass Contract").
a) The parties hereby agree that the Brazilian Glass Contract shall be
amended to effect the following agreement:
1) Extend the term of the Brazilian Glass Contract from 31st December
1996 to the 31st December 2000;
2) From the 1st January 1997 until 31st December 2000 OSRAM shall
purchase all its requirements for glass (of the type currently
purchased from IL) for its Brazilian lamp and lighting manufacturing
operations from the Brazilian glass manufacturing facility currently
operated by GTE do Brasil S/A Industria e Comerco ("Brazil Glass
Facility") (excluding those quantities of glass which it is obliged
to purchase from GE or Vitroarma under and for the period of glass
contracts in force with such parties as at Closing) except for the
period and/or to the extent that EDIL notify OSRAM (on 12 month's
notice) that such Brazil Glass Facility has no further capacity to
meet all of OSRAM's requirements in which case OSRAM may purchase
such quantities of glass that the Brazil Glass Facility cannot supply
for that period from elsewhere. EDIL shall for this period procure
that glass supplied under the Brazilian Glass Contract is continued
to be supplied on competitive terms.
b) OSRAM hereby consents to the assignment of the Brazilian Glass Contract to
EDIL or any of its Subsidiaries and to assignments within the EDIL Group
and OSRAM also agrees for and on behalf of its Subsidiaries to waive any
right that it or any of its Subsidiaries may have to terminate the
Brazilian Glass Contract pursuant to Clause 16 of the Brazilian Glass
Contract. Osram continues to be entitled to terminate the Brazilian Glass
Contract for material breach.
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<PAGE> 25
SECTION 3.5 Equipment for the Double Twin Compact Flourescent Line at Shipley,
United Kingdom
a) OSRAM agrees to sell EDIL the equipment necessary for the completion of
the double twin compact fluorescent line at EDIL's facility at Shipley,
United Kingdom (the "Shipley Line") on favourable terms, but in no event
at a price which is less than OSRAM's costs for such equipment.
b) OSRAM shall fulfill orders for equipment for the Shipley Line that are
outstanding as of Signing on the terms agreed upon by the relevant parties
at the time such orders were placed.
--------------------------
ARTICLE IV
CONTINUATION OF SUPPLY ARRANGEMENTS FOR FINISHED LAMPS
BETWEEN OSRAM, NAL AND IL
SECTION 4.1 Scope of Article IV
Subject to Section 4.3 below, this Article IV sets out the terms and conditions
upon which Lamps which were supplied by NAL to IL, by IL to NAL, by OSRAM Group
to IL and by IL to OSRAM Group in the twelve (12) months prior to Closing or
Similar Products, and Lamps which, although not supplied, were available to be
supplied by NAL to IL during such period as listed in Schedule D, shall be
supplied by OSRAM Group to EDIL Group, and by EDIL Group to OSRAM Group, for
the period set out in section 4.31 in respect of the Lamps set out on schedule
E and in respect of all other Lamps for a period of 4 years following Closing.
For the avoidance of doubt, the terms on which Lamps are to be supplied
pursuant to this Article IV shall not apply to Lamps supplied pursuant to
supply agreements referred to in Article III which, save as amended in Article
III, shall continue on their terms.
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<PAGE> 26
SECTION 4.2 LONG-TERM SUPPLY AND PURCHASE CONTRACTS
a) Within twelve (12) months of Closing, the parties shall, in good faith,
negotiate long-term supply agreements for the most significant Lamps to be
supplied by OSRAM Group to EDIL Group, and by EDIL Group to OSRAM Group
hereunder which agreements shall incorporate the terms and conditions set
out in Section 4.3 and provide for a commitment to purchase on the part of
the purchaser (including minimum quantities where appropriate) and fixed
prices for such Lamps calculated pursuant to Section 4.3 c) unless
otherwise agreed.
b) In the event that the parties agree and sign a long-term agreement for a
Lamp(s), the terms on which such Lamp(s) shall be supplied thereafter will
be as set out in such long-term supply agreement and, for the avoidance of
doubt, the terms of this Framework Agreement shall thenceforth not apply to
such Lamps.
c) Notwithstanding the above, the parties shall be committed to supply or
procure the supply of Lamps to the other party and its Subsidiaries
pursuant to its commitment in Section 4.3 a) unless and until the parties
agree that such commitment is replaced in respect of certain Lamps by a
long term Supply Agreement.
SECTION 4.3 TERMS AND CONDITIONS
a) SUPPLY COMMITMENTS
OSRAM hereby agrees itself and to procure that relevant members of the
OSRAM Group shall supply to EDIL Group, Lamps of a type which were offered
to be supplied by NAL to IL (as set out in Schedule D) and were supplied by
OSRAM Group to IL, in the 12 months prior to Closing or Similar Products on
the terms and conditions set out below and EDIL hereby agrees itself to and
to procure that relevant members of the EDIL Group shall Supply to OSRAM
Group Lamps of a type which were supplied by IL to NAL or OSRAM Group in
the twelve months prior to Closing or Similar products on the terms and
conditions in this Section 4.3.
For the avoidance of doubt, neither party shall be obliged to purchase
Lamps from the other, other than in accordance with the rolling forecast
and firm orders mechanism set out in Section 4.3 e) below, save that for
the first 12 months following Closing OSRAM Group and EDIL Group shall be
each other's Preferred Supplier of Lams or Similar Products which NAL and
IL supplied to each other (or which were available to the other) in the 12
months prior to Closing.
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<PAGE> 27
b) DURATION
OSRAM and EDIL's respective supply commitments for Lamps hereunder shall
commence on the date of Closing and shall continue (except in respect of
those type of lamps subject to long term supply agreements entered into
pursuant to Section 4.2) for the period set out in Section 4.3(j) in
respect of the Lamps set out in Schedule E and in respect of all other
Lamps for a minimum period of four years from the date of Closing and such
commitments shall not be terminated prior to such dates (and then or
thereafter only on twelve months advance written notice) unless the parties
shall have mutually agreed in writing.
c) PRICE
1) The prices for Lamps or Similar Products to be supplied hereunder shall
be the prices charged or if not purchased, quoted by the OSRAM Group
and EDIL Group to the other as at Closing (unless such prices have been
increased since Signing by an amount in excess of what can be justified
under paragraph 2 below in which case the prices shall be those charged
or quoted prior to Signing) for the period of one year following the
date of Closing and thereafter unless and until such prices have been
changed pursuant to this Section 4.3 c). The parties currently believe
that such prices are correctly set out in Schedule D.
2) Following the first anniversary of this Agreement and upon the
provision of six month's notice to the Buying Party, the Selling Party
may only change the prices for Lamps supplied hereunder to the extent
necessary to reflect increases or decreases (a) in the cost of labour,
materials or energy used in the production of such Lamps; (b) in the
reasonable costs of environmental protection measures undertaken by the
Selling Party in connection with the facilities used in the production
of such Lamps; and (c) in the Selling Party's productivity in
connection with such Lamps.
3) Notwithstanding the above, the parties hereby each undertake that the
price charged by it or its Subsidiaries for a Lamp supplied to the
other party or its Subsidiaries hereunder shall not on average exceed
the net price charged by it or its Subsidiaries to its most favoured
group of wholesalers, distributors, and original equipment
manufacturers less a reasonable margin in respect of such Lamps or for
similar quantities the price paid by original lamp manufacturers.
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<PAGE> 28
4) OSRAM will use its best efforts that for as long as OSRAM Group is the
exclusive Supplier of Lamps in Schedule E to EDIL Group in Europe the
price of such Lamps to the EDIL Group shall enable the EDIL Group to
remain competitive in the relevant market place.
d) Payment Terms
The payment terms for the supply of Lamps the subject of this Article shall
be those which applied between the OSRAM Group and EDIL Group prior to
Closing (believed to be set out in Schedule D) Provided that in respect of
Lamps supplied to EDIL Group, payment shall be due no sooner than 60 days
from the date of invoice for deliveries of Lamps of the type listed on
Schedule D and all other Lamps except in the case of deliveries of any
Lamps from OSRAM's European locations to EDIL Group European locations of
Lamps previously supplied by OSRAM to IL where payment shall be due no
sooner than 30 days from the date of invoice. The date of invoice shall be
the date of shipment or any date thereafter. The method of payment shall be
as the Selling Party shall reasonably specify from time to time.
e) Rolling Forecasts and Firm Orders
The Selling Party and the Buying Party shall implement the following
rolling forecasts and firm orders mechanism:
1) For the period from Closing to July 1, 1993, the parties will have
placed legally binding firm orders for Lamps with each other as set
out in Part II of Schedule B and it is agreed that such orders will be
fulfilled in accordance with the terms of such orders as set out in
Part II of Schedule B.
2) The Buying Party shall within two weeks of Closing submit to the
Selling Party in writing its bona fide best estimate of its
requirements for Lamps for the 12 month period commencing on 1st April
1993 and shall thereafter submit, at least six weeks before each
Calendar Quarter Start Day its bona fide best estimate of its
requirements for Lamps for the twelve months commencing on such
Calendar Quarter Start Day.
3) Each such twelve month estimate shall show the Buying Party's
anticipated requirements in the first and second calendar quarters
separately (broken down by month) and the third and fourth calendar
quarters together.
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<PAGE> 29
4) At the same time as the aforesaid twelve month estimate is submitted
to the Selling Party (except the first such estimate), the Buying
Party shall procure that its Subsidiaries submit legally binding firm
orders to the Selling Party for Lamps for the first quarter (the
"Committed Quarter") of such estimate. All such firm orders shall be
sent to the Selling Party's head office in the country from where
Lamps are to be supplied and a copy of orders and acceptances shall be
sent to the parties' nominated representatives.
5) The Buying Party's actual requirements for each Lamp in the Committed
Quarter shall not vary by more than 10 per cent from the previous
forecast for such quarter unless, after the Buying Party had submitted
its forecast for such quarter, the Selling Party has altered the terms
on which such Lamp(s) will be supplied.
6) Subject to sub-section 4.3 f) below, OSRAM shall ensure that the
relevant member of the OSRAM Group shall accept EDIL Group's orders
for the Committed Quarter and that such relevant member of the OSRAM
Group shall confirm receipt and acceptance of EDIL's Group's order in
writing within 14 days of receipt.
7) Subject to sub-section 4.3 f) below, EDIL shall ensure that the
relevant member of the EDIL Group shall accept OSRAM Group's orders
for the Committed Quarter and that such relevant member of the EDIL
Group shall confirm receipt and acceptance of OSRAM Group orders in
writing within 14 days of receipt.
8) OSRAM and EDIL shall each nominate a representative to manage this
rolling forecast and firm orders procedure. Such nominated
representative shall act as the point of first contact in the event of
supply difficulties and shall, in good faith, seek to resolve any
disputes which may arise. Any dispute relating to this rolling
forecast and firm orders procedure which cannot be resolved by the
nominated representatives shall be referred to a senior executive of
each of the parties, currently Mr. Swaanen for EDIL Group and Mr.
Wasser for OSRAM Group. Either party shall give the other at least 14
days notice of any change in its nominees from time to time.
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<PAGE> 30
f) Quantity
Subject to sub-section 4.3 p) below, OSRAM hereby agrees itself and to
procure that the OSRAM Group supply to EDIL Group all its requirements for
each Lamp of the type listed on Schedule D or supplied by OSRAM Group to IL
in the twelve months prior to Closing or Similar Products in the quantities
ordered by EDIL Group pursuant to Section 4.3 e) above and EDIL hereby
agrees itself and to procure that the EDIL Group supply to OSRAM Group all
its requirements for Lamps of a type supplied by IL to NAL in the twelve
months prior to Closing or Similar Products Provided that in the event that
the Selling Party notifies the Buying Party on 6 months notice that
Supplying Party has no capacity to manufacture Lamps or Similar Products,
or within 14 days of such firm order that there is a reasonable shortage in
production of such Lamp, then the Selling Party shall be obliged to supply
to the Buying Party the Lamps ordered for any quarter up to the greater of:
1) the quantity of such Lamp or Similar Product Supplied by the Selling
Party Group to the Buying Party Group in the relevant quarter of the
twelve month period to Closing or such date; or
2) a pro-rata share of the Selling Party Group total available supplies
of such Lamp having regard to the Buying Party's Group orders or
purchases of such Lamp or Similar Product from the Selling Party Group
and the purchases of such Lamp or Similar Product by other customers
of the Selling Party in the relevant quarter of the twelve month
period prior to Closing or such date; or
3) in respect of sub-miniature fluorescent Lamps or Similar Products 15%
of OSRAM Groups worldwide production capacity of such Lamps.
and for the purposes of this sub-section, where the Selling Party or Buying
Party is a member of the OSRAM Group, supplies to or from NAL or for OSRAM
Group's own use shall be included in such calculation, and where the Selling
Party or Buying Party is EDIL Group a member of the supplies to or from IL or
for EDIL Group's own use shall be included in such calculation.
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<PAGE> 31
g) Quality
The quality of Lamps to be supplied by the Selling Party Group to the
Buying Party Group pursuant to this Article shall at least equal the
quality of Lamps manufactured for sale under the Selling Party's Group
trade marks in Europe or, if not supplied in Europe, such other relevant
territory.
h) Amendment of Terms
1) The Selling Party may only amend terms relating to the availability of
Lamps supplied under this Article in the event that such party
permanently ceases production of such Lamps or Similar Products and
the Buying Party has been given six months' notice of such change;
2) The Selling Party may only amend terms relating to the quality and
specification of Lamps supplied under this Article if:
A) the same amendments have been made to the terms on which such
Lamps are supplied to the Selling Party's own Lamp manufacturing
facilities; and
B) the Buying Party has been given six months' notice of such
change.
i) Assignment
Without prejudice to OSRAM's commitment to supply Lamps to EDIL and its
Subsidiaries hereunder, in the event of a sale by EDIL or any of its
Subsidiaries of a company or of the whole or part of its business from time
to time to any Person OSRAM shall enter into a new supply contract for the
duration of the unexpired term of this Agreement at such time with the
purchaser of such company or business on the same terms as set out in this
Article IV in respect of the type of Lamps purchased by such company or
business at the time of such sale (including as to price, quantity,
quality, delivery and payment terms).
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<PAGE> 32
j) Exclusivity
1) Except as set out in paragraph 2) below the supply agreements
covered by this Article shall be on a non-exclusive basis.
2) For a period of 7 years OSRAM hereby appoint the EDIL Group as the
OSRAM Group's exclusive distributor in Europe for the Lamp Products
manufactured and/or supplied by NAL (except as limited by paragraph
3) below) listed in Schedule E and OSRAM shall not and shall ensure
that no member of the OSRAM Group shall distribute and sell or
appoint any third party to distribute and sell such Lamp Products in
Europe during this term. For the avoidance of doubt OSRAM may source
the Lamps listed in Schedule E from third parties or manufacture such
Lamps itself but shall not be entitled to source such Lamps (except
as permitted in paragraph 3 below) from NAL for distribution in
Europe.
3) Notwithstanding paragraph 2 above, OSRAM shall be entitled to sell
itself (but not through any third parties) the following Lamps
manufactured and supplied by NAL in the territories listed below:
(i) OSRAM may continue to sell VHO and HO Lamps and slimline
fluorescent Lamps in the United Kingdom up to a limit of the
same quantities of such Lamps as it currently sells in the
United Kingdom;
(ii) OSRAM may continue to sell Par 64 Lamps in Germany;
(iii) OSRAM may sell sub-miniature florescent Lamps throughout Europe
in any quantities but shall not sell any such Lamps to the
eight customers whom IL have sent quotations to prior to
Closing and who will be notified to OSRAM by EDIL within two
weeks of Closing. Furthermore EDIL assures OSRAM that it has
established a business relationship with such customers prior
to Closing.
4) Subject to paragraphs 4.3 L and N, EDIL hereby agree to indemnify
OSRAM Group against any losses, damages or expenses suffered or
incurred by OSRAM Group arising from any claim by a third party that
the use of sun-tanning or therapeutic lamps supplied by EDIL Group
has brought such third party health problems provided that the UV
Phosphors supplied to EDIL group and used in
- 29 -
<PAGE> 33
such lamps meet the agreed specification and comply with the
other warranties in paragraphs 4.3 L and N below. In the event
that such health claims are brought against OSRAM or EDIL and
as a result OSRAM Group withdraw completely from the
manufacture and sale of suntanning and therapeutic Lamps in
Europe then the distribution agreement in respect of such Lamps
supplied by NAL shall terminate forthwith.
k) Delivery
1) Lamps shall be delivered to the Buying Party on the terms as agreed
prior to Closing (set out in Schedule D) and for the avoidance of
doubt terms used in the schedule shall be INCOTERMS 1990.
2) In the event that the Selling Party fails to deliver Lamps to the
Buying Party in the month stipulated by such party, the Selling Party
shall use all reasonable efforts to deliver such Lamps to the Buying
Party as soon as practicable thereafter.
l) Warranty
1) The parties each undertake that it and the relevant members of the
Selling Party's Group shall in respect of Lamps supplied by it and/or
its Subsidiaries to a member of the Buying Party's Group warrant such
Lamps shall
(a) be free from defects in material and workmanship;
(b) comply with the agreed functional and performance
specifications for that Lamp; and
(c) equal the quality of the same or similar type of Lamps
supplied to the Selling Party's Group own manufacturing
facilities.
Except as set out above, there are no warranties express or implied,
including warranties of merchantability and of fitness for a
particular purpose with respect to the Lamps supplied under this
Article.
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<PAGE> 34
2) The Buying Party may, within thirty days of the date of delivery,
reject delivered Lamps which do not comply with the above warranty by
notifying the Selling Party in writing. The Selling Party shall, at the
Buying Party's option, either replace such Lamps within thirty days from
the date of the Buying Party's notice of rejection or issue a credit
note for the respective invoice amount and freight. The Selling Party
shall be responsible for the costs of re-transportation of any rejected
Lamps and delivery by air freight (if reasonably required by Buying
Party) of any replacement lamps, and if necessary, in order to effect
such replacement as soon as possible the Selling Party Group shall
reschedule production and do everything in its power to give the
re-supply of Lamps to the Buying Party the highest priority.
3) The Selling Party shall not be liable for consequential, indirect,
special or incidental damages.
m) TAXES
Prices for the Lamps listed in Schedule D are exclusive of all taxes,
tariffs, duties and other charges whatsoever unless otherwise stated
in Schedule D.
n) PATENTS
1) Each party hereby warrants and represents to the best of its knowledge
and belief that the sale or use of Lamps supplied by it or any of its
Subsidiaries to the Buying Party Group hereunder shall not infringe the
patent or other intellectual property rights of a third party, and such
party shall notify the Buying Party (in the form of a patent
infringement study to the extent available and to be kept strictly
confidential) of the existence or possibility of the use or sale of
such Lamp constituting an Infringement of the patent or other
intellectual property rights of a third party.
2) Each Party hereby undertakes to indemnify and hold harmless the other
party and its Subsidiaries from and against any and all losses, damages
or expenses, suffered or incurred by such other party and its
Subsidiaries arising from any claim by a third party that the use or
sale of Lamps supplied by it or any of its Subsidiaries to the other
party and its Subsidiaries infringes such third parties patents or
other intellectual property rights.
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<PAGE> 35
3) Where a Lamp has been supplied to the Buying Party, and the Buying
Party's use or sale of such Lamp would constitute or has constituted an
infringement of the patent or other intellectual property rights of a
third party, the Selling Party shall issue a credit note in return for
such Lamp equal to the respective invoice amount for such Lamp and costs
of freight
4) Neither party shall be liable to the other party for consequential,
indirect, special or incidental damages.
5) Neither party shall be obliged to deliver Lamps to the other party in
the event that it reasonably considers that the sale or use of such
Lamps would infringe the patent or intellectual property rights of a
third party.
0) LABELLING AND PACKAGING
1) The Lamps (including packaging supplied hereunder) shall bear such trade
marks as the Buying Party may request. Such application of the Buying
Party's requested trade marks is made at the sole and exclusive risk of
the Buying Party regarding the validity or infringement of any trade
mark or other intellectual property right and the Buying Party expressly
undertakes to indemnify and hold the Selling Party harmless from and
against any and all claims, damages or expenses which may arise by
reason of applying trade marks, labels, or inscriptions to Lamps at the
instruction of the Buying Party.
2) The interior and exterior packaging of Lamps supplied by the Selling
Party to the Buying Party under this Article IV shall be the packaging
existing at the date of Closing, and any changes thereto which will or
are likely to adversely affect the Buying Party require the Buying
Party's prior written consent, such consent not to be unreasonably
withheld.
3) The labelling of Lamps supplied by the Selling Party to the Buying Party
under this Article IV shall be the labelling existing at the date of
Closing (except that the use of the trade mark "GTE" shall be phased
out) and any changes thereto require the Buying Party's prior written
consent, such consent not to be unreasonably withheld.
4) Any costs incurred by the Selling Party in making changes to the
packaging and labelling of Lamps requested by the Buying Party shall be
for the Buying Party's account, except any changes required as a
consequence of the IL Purchase Agreements. All other
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<PAGE> 36
changes to labelling and packaging (including all costs connected with
removing and replacing the "GTE" and other trade marks associated with GTE
Corporation and its Subsidiaries) shall be made at the Selling Party's
cost and shall not increase the price of Lamps supplied hereunder.
p) FORCE MAJEURE
The Selling Party shall not be liable for failure to fill the orders of the
Buying Party where such failure or delay is due to force majeure including,
without limitation, fire; act of God; acts, restrictions or failure to act of
any government authority, domestic or foreign; strikes or labour disputes;
equipment failure; shortages of materials in the market which were
unforeseeable and which a prudent manufacturing company could not reasonably
have avoided; war or civil commotion; delays in transportation or any other
cause beyond its reasonable control. Provided, however, that in such event
the Selling Party shall use reasonable efforts to fulfil the Buying Party's
orders insofar as practicable, and shall at least supply to the Buying Party
the quantity of Lamps or Similar Products equal to a percentage to be
determined by the ratio of the Buying Party's firm orders to the Selling
Party's sales to all its customers for said Lamp [and its own use of such
Lamp], for the twelve month period proceeding the force majeure event, for
the duration of the event constituting force majeure.
q) CONFIDENTIALITY
The parties undertake to, and shall procure that their respective
Subsidiaries hold so far as reasonably possible the terms of any supply
arrangement to which this Article is applicable in confidence. Neither EDIL
nor OSRAM nor their respective Subsidiaries shall make any reference to the
origin of Lamps supplied hereunder in their sales promotion.
r) MINOR PRODUCT FINES
The parties shall within 12 months of Closing consider the continued
viability and practicality of each party supplying the other party with small
quantities of Lamps and in the event that the parties agree that the Selling
Party's costs of manufacturing such small quantities outweigh the commercial
benefits to the Buying Party of being supplied the same on the terms and
conditions set out herein then the Selling Party's obligations to supply the
Buying Party with such type of Lamp hereunder may be terminated by agreement.
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<PAGE> 37
ARTICLE V
SUPPLY OF MANUFACTURING APPARATUS
1) Whereas pursuant to the Research and Development and Engineering Support
Agreement OSRAM and EDIL were to have agreed, prior to Closing, full form
supply agreements for the supply by OSRAM to EDIL of Manufacturing Appararus
(as therein defined).
2) The parties have not agreed full form supply agreement for the supply of
Manufacturing Apparatus as at the date hereof and shall do so within 1 month
of Closing on the terms and conditions set out in the Research and
Development and Engineering Support Agreement (including Schedule 2) as well
as in the Master Agreement.
3) In addition, the parties hereby agree that the terms and conditions of
supply (including, but without limitation, prices, quality, delivery terms,
payment terms and capacity) shall be no less favorable than the terms
except the terms of the Supply Agreement between OSRAM and IL relating to
the Double Twin Company Fluorescent line installed at Shipley, United
Kingdom on which such Manufacturing Apparatus or similar Manufacturing
Apparatus was supplied by OSRAM to IL prior to Closing.
------------------------
ARTICLE VI
Section 6.1 Governing Law
This Agreement is governed by, and shall be constituted in accordance with the
laws of the state of New York, USA. Except:
(a) the Supply Agreements under Article III which are governed by the law
as provided in the respective Agreement; and
(b) the Long Term Supply Agreements and Purchase Orders between the parties
which shall be governed by such law as is agreed between the parties from
time to time.
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<PAGE> 38
SECTION 6.2 ARBITRATION
1) Any differences or disputes regarding the supply of Lamp Materials or Lamps
subject to this Agreement are to be settled by an amicable effort on the
part of both parties. An attempt to arrive at a settlement shall be deemed
to have failed as soon as one of the parties so notifies the other party in
writing.
2) Any claim or controversy arising at any time out of or in relation to this
Agreement shall be settled in accordance with the rules of commercial
arbitration of the International Chamber of Commerce by an arbitrator
appointed in accordance with the rules who shall be entitled to award
specific performance, preliminary or final injunctions and/or damages. Any
arbitration shall take place in Paris, France and shall be conducted in the
English language. Judgment upon the award rendered may be entered in any
court having jurisdiction thereof. All proceedings shall be conducted in
confidence; the parties agree to provide such information and make
available such employees as the arbitrator deems necessary for his or her
determination. Each party will be afforded an opportunity to examine the
witnesses and documents referred to or submitted by the other party as a
part of such proceedings and to submit a reasonable list of document
requests, interrogatories and requests for admission to which the other
will respond, it being understood that time is of the essence in the
completion of such proceedings. The arbitrator shall be required to put his
or her award and decision in writing and provide all parties with a copy
thereof.
SECTION 5.3 AMENDMENTS
a) Except as otherwise permitted in this Agreement, no amendment, waiver or
modification of any provision of this Agreement shall be valid unless it is
in writing and signed by or on behalf of each of the parties hereto.
b) Nothing in this Agreement shall be construed to limit the right of the
parties mutually to agree to amend the terms of this agreement or any
agreement referred to herein.
SECTION 5.4 ASSIGNMENT
Except as expressly provided in this Agreement, neither party shall assign or
transfer or purport to assign or transfer any of its or obligations under this
Agreement.
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<PAGE> 39
SECTION 5.5 NOTICES
Except as expressly provided herein, any notice or other communication under or
in accordance with this Agreement shall be in writing and shall be delivered
personally or sent by first class pre-paid recorded delivery (and by air mail
if overseas) or by fax (and confirmed by letter post) or by telex as follows:
if to OSRAM, to:
Address: Hellabrunner Strasse 1
D-8000 Muenchen 90
Germany
Telefax: 0049 89 6213 2019
Marked for the attention of Gerd Pokorny;
if to EDIL, to:
Address: Apollolam 171
1077 AS, Amsterdam
P.O. Box 7301, 1007 JH
Amsterdam
The Netherlands
Telefax: 31 20 6769326
Marked for the attention of C. Barbas:
and a copy to: CITICORP VENTURE CAPITAL UNLIMITED
Address: Citibank House
7th Floor
335 Strand
London WC2R 1LS
England
Telefax: 071 438 1420
Marked for the attention of M. Smith;
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<PAGE> 40
and
Address: [EDIL], Geneva
20 Route de Pre-Bois
P.O. Box 554
1215 Geneva 15
Switzerland
Telefax: 010 4122 7880363
Marked for the attention of R. Swaanen
or to such other person, address or telefax number as any party may specify by
notice in writing to the others. A notice shall be effective when received.
SECTION 5.6 Waiver
No waiver by either party of the exercise of any right or of enforcement of any
obligation of the other party shall operate as a waiver of any other such right
of enforcement of any other such obligation to a subsequent occasion.
SECTION 5.7 Severability
If any provision of this Agreement shall be held invalid, the remainder shall
nevertheless be deemed valid and effective, and it is the intention of both
OSRAM and EDIL that each provision hereof is being stipulated separately in the
event one or more of such provisions should be held invalid.
SECTION 5.8 Entire Agreement
This Agreement embodies the entire agreement of OSRAM and EDIL and supersedes
and cancels all previous negotiations, understandings, commitments or
agreements, written or oral, regarding the subject matter hereof.
SECTION 5.9 Counterparts
This Agreement may be executed in any number of counterparts, each of which
executed and delivered shall be an original, but all the counterparts together
shall continue one and the same instrument.
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<PAGE> 41
SECTION 5.10 Headings
The headings of the articles, sections and subsections in this Agreement are
inserted for convenience of the reader only and do not form a part of this
Agreement.
SECTION 5.11 Confidentiality
The parties undertake to, and shall procure that their respective Subsidiaries
shall take reasonable steps to, hold the terms of this Agreement in
confidence. No public announcement, communication or circular (other than and
to the extent required by law) concerning the transactions referred to in this
Agreement, the terms and conditions of this Agreement or the financial affairs
of any of the parties to this Agreement shall be made or dispatched by any
party without the prior written consent of the other party (such consent not to
be unreasonably withheld or delayed).
SECTION 5.12 U.N. Convention
Except as may by expressly provided to the contrary in any agreement to be
amended or entered into pursuant to this Agreement, the parties agree that the
provisions of the United Nations Convention on Contracts for the International
Sale of Goods shall not apply to this Agreement or to such agreements.
SECTION 5.13 Inconsistent terms
The provisions set forth in any purchase order, invoice or other printed form
used in the ordering or supply of products pursuant to a supply agreement
amended or entered into pursuant to this Agreement shall not take precedence
over the terms of this Agreement and to the extent contradictory of this
Agreement's terms, shall be of no effect.
In Witness whereof, this Agreement has been executed by the parties on the date
first written above.
OSRAM GmbH EDIL International Lighting B.V.
By: /s/ By: /s/
--------------------------- --------------------------------
Name: Name:
Title: General Counsel Title: Authorized Signature
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<PAGE> 42
SCHEDULES
SCHEDULE A - Lamp Materials
Part I - Lamp Materials supplied by NAL to IL
Part II - Lamp Materials supples by IL to NAL
SCHEDULE B - Firm Orders for period from Closing to July 1st 1993
Part I - Lamp Materials
A) NAL to IL
B) IL to NAL
Part II - Lamps
A) NAL to IL
B) IL to NAL
SCHEDULE C
No Longer Applicable
SCHEDULE D - Finished Lamps
SCHEDULE E - Specialty Lamps purchased by IL from NAL
The products which present a Sylvania specialty in Europe and are purchased
from NAL are:
Metalarc M Types (excluding NAL types MP75 AND MP100)
VHO Fluorescent
HO Fluorescent
Slimline Fluorescent
Photocopy Fluorescent
UV suntanning and therapeutic lamps and UV phosphors
PAR 64 Lamps
Sub-miniature Fluorescent Lamps
- 39 -
<PAGE> 43
\ 4.2.2 OSRAM shall retain for a period of two (2) years
after making a royalty report, the records, files,
and books of account prepared in the normal course of
business, which contain data reasonably required for
the computation and verification of the amounts to be
paid and the information to be given in such report.
OSRAM shall permit the inspection, with reasonable
advance notice and at reasonable times during normal
business hours, of such records, files, and books of
account, by a certified public accountant to when
OSRAM has no reasonable objection. Said accountant
shall be permitted to inspect such records, files,
and books and OSRAM shall give the accountant such
other information as may be necessary and proper to
enable the amounts of payments payable hereunder to
be accurately ascertained. Such inspection shall be
at SLI's expense unless it is determined by said
accountant that the royalties paid to SLI are
deficient in excess of five percent (5%), in which
case the costs of such inspection shall be paid by
OSRAM. Neither SLI nor said accountant shall
disclose to anyone, directly or indirectly, any of
the information which they obtain as a result of any
such inspection and such accountant shall report to
SLI only the amount of royalty due and payable.
5. Notwithstanding the provisions of section 4.3 c) part 3 of the
Supply Agreement, OSRAM hereby undertakes that the price charged to SLI, or its
Subsidiaries, by OSRAM, or its Subsidiaries, for subminiature fluorescent Lamps
to be supplied to SLI, or its Subsidiaries, pursuant to the Supply Agreement
shall in respect of orders received by OSRAM after January 29, 1993 always be
15% less than the Net Price (less all discounts, allowances, rebates and
credits) charged by OSRAM, or its Subsidiaries, to its most favoured group of
wholesalers, distributors, original equipment manufacturers or any third party
for the same type of subminiature fluorescent Lamps. The parties agree that
with effect from 29 January 1996 the price charged by OSRAM to SLI will be
reviewed with the purpose to agree an increase of such price by taking into
account the increased demand from the after market.
6. Except as provided above all other terms and conditions set forth
under the Supply Agreement shall remain unmodified and in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment Agreement
as of the date first above written.
<PAGE> 44
Sylvania Lighting OSRAM GmbH
International S.V.
/s/ /s/
- ----------------------------------- -----------------------------------
December 23, 1994 December 23, 1994
<PAGE> 1
EXHIBIT 10.36
TRANSLATION
SUPPLY CONTRACT
between
OSRAM Gesellschaft mit beschrankter Hattung, Berlin/Munich -
hereinafter called "OSRAM" -
and
SABA Schwarzwalder Apparate-Bau-Aristalt August Schwer Sohne
GmbH, Product section Sylvania, Enangon - hereinafter called
"SYLVANIA"-
1. ESTIMATE OF BULB REQUIREMENTS
SYLVANIA agrees to order its bulb requirements for fluorescent and
circline lamps from OSRAM.
The order quantities are estimated as follows:
<TABLE>
<CAPTION>
Calendar Year Quantities in Mio. Units
------------- ------------------------
<S> <C>
1979 31,6
1980 33
1981 34,7
1982 35,5
1983 38,3
1984 40,2
1985 41,9
1986 44
</TABLE>
The above-mentioned quantities are estimates only. The order volume
with respect to bulb quantities and types remains subject to the
provisions of paragraph 3 hereof.
OSRAM agrees to provide capacity in accordance with the
above-mentioned quantities in order to meet the SYLVANIA requirements.
2. PRICE STRUCTURE
Each year the bulb sales prices shall be determined in advance for the
period of October 1 of one year until September 30 of the following
year, based on the attached standard cost breakdown (Appendix 1). The
annual variance of TMCs shall be determined as of September 30 for
each year, and credited and debited to SYLVANIA. Each year SYLVANIA
shall obtain from OSRAM six months after the beginning of the OSRAM
financial year a forecast concerning the anticipated development of
cost variances. Thereafter a forecast shall be given monthly.
For the period of January 1, 1979 until the production start-up of the
vello draw the above-mentioned standard cost breakdown shall not be
used for determination of prices. Up to this date, the current bulb
sales price shall be adjusted on January 1 of each year in the same
proportion as the manufacturing costs have changed. For this price
adjustment, variances of manufacturing costs resulting from process
changes shall not be taken into consideration. Whereas volume
variances shall be considered.
<PAGE> 2
2
Supplementary remark in handwriting:
Expected production start-up with vello draw process is planned for
end of 1980, beginning 1981.
After start-up of the vello process, SYLVANIA is entitled to request
an audit of standard costs (in accordance with appendix 1) and the
variances thereof by a neutral auditor to be appointed by both parties
of this contract, at the close of the OSRAM financial year on
September 30 of each year. The audit costs shall be shared equally by
both parties.
3. ORDERING SUPPLY PROCEDURES
Not later than December 1, March 1, June 1, and September 1 of each
year, after signing of the contract, SYLVANIA shall submit to OSRAM
information regarding its requirements in the periods January to March,
April to June, July to September and October to December, so that for
each of the above-mentioned dates most recent information is submitted,
covering the requirements of the 12 calendar months beginning one
calendar month after submission of the information. Each of the said
periods is henceforth referred to as "quarter" and the expressions
"first quarter", "second quarter", "third quarter" and "fourth quarter"
refer to the four quarters directly subsequent to the submission of the
information.
Information submitted regarding the requirements for each third and
fourth quarter shall be an estimate only. Information submitted as to
requirements for each second quarter shall be subject to a volume
variance of individual types, at the option of SYLVANIA, of no more
than plus or minus 20% or no more than 10% of the total quantity
compared to the previously submitted estimate for each third quarter.
The information as to the requirements for each first and second
quarter shall contain a breakdown of types and months. The firm order
for each first quarter shall be subject to a volume variance, at the
option of SYLVANIA, of no more than plus or minus 10% from the
information submitted as to requirements for each second quarter. It is
to be understood that this firm order may within the frame or the
aforementioned volume variances include bulb types which were not
included in the forecast. OSRAM warrants delivery after 4 weeks for
bulb types which can be produced with no change in manpower
requirements. Bulbs with a length of more than 1495 mm require more
manpower, for these types OSRAM ensure the production start latest
after 4 weeks.
If the firm order increases by more than 10% compared to the forecast
or SYLVANIA increases the quantity of the already placed firm order
later and the increase cannot be covered out of the 10 days stock,
OSRAM has the right to refuse the delivery of the difference. In this
case SYLVANIA is free to purchase the difference elsewhere.
Within the limits of the given firm order, SYLVANIA shall inform
OSRAM of the weekly call-offs with a notice of at least 14 days
whereby it is understood that SYLVANIA shall accept the bulbs in due
time.
Short term changes (up to two truck loads) are possible until
Wednesday of the previous week.
After receipt of a firm order OSRAM shall send a written order
acknowledgement, which shall contain prices as well as delivery times
to be applied in accordance with this contract. If it becomes obvious
that delivery delays shall occur, immediate notification of the period
of delay shall be made. Except for the case of Acts of God OSRAM shall
pay a penalty for deliveries, which cannot be carried out within the
specified time. This penalty is twice the value, without value added
tax, of each bulb for every day of delivery delay exceeding 5 working
days.
All deliveries shall be carried through eif SYLVANIA, factory
Frauenaurach. For all shipments a delivery note indicating contents
and SYLVANIA, order number shall be written out by OSRAM.
<PAGE> 3
3
OSRAM carries the risk for all shipments and return shipments. The
risk will only then be borne by SYLVANIA for all shipments when the
products have reached the SYLVANIA warehouse Erlangen-Frauenaurach.
The risk for return shipments to OSRAM will be carried by OSRAM when
leaving the SYLVANIA warehouse in Erlangen-Frauenaurach.
Firm orders are only valid if given in writing or confirmed in
writing. Verbal agreements or arrangements with respect to firm orders
are neither binding for SYLVANIA nor for OSRAM unless they have been
confirmed in writing. Regarding the firm orders correspondence shall
always carry the numbers of same.
4. DELIVERY LIMITATIONS
Supplementary remark in handwriting:
The annual audit referred to in paragraph 2, section 3, shall contain
the audit of obedience to the above-mentioned.
If for any reason, including Acts of God or other unforeseen
circumstances, OSRAM is unavoidably prevented from manufacturing the
bulbs and the ten working days stock is exhausted (see para. 5), OSRAM
will ensure that delivery shall be effected to SYLVANIA of quantities
proportional to those which in fact OSRAM makes to its other customers
taking into consideration OSRAM's obligation towards these. In this
case SYLVANIA has the right to purchase the balance of its
requirements elsewhere.
All OSRAM production facilities processing bulbs are also to be
understood as "other customers" according to first section of this
paragraph. In compliance with section 1 of this paragraph SYLVANIA may
not under any circumstances be put at a disadvantage against OSRAM.
If SYLVANIA as a result of provable Acts of God, strike and furlough
cannot fulfil its purchase commitments, already scheduled deliveries
may be cancelled for periods of such events. In such case SYLVANIA
shall try beforehand to announce and adjust its purchase volume to the
corresponding reduced requirement.
If SYLVANIA upon delivery of the bulbs determines either delivery
shortage as to the advised number of units or failure to comply with
the quality requirements in accordance with this contract, SYLVANIA
shall be given written notification to OSRAM. Upon receipt of such
notification, OSRAM shall have the right to send an inspector to
SYLVANIA's plant at Frauenaurach with a maximum period of two working
days. Whether or not OSRAM exercises this right SYLVANIA shall have
the right to place the bulbs in question at OSRAM's disposal, whereby
SYLVANIA shall be released from its purchase and payment commitment
unless OSRAM provides compensation according to the arrangement in the
following section.
For delivery shortages and defective bulbs caused by OSRAM
manufacturing OSRAM has to deliver replacement within 5 working days
after written notification. For defective bulb deliveries not caused
by OSRAM (for example damage in transit) the period for replacement
delivery shall be agreed upon case by case whereby ORSAM shall be
endeavoured to deliver as fast as possible.
<PAGE> 4
-4-
5. SAFETY STOCK
Osram shall maintain for SYLVANIA a stock of the main types 20, 40
and 65 Watt bulbs for straight lamps as well as of the types 22, 32
and 40 Watt bulbs for circline lamps which covers a requirement of ten
working days with respect to the orders for the corresponding first
quarter.
This stock will be maintained according to the principle "first in
first out". The warehousing shall occur with the same attention as
the warehousing for OSRAM's own bulb requirements. Whenever the
said stock is diminished as a consequence of replacements being
delivered to SYLVANIA, OSRAM shall notify SYLVANIA in writing, if at
any time the stock is fully or partially depleted, traceable to
replacements as a consequence of OSRAM failure, it shall be fully
replenished within a maximum period of ten working days.
If at any time the stock shall be partially or fully exhausted at
the request of SYLVANIA OSRAM shall replenish the stock as fast as
possible without any additional costs for OSRAM, SYLVANIA shall be
informed in writing when replacement is completed.
6. DAMAGES IN TRANSIT
The provisions with respect to bulb replacement deliveries shall
apply regardless of any insurance claims, which may be made as a
consequence of damage to bulbs prior to delivery to SYLVANIA's
factory at Frauenaurach.
Upon receipt of bulbs which have been damaged during transportation
to Frauenaurach, SYLVANIA shall initiate all measures necessary for
the assertion of claims against carrier or any insurers.
7. PACKING, DELIVERY
Bulbs shall be loaded, without any exception, on pallets and delivered
to SYLVANIA's factory by trucks which can be unloaded on both sides.
The pallet design shall be fixed by mutual agreement, Manufacturing
and maintenance expenses shall be borne by SYLVANIA. The expenses of
returning empty pallets and packing material shall be borne by OSRAM.
SYLVANIA shall accept deliveries from Monday through Friday each week
from 7 a.m. until 6 p.m. as well as from 7 p.m. until 10 p.m. if
deliveries on Saturday or legal holidays become necessary. OSRAM
shall notify SYLVANIA thereof not later than 12 o'clock noon on the
preceding working day. Such deliveries shall be between 7 a.m. and
12 a.m.
8. PALLETS
SYLVANIA shall supply OSRAM in time and with sufficient quantities
of pallets, covers and edge protections. For each million bulbs
purchased per year 138 faultless pallets including faultless
accessories shall be supplied by SYLVANIA. Therefore for 1979 with
a requirement estimated at 31.5 million bulbs 4,350 pallets have
to be supplied. On increasing purchases SYLVANIA shall increase the
number of pallets with cover and/or edge protections in due time.
SYLVANIA shall continuously make available to OSRAM at least half
of the total quantity of pallets.
OSRAM guarantees packing to be in accordance with the standard
specifications agreed upon by both parties with the understanding
that SYLVANIA makes available in due time sufficient pallets with
corresponding accessories. It has been decided that the packing
agreed upon can only be changed by mutual agreement.
The return of packing material to OSRAM shall be in shipments of
at least 250 pallets including accessories and caps of corrugated
paper. OSRAM shall bear the transportation costs.
<PAGE> 5
- 5 -
9. TERMS OF PAYMENT
Invoices for deliveries effected from the 1st to 14th of each month are
payable up to the 25th of the same month; invoices for deliveries from the
15th to the end of each month are payable up to the 10th of the following
month. Accounts are payable net without any deductions. SYLVANIA reserves
the right to remit by draft.
Invoices shall be submitted in duplicate. They are to contain purchase
order details for each item. Copies of invoices shall be clearly marked as
such.
10. WARRANTY
OSRAM warrants any material and any service to be rendered based on any
firm order to be in accordance with the provisions of this contract,
especially with reference to the quality requirements according to Appendix
2 and other assured characteristics according to Appendix 2. Deviations
shall not be accepted unless prior written approval has been obtained.
Notwithstanding the provisions of paragraph 4, sections 2 and 3 hereof
warranty claims with respect to type, quality and quantity of bulbs
delivered may be asserted within a month after receipt. In case bulbs
delivered and services rendered are not in accordance with the
specifications agreed upon by both parties, SYLVANIA reserves the right, in
addition to the provisions of this contract and to warranties implied in
fact or law, either to obtain bulb replacement from OSRAM at no extra cost
or to negotiate an adjustment of price.
In addition, warranty claims based on material defects or unfitness of
material (except for weathering defects), which become evident only during
or after processing of bulbs, may be asserted immediately after detection,
however, not later than six months after receipt of bulbs.
All expenses arising in connection with warranty claims shall be borne by
OSRAM in the event that the warranty claims are justified. In the event
that the warranty claims are not justified, those expenses shall be borne
by SYLVANIA.
11. PATENT CLAIMS
OSRAM warrants that the bulbs delivered under this contract do not infringe
any valid patent owned or controlled by any third party and agrees to
protect SYLVANIA against any and all liability, loss and expense by reason
of any claim, action or litigation arising out of any infringement of such
rights.
SYLVANIA shall give OSRAM prompt notice in writing of all necessary details
if such claim, action or litigation occurs, and further agrees to give
OSRAM such opportunity to participate in the defence thereof as is afforded
by applicable laws, rules and regulations.
OSRAM does not warrant that SYLVANIA by further use or further processing
of bulbs delivered will not infringe on protective rights at either German
or foreign patents. Moreover, delivery does not entitle SYLVANIA to
participate in any protective rights which are at OSRAM's disposal with the
exception of those merely referring to the nature of the delivered
products. If bulbs should be delivered to SYLVANIA bearing trade marks,
labels or other inscriptions as specified by SYLVANIA such application is
made at the sole and exclusive risk of SYLVANIA as regards the validity of
any trade mark rights. SYLVANIA explicitly undertakes to indemnify and
protect OSRAM from and against all claims and damages which may arise by
reason of OSRAM following SYLVANIA's instructions with respect to the
application of the trade marks, labels and inscriptions.
<PAGE> 6
- 6 -
12. LEGAL SETTLING PLACE, ARBITRATION
All controversies arising from this contract, also concerning its legal
validity shall be settled by an arbitration committee consisting of three
members. Each party to the contract shall nominate one arbitrator; if
these two arbitrators cannot agree upon the chairman of the arbitration
committee, he shall be nominated by the president of the Munich court of
appeal (Oberlandesgericht); the chairman must be qualified to be appointed
judge. The procedure shall be in accordance with the Civil Code of German
Law (ZivilprozeBordnung). The place of arbitration shall be Munich,
Germany.
Place of delivery and payment is Erlangen, Germany.
13. MISCELLANEOUS
SYLVANIA shall not be bound by any printed text on OSRAM's acknowledgement
forms or invoices if they deviate from the provisions and conditions of
this contract.
The standard conditions of purchase/sale of SYLVANIA and of OSRAM,
respectively, are not applicable to this contract.
OSRAM agrees to introduce in due time new technological developments which
are available and which offer economical advantages with respect to the
process of glass manufacturing. SYLVANIA shall inform OSRAM as soon as
SYLVANIA shall get knowledge of or shall have available such new
technological developments and SYLVANIA requests their introduction.
Provided that SYLVANIA puts own know-how at OSRAM's disposal, a special
licence agreement regarding this know-how shall be reached which shall
also contain an appropriate licence fee to be paid by OSRAM in favour of
SYLVANIA.
Appendix 1, 2 and 3 shall be essential parts to this contract.
14. DURATION AND TERMINATION OF CONTRACT
This contract shall become effective on January 1, 1979 and shall replace
the bulb delivery contract of June 16/25, 1969. The contract shall expire
on December 31, 1986.
The contract shall automatically be extended for another year, unless
written notice is given 24 months prior to the expiration date.
15. FURTHER PROVISIONS
If any provisions of this contract become invalid, the remainder of said
contract shall remain fully effective. The parties of the contract commit
themselves to replace the invalid provision by another provision
corresponding to the aim and object of the valid agreement.
Verbal secondary arrangements shall not be made.
In order to become effective changes or additions to this contract need to
be done in writing.
Munich, 30,10,1978 Erlangen, 14,11,1978
OSRAM SABA Schwarzwalder Apparate-Bau-Aristalt
Gesellschaft mit beschrankfer August Schwer Sohne GmbH
Haftung Produktbereich SYLVANIA
<PAGE> 7
TRANSLATION
Addition to
SUPPLY CONTRACT FLUORESCENT BULBS - OSRAM/SYLVANIA
DATED 30.10./14.11.1978
The present version of paragraph 14, section 2 shall be cancelled and obtains
the following new version:
"The contract shall automatically be extended for another year each, unless
notice is given latest 24 months each prior to the expiration date."
All other provisions to the contract remain unchanged.
Munich, 19 February 1985
OSRAM
Gesellschaft mit beschrankter Haftung
Erlangen, 18 February 1985
GTE SYLVANIA Licht GmbH
<PAGE> 8
Appendix 1 to
Supply Contract
OSRAM - SYLVANIA
CALCULATION OF STANDARD COSTS
Direct material includes all materials directly used for the product
manufactured. Materials efficiencies are expressed in "Standardzahlen" (see
Appendix 3).
Included are accessory materials (steel straps, packaging accessories, general
operating supply, materials, etc.) on an allocation basis.
Direct labor includes all labor directly associated with the product
manufactured. Labor efficiencies are expressed as "Standardzahlen".
Fringe Benefits are included in direct labor costs. They are allocated on a
percentage basis.
Machine cost is directly allocated and consists of depreciation and interest
based on replacement value of the equipment concerned.
- - Maintenance expenses;
- - Occupancy expenses based on the space occupied. These contain depreciation
and interest on the replacement value of buildings, interest on land property
as well as building maintenance and building safety.
- - Energy costs.
Production overhead cost consists of
Production overhead cost/personnel
a. Labor and fringes for production planning, paid breaks and premiums for
4-shift work, nights, Sundays and holidays.
b. Salaries and fringes for supervisory personnel (indirect labor).
<PAGE> 9
Page 2
of Appendix 1
PRODUCTION OVERHEAD COST/OTHER
includes all other expenses of the production cost center not covered by
machine allocations as for instance occupancy expenses for areas not occupied
by production equipment and downtime expenses for glass furnaces.
Production overhead cost is allocated on a percentage basis.
Abteilungskosten is the sum of all aforementioned cost categories.
Plant period cost includes plant management, administration, plant facilities,
production planning, quality control and warehousing.
Total manufacturing cost (Erstellkoston) is the sum of Abteilungskosten and
plant period cost.
Landed cost (Kolbenabgabepreis) is the sum of total manufacturing cost + $.5 &
corporate overhead cost for corporate management, quality assurance, general
administration, personnel administration, engineering and research, royalty
payments and expenses for bulb transport and return or pallets.
<PAGE> 10
APPENDIX 2 TO
SUPPLY CONTRACT
OSRAM - SYLVANIA
Quality requirements for performed bulbs consisting of glass 905 for the
manufacturing of fluorescent lamps.
Following quality requirements have been agreed upon by both parties to this
contract:
Referring to bulbs for fluorescent lamps No. 07 24 900
Referring to bulbs for circline lamps No. 07 24 903
<PAGE> 1
EXHIBIT 10.37
PURCHASE AGREEMENT
"PHILIPS"
TIENEN, MARCH 8, 1996
<PAGE> 2
PURCHASE AGREEMENT
By and between
Phillips Lighting B.V., a company with limited liability incorporated under
the laws of the Netherlands having its office in Bindhoven, acting on its own
behalf and on behalf of its associated companies represented by Mr. P.J. HUT
(hereinafter referred to as "Phillips")
and
Sylvania N.V., a company with limited liability incorporated under the laws
of Belgium having its office in Tienen, Belgium represented by Mr. M. SWAANEN
(hereinafter referred to as "Sylvania")
Hereinafter referred to jointly as the "Parties".
- --------------------------------------------------------------------------------
It is agreed upon as follows:
ARTICLE 1
DEFINITIONS AND SCOPE
1.01 "Agreement" shall mean this present document and all annexes, exhibits
and other documents referred to herein or attached hereto and signed or
initialled by the parties hereto, all of which annexes, exhibits and
other documents form an integral part hereof.
1.02 "Lamps" shall mean Tungsten Halogen Reflector lamps 230 and 240V
aluminised shaped PAR 38, PAR 30 S.
1.03 "Capsules" shall mean Tungsten Halogen burner 50 W 230 V and or 240 V
for mounting in Halogen Reflector lamps (aluminised) shaped PAR 20 and
Tungsten Halogen burner 75 W 230 V and/or 240 V for mounting in Halogen
Reflector lamps (aluminised) shaped PAR 30 L.
1.04 "Specifications" shall mean all requirements and other specifications of
the Lamps and Capsules as agreed upon by the parties and
<PAGE> 3
"Quality Agreement" shall mean the agreement on quality specifications
for Lamps and for Capsules
49 F 0405-028/A for Lamps PAR 38
49 F 0405-031 for Lamps PAR 30 S
49 F 0405-041/C for Capsules
which is further detailed and attached as Annex 1.
1.05 "Effective Date" shall mean the date on which this Agreement is duly
signed by both parties hereto.
1.06 "Contract Year" shall mean a period of twelve (12) months, starting the
Effective Date and every successive period of twelve (12) months during
the term of this Agreement.
ARTICLE 2
PURCHASE AND SALE OF LAMPS AND CAPSULES
The purpose of this Agreement is to define the terms and conditions under
which Phillips shall purchase from Sylvania a minimum quantity of Lamps and
Capsules per Contract Year, during a period of 2 (two) years, and Sylvania
shall supply said quantities of Lamps and Capsules complying with the
Specifications.
ARTICLE 3
ORDERING PROCEDURE
3.01 On the terms and conditions as set forth herein, Sylvania shall sell and
deliver to Phillips and Phillips shall purchase and accept from
Sylvania, a minimum quantity of
five hundred thousand (500,000)
both
Halogen PAR 38
Aluminised lamps
75 & 100 W
230 & 240 V version with Philips Wiso design
and
Halogen PAR 30 S
Aluminised lamps
75 & 100 W
230 & 240 V version with Philips Wiso design
one million and six hundred thousand (1,600,000)
Capsules
50 W / 75 W
230 & 240 V
in each Contract Year.
<PAGE> 4
3.02 It is the intention of the Parties that deliveries shall be
spread evenly over the year, with a minimum order quantity of
twenty thousand (20,000) Lamps and fifty thousand (50,000) Capsules.
3.03 Monthly orders for supply of Lamps and Capsules specified by type, and
quality shall be placed by Philips with Sylvania at least forty (40)
working days in advance of the desired delivery date. Sylvania shall
acknowledge these orders by letter or fax at least three (3) working days
after receipt of such an order confirming the delivery dates as requested
by Philips, or if the order cannot be executed in accordance with the
requested delivery dates. Sylvania shall indicate the alternative
delivery dates, which should be within a maximum of twenty (20) working
days additional to the original delivery dates requested by Philips.
In the event that Sylvania cannot, for whatever reason, deliver within
the maximum of sixty (60) working days from receipt of an order from
Philips, Philips shall be informed within ten (10) working days after the
receipt of the order from Philips of the delivery date, Philips on
receipt of this information shall confirm acceptance of this delivery
date or cancel the order, where upon the minimum quantity as referred to
in Section 3.1 will be reduced accordingly.
3.04 Each month Philips shall provide Sylvania a 3 months binding forecast
from which Philips may not deviate with more than 10% and a further nine
(9) months non-binding rolling forecast of the total quantity of Lamps
and Capsules on an aggregated total level which Philips plans to order
for delivery.
ARTICLE 4
QUALITY PERFORMANCE AND WARRANTY
4.01 Unless otherwise agreed by the parties hereto, the Lamps and Capsules
sold by Sylvania to Philips shall be of a quality and performance in
accordance with the "Specifications" set forth in Annex I and the Quality
Agreement.
4.02 The Lamps and Capsules shall be packed and labelled as per the
"Specification" defined in Annex 2 to this Agreement. The Lamps and
Capsules shall be supplied to Philips under Philips owned trademarks to
be indicated by Philips and bear the markings as indicated by Philips.
Artwork and packaging initiation cost for these brands will be paid by
Philips as incurred.
<PAGE> 5
4.03 The warranty described in Sections 4.01 and 4.02 of this Agreement is
the sole warranty which Sylvania gives with regard to Lamps and
Capsules.
Sylvania can not be held liable for lamps produced by Philips using
Sylvania capsules.
Philips shall be at liberty to examine or have examined the Capsules
and Lamps suppled by Sylvania and may within 40 days as from the
delivery, reject such Capsules and Lamps which do not comply with the
quality and performance mentioned above. Sylvania shall, at its
option, either replace the Capsules and Lamps within 20 days from the
date of Philips written notice of rejection or issue a credit note for
the respective invoice amount.
ARTICLE 5
LIABILITY
Sylvania shall not be liable for any damages or losses except those for
which Sylvania has expressly assumed liability in this Agreement.
Sylvania's liability shall in no event be considered to extend to indirect
or consequential damages of any nature whatsoever, including loss of
profits and / or revenues and Philips shall indemnify and hold Sylvania
harmless for all costs, damages and interests which might arise directly or
indirectly form any claim of third parties expressly including but not
limited to a claim based on product liability.
ARTICLE 6
DELIVERY AND SCOPE
Sylvania shall arrange for supply of the Lamps and Capsules from its
factory in lienen Belgium and Philips shall take delivery of all Lamps and
Capsules ordered by Philips under the Agreement at the agreed times
Delivery ex Works, lienen as this Term is defined in the Incoterms
(version 1990), it being understood that Sylvania will be responsible for
the loading of the Lamps and Capsules.
ARTICLE 7
FORCE MAJEURE
7.01 If Sylvania is unable, due to force majeure (including without
limitation the direct results of: acts of God; fire; natural
phenomena; governmental regulations; acts; restrictions or omissions
to act of any governmental authority, domestic of foreign; strikes,
labour disputes; shortage of materials in the market; civil commotion;
delays in transport and any other cause beyond its reasonable
control), to fill all or any part of orders on the scheduled delivery
dates thereof, any
<PAGE> 6
such cause shall be sufficient excuse for any failure or delay in delivery
and Philips' orders may be scaled down by Sylvania to a share of available
production.
7.02 Any suspension or reduction of orders or deliveries of Lamps and
Capsules, due to force majeure shall not invalidate this Agreement and
upon removal or termination of the cause of such force majeure orders and
deliveries of Lamps and Capsules shall be resumed in accordance with
terms and conditions hereof.
ARTICLE 8
PRICES
Sylvania shall supply the products under the following conditions:
<TABLE>
<CAPTION>
Lamps Type (Wiso) Price ex Factory Min. Qty per annum
----- ---------------------------- ------------------
<S> <C> <C>
PAR 38 BEF 180 500,000 pcs
PAR 30 S BEF 168
</TABLE>
If the minimum quantity of 500,000 pcs for both products together will be
exceeded in the course of the first 12 months of the contract the price of
all lamps will be reduced as from that moment on by REF 5 per lamp for all
future purchases.
It is the mutual understanding that the Sylvania purchase prices as they
have been established as stipulated in this paragraph should allow
Philips to achieve a reasonable margin when selling said lamps.
In the event Philips consider this margin to be provably jeopardised due to
external market conditions not initiated by Philips, Sylvania agrees to
adapt 12 months after signing the lamp prices to be charged to Philips,
but Philips recognises that Sylvania must earn a reasonable return on the
sale of lamps covered by this Agreement.
<TABLE>
Capsules Type Price ex Factory Min. Qty per annum
-------- ---- ---------------- ------------------
<S> <C> <C> <C>
50 W/75 W REF 55 1,600,000 pcs
</TABLE>
Prices for Capsules are firm for 2 years.
<PAGE> 7
Minimum quantities:
- ------------------
If the agreed minimum capsule quantity is not purchased Philips agrees to
purchase from Sylvania one (1) finished lamp for each three (3) capsules
purchased below the minimum annual quantity.
If the agreed minimum lamp quantity is not purchased Philips agrees to purchase
from Sylvania three (3) burners for each lamp purchased below the minimum
annual quantity as long as capacity is available.
ARTICLE 9
---------
PAYMENT
-------
Philips shall pay cash invoice from Sylvania for Lamps and Capsules supplied
within thirty (30) days from the last day of the calendar month in which said
Lamps and Capsules are invoiced.
ARTICLE 10
----------
DURATION/TERMINATION
--------------------
This Agreement shall become valid as from the Effective Date and shall remain
in effect for an initial term of two (2) years and may thereafter be
automatically renewed for successive two (2) year periods if not terminated by
either party by a notice of termination sent to the other party by registered
mail at least three (3) months before the end of the initial period or 3 months
before the end of any successive two (2) years period.
This Agreement may be terminated earlier:
(a) in the event a party hereto would breach any of the material provisions of
this Agreement the other party is entitled to give written notice to the
party in breach specifying such breach and if the breach is remediable
giving the party in breach an opportunity to remedy the breach to
reasonable satisfaction of the other party within a reasonable period of
time which need not be in excess of thirty (30) calendar days. Failing
such remedy, the party issuing the notice of breach is entitled to take
any action open to it under this Agreement or in law including suspension
of payments, work or deliveries as the case may be, immediate termination
by notice in writing and/or to claim damages; or
(b) by either party by written notice to the other party in the event the
latter party would become insolvent, bankrupt or makes an assignment for
the benefit of its creditors;
(c) by either party by written notice to other party in the event of a change
of ownership or control of the other party whereby the business and/or
shares of that party would pass to other(s) than those now.
<PAGE> 8
having ownership or exercising control. It is understood that this is not
application the event a change of ownership of shares of a party is
effecutated through a public listing at a stock exchange.
Article 11
Deliveries after notice of termination
As from the moment Philips gives notices of termination of this Agreement in
accordance with article 10, Sylvania shall maintain its deliveries to Philips
for the coming three (3) months period of the level supplied during the three
(3) months period prior to the receipt of Philips' notice of termination.
Mutatis muntandis as from the moment Sylvania gives notice of termination of
this agreement in accordance with article 10.
Philips shall maintain its off-take from Sylvania in the coming three (3)
months period at the level of the three (3) months period prior to the moment
of Sylvania's notice of termination.
Article 12
Confidentiality
During the term of this Agreement and any renewal hereof and for a period of
two (2) years after is expiration or termination, each party agrees not to use
or disclose any proprietary information (whether technical, commercial or
otherwise) made available to it by the other party or which it may have
acquired in the performance of this Agreement, unless and to the extent such
information is to the public domain through no fault of the receiving party, is
known and on record at the receiving party prior to receipt or is lawfully
obtained from a third party who was free to disclose such information.
Article 13
Assignment
This Agreement is not assignable in whole or in part by either party without
the prior written consent of the other party, provided, however, that a party
may assign its right under this Agreement to any successor of substantially all
of the business assets related to this Agreement or to an affiliate. Such
assignment shall become effective only when the signee acknowledges in writing
that it agrees to all terms and conditions of this Agreement.
Article 14
Governing Language and Choice of Law
The governing language of this Agreement shall be in English and the applicable
law shall be that of Belgium.
<PAGE> 9
Article 15
Disputes
All disputes shall be within the jurisdiction of the courts at Leuven,
Belgium.
Made on March 1, 1996 in two (2) copies
PHILIPS LIGHTINGS, B.V. SYLVANIA N.V.
By: /s/ By: /s/
--------------------------- ---------------------------------
TITLE: Senior President TITLE:
DATE: April 4, 1996 DATE: March 11, 1996
<PAGE> 10
RIDER TO THE PURCHASE AGREEMENT BETWEEN PHILIPS LIGHTING BV AND SYLVANIA NV
- ------------------------------------------------------------------------------
By and between:
Philips Lighting BV, a company with limited liability incorporated under the
laws of The Netherlands, having its office in Eindhoven, acting on its own
behalf and on behalf of its associated companies.
represented by Mr. P.J. HUT
(hereinafter referred to as "Philips")
and:
Sylvania NV, a company with limited liability incorporated under the laws of
Belgium having its office in Tienen, Belgium
represented by Mr. J. Germis
(hereinafter referred to as "Sylvania")
Hereinafter jointly referred to as the "Parties."
It is witnesseth:
Whereas Philips and Sylvania have entered into a purchase agreement dated March
1, 1996.
Whereas such purchase agreement provides for the purchase by Philips of minimum
quantities of Halogen PAR 38/Halogen PAR 30 S and capsules over each Contract
Year;
Whereas the value of the quantities accounted for the 1st Contract Year - which
started on March 1, 1996 (the "Effective Date") - only to 91.5 million BF
whereas the contract requires minimum purchases by Philips in the amount of
173.8 million BF per Contract Year,
Whereas Philips has requested Sylvania to agree to an amendment to the purchase
agreement to provide for:
<PAGE> 11
(1) an initial fixed contract period of 3 (instead of 2) years with minimum
purchase obligation of BF 91.5 million for the 1st, BF 121 million for the
2nd and BF 135.1 million of the third contract year;
(2) a price reduction for PAR 30S lamps.
In consideration of Sylvania's acceptance of such amendments Sylvania has
requested Philips to replace to the extent possible orders for capsules
by orders for lamps and more in particular PAR 20 and PAR 25 lamps.
It is agreed as follows:
Article 1
1.1. Article 3.01 of the Purchase Agreement of March 1, 1996 is replaced as
follows:
"3.01. On the terms and conditions as set forth herein, Sylvania shall
sell and deliver to Philips and Philips shall purchase and accept from
Sylvania the quantities of the following products to meet the agreed upon
minimum purchase values over the initial 3 year term of this Agreement:
1. Minimum purchase values (exel, VAT/transportation, etc)
1.1. First Contract Year (1/3/96 - 28/2/97): 91.5 MBF
1.2. Second Contract Year (1/3/97 - 28/2/98): 121 MBF
1.3. Third Contract Year (1/3/98 - 28/2/99): 155.1 MBF
----------
347.6 MBF
2. Products
2.1. Halogen PAR 38 Aluminised lamps 75 & 100 W - 230 & 240 V version
with Philips Wiso design
2.2. Halogen PAR 30S - Aluminised lamps 75 & 100 W - 230 & 240 V version
with Philips Wiso design
2.3. Capsules 50W/75W - 230 & 240 V
2.4. Halogen PAR 25; provided it is technically possible to produce such
lamps on existing SLI equipment subject to achievement of Philips
specifications to be proven by test.
2.5. Halogen PAR 20; provided it is technically possible to produce
such lamps on existing SLI equipment subject to achievement of
Philips specifications to be proven by test.
<PAGE> 12
3. General forecast Second contract year (1/3/1997 - 2/2/1998)
<TABLE>
<CAPTION>
Quantity Selling Price
<S> <C> <C>
Capsules 600,000 55 BF
PAR 20 20,000 130 BF if available 1/1/1997
PAR 25 50,000 145 BF if available 10/1/1997
PAR 308 288,000 165 BF
PAR 38 185,000 180 BF
</TABLE>
Philips undertakes to increase to the extent possible in both the 2nd and
3rd contract years the purchases of lamps and decrease the purchases of
capsules.
The price reduction on the PAR 30S lamps from 168BF to 155 BF per lamp will
be applicable as from March 1, 1997 and will be covered by a credit note
that will be issued to Philips at the end of the 2nd contract year. For the
determination of compliance with the minimum purchase requirement (values)
over the 2nd and 3rd contract years the purchases of the PAR 30S Lamps will
be counted at their reduced selling price of 155 BF.
The general forecast for the split-up of the orders per product type for the
3rd contract year will be communicated by Philips early 1998 subject to the
undertaking of Philips to further reduce the quantities of capsules by an
increase of the orders for PAR 20 and PAR 25 lamps.
4. Calculation of the relevant contract year purchase values/commitment to
cover possible shortfalls
4.1 The purchase values to which Philips has committed will not be
impacted by the delivery by Philips of components free of charge to be
assembled in the products and more in particular the coming cups and
lenses for PAR 20 lamps i.e. the reduced selling prices which will
result from the supply free of charge by Philips of such components
will not release Philips from its obligation to meet the minimum
purchase values (i.e. selling prices effectively invoiced by Sylvania
over the relevant contract years).
4.2 If the agreed upon minimum values would not have been reached at the
end of the second or third contract year, Philips will immediately
upon the expiration of such second Contract Year respectively third
Contract Year place an order to cover the shortfall. Such order will
be supplied by Sylvania within three (3) months following receipt."
1.2. Sylvania recognizes that the revised purchase value for the first
Contract year, i.e. 91.5M BF has been met.
<PAGE> 13
1.3. The ordering and forecast procedures provided for in Article 3.02 to 3.04
of the Purchase Agreement will remain unchanged subject only to the
understanding that they will be based on the revised committed purchase
values for the second and third contract years.
Article 2
Provided the conditions for the production of Halogen PAR 20 and PAR 25 lamps
will be met the specifications set forth in annex 1 and the Quality Agreement
shall be completed in mutual agreement to include the specifications for such
lamps.
Article 3
Article 8 of the Purchase Agreement is replaced as follows:
"Sylvania shall supply the products under the following conditions:
<TABLE>
<CAPTION>
Lamps Type (Wi??) Price exfactory per lamp
- ----- ----------- ------------------------
<S> <C> <C>
PAR 38 BF 180
PAR 30S BF A55
PAR 20 BF 130
PAR 25 BF 145
</TABLE>
Subject to supply by Philips of proper glassware (corning cups and lenses) free
of charge for assembly in the PAR 20 lamps the selling price per PAR 20 lamp
will be reduced with a maximum amount of BF 28 (not including efficiency losses
to be proven by test).
<TABLE>
<CAPTION>
Capsules Type Price exfactory per lamp
- -------- ---- ------------------------
<S> <C> <C>
50W/75W BF 55
</TABLE>
The prices will remain firm until the expiration of the initial 3 year term of
the Purchase Agreement.
In case the Purchase Agreement will be renewed for (a) further consecutive 2
year period(s) the prices will be adapted to allow Sylvania to earn a
comparable return on the sale of the products covered by this Agreement (i.e.,
at least equal to the return envisaged at the time of the conclusion of the
Purchase Agreement)".
In case of renewal of the Purchase Agreement the minimum purchase value for the
third Contract Year will also be applicable for the subsequent contract years.
<PAGE> 14
Article 4
The 1st paragraph of Article 10 is replaced as follows:
"This Agreement shall become effective as from the Effective Date (March 1,
1996) and shall remain in effect for an initial term of three (3) years and
will thereafter be automatically renewed for successive two (2) year periods if
not terminated by either party by a notice of termination sent to the other
party by registered mail at least three (3) months before the end of the initial
period or 3 months before the end of any successive two (2) years period".
Article 5
5.1 All terms and conditions of the Purchase Agreement of March 1, 1996 which
are not amended by the present rider remain in full force and effect.
5.2 The effective date of the amendments shall be the date on which the
present rider will have been signed by both parties unless otherwise
indicated in the present rider.
Made in two copies. Each party acknowledges receipt of an originally signed
copy.
PHILIPS LIGHTING BV SYLVANIA NV
By: P.I. Hut By:
Title: Senior Vice President Title:
Date: Date:
<PAGE> 1
EXHIBIT 10.38
SETTLEMENT AGREEMENT
In the light of a potential sale (the "CML sale") of the entire issued share
capital of Sylvania Lighting International B.V. to Chicago Miniature Lamp Inc.
("CML"), or a wholly owned subsidiary of CML, the parties, being
Sylvania Lighting International B.V. ("SLI")
and
Osram GmbH ("Osram")
have agreed that:
1. If the CML sale does not compete until December 31, 1997, this entire
settlement agreement will be null and void. (For the avoidance of doubt,
if the CML sale does not complete until December 31, 1997, the waiver in
paragraph 2 will cease to have effect in relation to any actions taken
after December 31, 1997 to enable the signing and completion of the CML
sale, but the waiver will be effective in relation to any action taken on
or before December 31, 1997 to enable the signing and completion of the
CML sale; paragraph 7 will become effective on the signing of the letter -
however if the CML sale does not complete until December 31, 1997, Osram
will not have any obligation under paragraph 7 in respect of the period
after December 31, 1997).
2. Osram hereby waives its right of first refusal as defined in clause 10.3 of
the Master Agreement dated 29 January, 1993 between (1) Siemens AG (2)
Osram GmbH (3) Citicorp Capital Investors Europe Limited (4) SLI (as
amended) in relation to the CML sale and only for the purpose to enable
the signing and completion of the CML sale.
3. In the event that the CML sale completes, it is agreed that CML will be
deemed to be 'Lamp Competitor' for the purposes of the various agreements
between the Siemens Group and the Osram Group on the one hand and the
Sylvania Group on the other hand, notably the Research and Development and
Engineering Support Agreement of 29 January, 1993 (as amended) and the
Apparatus Supply Agreement dated 23 December 1994 and the License Agreement
between Osram (1) and SLI (2) dated 29 January 1993 (as amended). Subject
to and with effect from completion of the CML sale, all such agreements
will take effect in accordance with their terms as if on such completion,
the entire share capital of SLI had been acquired by a Lamp Competitor.
The parties agree that upon completion of the CML sale, without any further
notice requirement the Apparatus Supply Agreement, the Research and
Development and Engineering Support Agreement and the Licence Agreement
shall automatically terminate; however all existing licences to use
previously licensed Intellectual Property will continue to be in force
according to the provisions of the respective agreements and the provisions
of clause 12.1 of the Research and Development and Engineering Support
Agreement (Consequences of Termination) will take effect.
4.1 At any time until:
<PAGE> 2
(i) December 30, 1999 in respect of the Supply Agreement for
Finished Lamps dated January 29, 1997; and
(ii) January 28, 1998 in respect of the supply for Lamp Materials
acc. to Article II of the Framework Agreement for Supply
Contracts dated January 9, 1993.
OSRAM (or respectively OSRAM Sylvania Products Inc) shall have the
option by notice in writing to SLI to elect to extend the Supply
Agreements under (i) and (ii) above until December 31, 2003 and
receive the status of preferred supplier in each case as described
below.
4.2 In the event that OSRAM (or OSRAM Sylvania Products Inc) exercises this
option, the following provisions will take effect:
(a) in par 9 a of the Supply Agreement for Finished Lamps the phrase
"through December 31, 1999" shall be deleted and the phrase "through
December 31, 2003" shall be inserted after the phrase "February 1,
1997"
(b) in the Frame Work Agreement for the Supply Contracts (i) in Section 2.1
the phrase "for a period of 5 years" shall be deleted and the phrase
"for a period until December 21, 2003" shall be inserted before the
phrase "following Closing for all other Lamp Materials" and (ii) in
Section 2.3 (b) the phrase "for a period of five years" shall be
deleted and the phrase "for a period until December 31, 2003" shall be
inserted before the phrase "from Closing".
4.3 All existing finished goods and material supply contracts other than
the ones mentioned under 4.2 will remain in place on its existing
terms.
4.4 In the event that Osram exercises its options under paragraph 4.1, it
will become under the Supply Agreements a preferential supplier under
the following provisions; (all existing SLI contracts with other
suppliers will be allowed to continue to expiry):
(a) In all cases, when a member of the SLI Group intends to place with
third parties a material order for Products, which SLI is not obliged
to place according to the provisions of the Supply Agreement with the
OSRAM Group, SLI shall give what it believes to be the relevant member
of the OSRAM Group written notice of all reasonable details (including
without limitation, Product type and specifications, price, quality,
delivery terms and quality) of the terms upon which such third party
has offered the delivery of such Products to SLI Group.
(b) If the relevant member of the OSRAM Group agrees in writing within 14
working days after receipt of SLI's information under the above to
supply such Products on terms which are at least equal to the terms
offered by third parties (including, without limitation, price,
quantity, availability, delivery terms, specifications and quality),
SLI shall procure that the relevant order is placed with Osram and
Osram will accept the relevant order.
(c) If Osram does not so agree within the time period described in
paragraph (b) or if Osram states that it does not wish to supply a
material order, then the SLI Group will be free to place the relevant
order with a person other than Osram.
For the purposes of this paragraph 4.4 "Products" means all products
covered by the Definitions of "Products" and "Lamp materials" in the
respective Supply Agreements.
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<PAGE> 3
(d) For the purposes of this paragraph 4.4, a material order is an order
whose value will exceed for each Product together with previous orders an
aggregate amount of US$25,000 per calendar year.
(e) If not otherwise agreed in case of an extension of the Supply Agreements,
the provisions of this paragraph 4.4 will cease to have effect on 31
December 2003.
4.5 In this paragraph 4:-
(a) the "Framework Agreement for Supply Contracts" means Article II (Supply
of Lamp Materials) of the Framework Agreement for Supply Contracts dated
29 January 1993 between Osram (1) SLI (2) as amended.
(b) the "Supply Agreement for Finished Lamps" means the Supply Agreement for
Finished Lamps between OSRAM Sylvania Products Inc. (1) SLI (2) made as of
29 January 1997.
(c) The "Supply Agreements" shall mean collectively the Supply Agreement for
Finished Lamps and the Framework Agreement for Supply Contracts.
4.6 The parties will negotiate in good faith to seek to agree terms on which
the agreements referred to in paragraph 4.2 are extended for a further
period of five years.
4.7 Other than as described above, it is intended that the existing
arrangements between the Osram/Siemens Group and the SLI Group remain in
effect on its agreed terms except that:
(i) paragraph 9 (c) of the Supply Agreement for Finished Lamps does not
apply in the case of the CML Sale;
(ii) the Supply Agreement for New Lamp Products dated 29 January 1993
shall be deemed to be terminated.
Both parties undertake not to use the change of ownership or change in
status of the above agreements as a pretext to change (or fail to
continue with) any of today's successful supply arrangements between the
groups worldwide.
5. The parties will negotiate in good faith to seek to agree a patent
licence to be granted to the SLI Group by the Osram Group in respect of
Patents developed by the Osram Group from the date of completion of the
CML Sale for a five year period (to be extended for a further period of
five years with the agreement of the parties). For the avoidance of
doubt, any such licence would exclude use in North America and in the
automobile market and would bear a royalty to be agreed. The parties
will negotiate in good faith to seek to agree terms for the supply of New
Lamp Products by the OSRAM Group to the SLI Group, based on the existing
Supply Agreements with reasonable modifications as required by the
specific situation of New Lamp Products. (For these purposes "New Lamp
Products" mean Lamp Products (as defined in the Supply Agreement for New
Lamp Products dated 29 January 1993 between OSRAM (1) and SLI (2) which
have not been manufactured and sold on a commercial basis by or on behalf
of the OSRAM Group prior to Closing (as defined in that Supply
Agreement), but which are manufactured and sold on a commercial arm's
length basis by, or on behalf of, the OSRAM Group thereafter.
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<PAGE> 4
6. For the avoidance of doubt, any firm orders under the Apparatus Supply
Agreement which have been accepted will remain in place and will not be
affected by this Agreement. Nothing in paragraph 4.2 or 4.4 of this
Agreement will affect any orders placed with third parties at the time
Osram gives notice under paragraph 4.1
7. Osram will reasonably support SLI in preserving and defending any
anti-trust or other regulatory filings throughout the world in relation to
the CML sale only provided that OSRAM shall not be obliged to make any
statements or give any support which in its sole discretion it considers to
be factually incorrect or to be against its own interests.
8. The parties undertake to, and shall procure that their respective
subsidiaries shall hold so far as reasonably possible the existence and
terms of this Agreement and of any supply arrangement arising out of this
Agreement in confidence. No public announcement, communication or circular
(other than and to the extent required by law) concerning the transactions
referred to in this Agreement, the terms and conditions of this Agreement
or the financial affairs of any of the parties to this Agreement shall be
made or dispatched by any party without the prior written consents of the
other party (such consent not to be unreasonably withheld or delayed). SLI
shall be entitled to deliver a copy of this letter to CML and its advisers.
9. This Agreement is governed by English law.
/s/ /s/
---------------------------- ------------------------------------
Osram GmbH Sylvania Lighting International B.V.
Munich August 14, 1997
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<PAGE> 1
EXHIBIT 10.39
OSI/SLI
FRAMEWORK AGREEMENT
FOR SUPPLY OF FINISHED LAMPS
AGREEMENT, (hereinafter called "Agreement") made as of January 29, 1997
between OSRAM SYLVANIA PRODUCTS INC a Delaware corporation, acting through its
General Lighting Business Group with a principal place of business at 100
Endicott Street, Danvers, MA 01923 (hereinafter called "OSRAM SYLVANIA") and
SYLVANIA LIGHTING INTERNATIONAL B.V. (formerly EDIL International Lighting
B.V.), a private limited company incorporated under the laws of the Netherlands
with a registered office located at Oudeweg 155, 2031 CC Haadem, The Netherlands
("SLI").
W I T N E S S E T H.
WHEREAS, Osram GmbH and EDIL International Lighting, B.V. signed a Framework
Agreement for Supply Contract dated January 29, 1993 for the supply of many
products including lamps and various other agreements connected with the
separation of GTE Corporation's North American Lighting business acquired by
Osram GmbH) from the international lighting businesses of GTE Corporation and
GTE International Incorporated (acquired by SLI).
WHEREAS, Sylvania Lighting International B.V. has succeeded to all of the
rights, benefits and obligations of EDIL International Lighting B.V. under the
Framework Agreement for Supply Contract dated January 29, 1993;
WHEREAS, OSRAM SYLVANIA PRODUCTS INC. and Sylvania Lighting International B.V.
believe it desirable to enter into a new framework agreement setting forth the
standard terms and conditions that will apply to Schedule D lamp sales and
purchases thereby making unnecessary to negotiate such terms and conditions in
connection with each individual transaction;
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS
The term "Products" shall mean Lamps as defined and set forth in Article
IV and Schedule D of the Framework Agreement by and between Osram GmbH and
EDIL International Lighting B.V., and dated January 29, 1993. Additional
products may be added to this Agreement or any of the Products may be
deleted herefrom, upon 6 months prior written notice given by OSRAM
SYLVANIA to SLI that such product or Products are, respectively, to be
added or deleted form this Agreement together with OSRAM SYLVANIA's written
designation of the effective date of such addition or deletion.
2. PRICE SCHEDULES; TERMS AND CONDITIONS
(a) OSRAM SYLVANIA will sell the Products to be sold and distributed by
SLI on accepted orders at prices to be negotiated annually for the
next calendar year. So long as the most recently completed calendar
year's purchases by SLI equal at least 80% of the prior calendar
year's purchases, then each year's price increase will not exceed the
published percentage increase for all general lighting products
(including lamps and ballasts) sold in the United States to
industrial/commercial distributors of the General Lighting business
division of OSRAM SYLVANIA. For the purpose of calculating the "80%".
SLI purchases
<PAGE> 2
shall be deemed to include unfilled, non-cancelable firm purchase
orders for product to be delivered during the then current calendar
year and firm purchase orders for products no longer commercially
available from OSI. Regardless of the date of receipt and acceptance of
orders OSRAM SYLVANIA reserves the right to invoice all or part of
accepted orders at prices in effect on the date of shipment for
backorders greater than 90 days.
The price of any particular Product type or family of product types may
be increased from time to time subject to the mutual written agreement
of the parties; provided, however, (a) the price adjustments result
from unfavorable changes in market conditions or labor, material energy
or other costs of manufacture, or other unfavorable factors beyond the
direct control of OSRAM SYLVANIA and (b) OSRAM SYLVANIA has given SLI
three (3) months' prior notice of the proposed price adjustment.
Conversely, favorable changes in market conditions of labor, material,
energy or other costs of manufacture will result in OSRAM SYLVANIA
providing to SLI price relief on the affected Product type or family of
products. In the event the parties cannot mutually agree on price
adjustments, the parties hereby agree to apply 50% of the price
adjustment for a ninety (90) day period while negotiations continue. If
at the end of such 90 day period, the parties fail to reach mutual
agreement, then OSRAM SYLVANIA will not have any obligation to supply
or SLI obligation to buy such Product type or family of product type
and no liability will result therefrom.
(b) SLI agrees to pay OSRAM SYLVANIA all sums incurred on SLI's open
account with OSRAM SYLVANIA in accordance with the following payment
terms: net 60 days from date of invoice no cash discount for early
payment. The date of invoice shall be the date of shipment or any
date thereafter. The method of payment shall be as OSRAM SYLVANIA
shall reasonably specify from time to time.
(c) OSRAM SYLVANIA reserves the absolute right to review and establish new
credit terms with respect to SLI's open account at any time and from
time to time.
(d) The pricing discussed in this Paragraph (2) is meant to apply only with
respect to the purchase by SLI of Products intended for resale outside
North America. In the event SLI (or any successor) were to purchase
Products under private label for resale in North America, then SLI
would need to negotiate and reach mutual agreement with OSI on the
pricing (and such other terms and conditions) that would apply with
respect to such products destined for resale in North America.
3. PURCHASE ORDERS
OSRAM SYLVANIA will not be required to make any shipments except against
orders sent by SLI to OSRAM SYLVANIA and accepted by OSRAM SYLVANIA. Any
provision of any order placed by SLI which is inconsistent with or in
addition to any provision hereof (other than provisions specifying lamp types
and quantities, delivery dates, invoicing and shipping instructions and
additional specifications) shall be null and void and not binding on OSRAM
SYLVANIA. All orders (excluding sample orders) will be subject to a minimum
order value of $1250 (U.S.) Orders below this amount will be subject to a
$55 (U.S.) handling charge.
4. DELIVERY
(a) Unless otherwise mutually agreed to OSRAM SYLVANIA shall deliver the
Products sold to SLI Ex-works (Incoterms 1990) shipping point from
the OSRAM SYLVANIA Distribution Center nearest the SLI customer
destination. Notwithstanding the foregoing, SLI private-label Product
will be warehoused at and shipped from OSRAM SYLVANIA's Bethleham,
Pennsylvania Distribution Center or such other locations as determined
by OSRAM SYLVANIA. Title and risk of loss with respect to the Project
will pass to SLI upon delivery at the f.o.b. point and all
transportation, insurance and other charges beyond such point of
shipment shall be for SLI's account. (Freight charges will be prorated
and added to the invoice.) OSRAM SYLVANIA shall ship Products in
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<PAGE> 3
accordance with its standard mode of transportation at freight rates
then available to OSRAM SYLVANIA. If SLI requests a faster mode of
transportation, SLI shall be liable for the added transportation
cost. OSRAM SYLVANIA will containerize freight when requested by
SLI. Loading of containers will be to the maximum extent possible
under the circumstances.
(b) All delivery dates shall be deemed approximate. While OSRAM SYLVANIA
will endeavor to meet delivery schedules OSRAM SYLVANIA shall not be
liable for delays in delivery or failure to manufacture or deliver due
to (1) causes beyond its reasonable control, (2) acts of God, acts of
SLI, acts of civil or military authority, or other governmental
allocations or controls, fires, strikes or other labor difficulties,
flood, epidemics, war, riot or other civil disturbance, delays in
usual source of supply, delays in transportation or car shortage, (3)
inability on account of causes beyond its reasonable control to obtain
or delay in obtaining necessary labor, materials, components or
manufacturing facilities, or (4) any other commercial
impracticability. In event of any such delay, the date of delivery
shall be extended for a period equal to the time lost by reason of the
delay.
(c) When necessary and subject to mutual agreement, OSI will provide
palletized product at OSI's cost.
5. PRODUCT AVAILABILITY
(a) In the event of a shortage of Products for any reason, OSRAM SYLVANIA
shall have the right to allocate its available supply of Products
among its customers (including divisions, subsidiaries and affiliates
of OSRAM SYLVANIA that use Products) in any manner that OSRAM
SYLVANIA considers to be equitable or in its best interests.
Expressly subject to the preceding sentence limitation, OSI will
endeavor to supply SLI in accordance with historical buying patterns
of SLI. However, this is merely a non-binding target.
(b) OSRAM SYLVANIA agrees to notify SLI in writing 60 days prior to
obsoleting any specific lamp item and to identify substantially
equivalent replacement(s), if any,
(c) If possible, OSRAM SYLVANIA will provide SLI with a 6 months notice
advising of any known existing or anticipated long term capacity or
production problems (and plans to correct same) affecting a Product
or family of products, e.g., capacity problem experienced with PAR 38
lamps prior to EPACT implementation.
(d) In the event that OSRAM SYLVANIA experiences a short term capacity or
production problem, e.g., availability of F20D, F40D, circtines,
affecting any Product or family of products, it shall notify SLI of
the nature of the problem(s) (and plans to correct same) within 14
days after receiving SLI's firm orders for the affected Product(s).
6. MARKING, PACKAGING AND PACKAGE
(a) Products shall be marked and their packages shall contain graphics and
be labeled in the manner specified by SLI provided, however, that
OSRAM SYLVANIA shall not be obligated to mark or label in a manner
that it, in its sole discretion, believes would violate obligated to
mark or label in manner that it, in its sold discretion, believes
would violate the law or applicable regulations or its own or another
party's rights. SLI will either provide OSRAM SYLVANIA with art work
and films for graphics and labeling or identify its packaging
suppliers and authorize OSRAM SYLVANIA to secure such packaging at
SLI's cost, in which event the price of Products will be equitably
adjusted to reflect the fact that OSRAM SYLVANIA is no longer bearing
the cost of unit packages and/or
- 3 -
<PAGE> 4
shipping cartons and their graphics and labeling. SLI will reimburse
OSRAM SYLVANIA for all costs associated with any change in graphics
and labeling after the original graphics and labeling have been
supplied, including all costs of obsolete packaging material that
result from the change. Periodically, if it so elects and within its
sole discretion, OSRAM SYLVANIA may substitute its standard SYLVANIA
branded packaging of OSRAM SYLVANIA and/or "white box" or generic
packaging, which includes no corporate reference. SLI's consent would
be required if more than 20% of ordered Product types would be
supplied in non-private labeled packaging. Under no circumstance will
OSRAM branded products be available for purchase by SLI.
(b) The parties will mutually agree on a list of those lamp types which
will be supplied under SLI's private labels and trademarks. Private
labeled Sylvania brand product will be produced for SLI, subject to
minimum purchase requirements and such other requirements as set
forth in OSRAM SYLVANIA Policy #OQ2-133-02 (a copy of which is
attached hereto and incorporated herein). SLI will provide OSRAM
SYLVANIA with its annual forecast (updated quarterly) of private
labeled product requirements. Private labeled product which fails to
meet forecasted demand levels will be subject to deletion or will be
supplied on a "made to order" basis, subject to minimum production
runs and shipment of all such production when the order is completed.
7. COMPLIANCE WITH LAWS
OSRAM SYLVANIA shall not be required to deliver to SLI any Products which,
in OSRAM SYLVANIA's reasonable judgment, do not conform to applicable
standards, rules, regulations (including, but not limited to EPACT) or
guidelines, if any, for Products established by any governmental
authority. In the event OSRAM SYLVANIA determines in its reasonable
judgment, that it can or will export these products to SLI, OSRAM
SYLVANIA may condition its approval on such reasonable, additional terms
and conditions of sale as they would apply to private-labeled products (see
Paragraph 6 above).
8. TRADEMARKS & TRADENAMES
(a) It is understood that the trademarks and tradenames of each of the
parties hereto shall remain the sole and exclusive property of such
party and subject to such terms, conditions, rights and obligations
as set forth in the Amended and Restated Intellectual Property
Allocation and License Agreement by and between EDIL International
Lighting B.V., Osram Acquisition Corporation and Osram GmbH and dated
August 6, 1992 ("Allocation and License Agreement"), as amended by
the Variation Agreement by and between Osram GmbH and Sylvania
Lighting International B.V. and dated December 23, 1994 ("Variation
Agreement"). Neither party will use any of the trademarks or
tradenames of the other party on or in connection with any product
except as permitted by this Agreement or the Allocation and License
and Variation Agreements.
(b) Any breach of Article 18(b) of the Allocation and License Agreement
shall be deemed a breach of a material term of this Agreement and
give rise to early termination, as set forth in Paragraph 9(b) herein.
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<PAGE> 5
9. TERM AND TERMINATION
(a) The Initial term of this Agreement shall be for the period February
1, 1997 through December 31, 1999 and from year to year thereafter
unless otherwise terminated as provided herein. Notwithstanding the
foregoing, either party may terminate this Agreement, with or without
cause, during any renewal period hereof, by giving not less than nine
(9) months prior written notice of termination to the other party,
and upon the giving of such notice, this Agreement shall terminate
without further notice the date specified in such notice of
termination.
(b) Notwithstanding anything to the contrary contained in this Agreement
or this Paragraph 9, in the event of a breach by either party of any
material term, condition or provision of this Agreement, the other
party (in addition to such other rights as it may have) shall have
the right to terminate this Agreement forthwith by giving written
notice of termination to the defaulting party, provided at least 30
(thirty) days' prior written notice of breach and intention to
terminate has been given and the breach is not cured during such
period.
(c) Notwithstanding anything to the contrary in Paragraph 9, or this
Agreement, if SLI ceases to function as a going business or if SLI
becomes involved in financial difficulties or becomes insolvent, or
in the event that: (a) any person, persons or company participating in
the general lighting market acquires twenty-five percent (25%) or
more common equity, ownership or control of SLI, its successors or
any of its assigns (other than pursuant to a public listing), or (b)
SLI, its successor or any of its assigns are or become a publicly
listed company and any person, persons or company participating in the
general lighting market acquires forty-nine percent (49%) or more of
the common equity of such company, or (c) any person, persons or
company participating in the general lighting market has the right to
appoint any director, officer, employee or one or more persons on the
board of management of SLI, its successors or any of its assigns, then
OSRAM SYLVANIA may, at its option, immediately terminate this
Agreement by giving written notice to SLI at termination. It is
expressly agreed that OSRAM SYLVANIA shall have the sole right to
determine whether any of the conditions set forth above shall have
occurred, and its determination, if not unreasonable, shall be binding
upon SLI. With respect to this Paragraph 9(c), any reference to "SLI"
shall be deemed to include any subsidiary owned or controlled by SLI.
(d) All claims shall survive the termination of this Agreement but
neither party shall be liable to the other for damages, indemnities,
losses or compensation of any kind by reason of, or attributable to,
the termination, for any reason, of this Agreement.
(e) In the event of termination of this Agreement by OSRAM SYLVANIA for
cause or by SLI for reasons other than OSRAM SYLVANIA's breach, SLI
will purchase all lamps under firm purchase orders of SLI in finished
packaged inventory at the time of termination plus reimburse OSRAM
SYLVANIA for the costs of all packaging materials, other stock
inventories and dedicated lamp inventories OSRAM SYLVANIA may have
purchased, committed to purchase or manufactured under this
Agreement, not to exceed ninety (90) days of annual purchases. If
such remaining inventory is not purchased by SLI within thirty (30)
days after termination of this Agreement, OSRAM SYLVANIA, without
waiving any other rights it may have, may sell this stock to
purchaser(s) of its choice at prevailing price; provided however, that
no packaging, artwork or labels of SLI shall be used in sales or
affixed to such stock.
10. WARRANTY AND INDEMNIFICATION
(a) Unless otherwise agreed to by the parties, OSRAM SYLVANIA will
manufacture Products to be delivered hereunder in accordance with
applicable specifications published by
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<PAGE> 6
OSRAM SYLVANIA in its Large Lamp catalogue at the time of purchase by
SLI. This warranty shall apply only to defects appearing within one
(1) year from the date of delivery to SLI. Damages resulting from
external causes such as abuse, misuse, or acts of God are not covered
by this Warranty. The conditions of any tests concerning Products
which SLI claims fail to conform to this warranty shall be mutually
agreed upon in writing and OSRAM SYLVANIA shall be notified of, and
may be represented at, all tests that may be made. If any Product
does not meet the above warranty, and if SLI notifies OSRAM SYLVANIA
in writing within thirty (30) days after discovery of the defect,
OSRAM SYLVANIA shall thereupon correct such defect by either (at
OSRAM SYLVANIA's sole option) replacing the defective Product, or
part thereof, or refunding purchase price thereof. IN NO EVENT SHALL
OSRAM SYLVANIA BE LIABLE FOR CONSEQUENTIAL, INDIRECT, SPECIAL, OR
INCIDENTAL DAMAGES, INCLUDING, BUT NOT LIMITED TO LOSS OF PROFITS OR
REVENUE, COST OF CAPITAL, OR CLAIMS OF CUSTOMERS OF SLI FOR SUCH
DAMAGE. THIS WARRANTY REPRESENTS SLI'S EXCLUSIVE REMEDY UNDER THIS
AGREEMENT. THERE ARE NO OTHER WARRANTIES OF ANY KIND, WHETHER
EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY AND
OF FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO PRODUCTS SOLD
UNDER THIS AGREEMENT.
(b) Where Products have limited life or may deteriorate through age or
other factors such as improper storage, or where industry accepted
visual imperfections exist as in glass or fused quartz products, such
limited life, or imperfection is not a defect or a failure to conform
to specifications as contemplated herein. SLI acknowledges that on
high volume production items such as Products, a small percentage of
defects (including failure to conform to specification(s) or breakage
is considered normal. SLI understands and acknowledges that
allowances for such defects and breakage is factored into the prices
for Products. Should any particular manufacturing lot of Products
develop an unusual number of defects, the parties shall negotiate
regarding an acceptable resolution of the problem, but, in no event
shall OSRAM SYLVANIA make available to SLI anything less in terms of
remedies that it makes generally available to its customers for the
same type of Product. If SLI desires specific acceptable quality
levels or a different remedy for exceeding such levels. SLI shall so
specify on the face of its Purchase Order.
(c) SLI agrees to indemnify and hold OSRAM SYLVANIA harmless from and
against any damage, expense, or loss that OSRAM SYLVANIA may suffer,
sustain or be subject to by reason of infringement of patent or
trademark arising from compliance with SLI designs or specification,
modifications or instructions. Except as otherwise provided in the
preceding sentence. OSRAM SYLVANIA shall defend any suit or
proceeding brought against SLI so far as based on a claim that any
Product furnished under this Agreement constitutes an infringement of
any patent of the United States, if notified promptly in writing and
given authority, information and assistance (at OSRAM SYLVANIA's
expense) for the defense of same, and OSRAM SYLVANIA shall pay all
damages and costs awarded therein against SLI. The foregoing states
the entire liability of OSRAM SYLVANIA for patent infringement by the
said Product.
11. GENERAL PROVISIONS
(a) Anything hereinabove, or in any documentation relating to particular
sales-transactions pursuant hereto, to the contrary notwithstanding,
title to Products sold to SLI hereunder shall pass upon delivery to
SLI.
- 6 -
<PAGE> 7
(b) This Agreement does not, and shall not be deemed to, make either
party the agent or legal representative of the other party for any
purpose whatsoever and neither party shall have the right or
authority to assume or create any obligation or responsibility
whatsoever express or implied, in behalf of or in the name of the
other party, or to bind the other party in any respect whatsoever,
neither party shall make any guarantee, warranty or representation of
Products on behalf of the other party.
(c) This Agreement contains the entire and only understanding and
agreement between the parties with regard to the subject matter
hereof, there being merged herein all prior and contemporaneous oral
or written representations, understandings, agreements, promises, and
conditions relating to the subject matter hereof and any
representation, understanding, agreement, or condition not
incorporated herein or made a part hereof shall not be binding upon
either party.
(d) The terms of this Agreement may not be altered, waived, modified or
discharged except by an express declaration in writing signed on
behalf of OSRAM SYLVANIA by a duly authorized officer and referring
specifically to this Agreement, and no separate verbal or written
agreement, which may be made between SLI and OSRAM SYLVANIA's
employees shall in any way modify or affect this Agreement.
(e) The failure of either party at any time to require performance of the
other party of any provisions hereof, shall in no way affect the full
right to require such performance at any time thereafter nor shall
the waiver by either party of a breach of any provision hereof be
taken or held to be a waiver of the provision itself.
(f) In the event that this Agreement, or any of its provisions, is
declared invalid by a court, agency, commission or other entity
having jurisdiction thereof, neither party shall have any cause of
action or claim against the other party by reason of such declaration
of invalidity. The invalidity or unenforceability of any one or more
provisions of this Agreement shall not affect the validity or
enforceability of the remaining provisions.
(g) This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns.
Neither party shall in whole or in part, directly or indirectly sell,
transfer, assign, pledge or otherwise encumber its rights or
obligations under this Agreement without the other party's prior
express written consent. Such consent shall not be unreasonably
denied or delayed.
(h) OSRAM SYLVANIA's liability arising from any claim, including for any
loss or damage resulting from or connected with agreements or from
the breach of performance thereof or from the design, manufacture,
sale, delivery, installation, repair or use of any Product sold or
delivered hereunder shall in no event exceed the price allocable to
the Product(s) which give(s) rise to the claim and shall terminate
three (3) years after delivery of such Product(s) to SLI.
(i) This Agreement and all transactions between OSRAM SYLVANIA and SLI
related thereto has been made and will be governed by and construed
according to the laws of the Commonwealth of Massachusetts, USA,
excluding its conflict of law rules and excluding the 1980 U.N.
Convention on Contracts for the international Sales of Goods.
(j) Except as provided in Paragraph 2(b) herein, any claim or controversy
arising at any time out of or in relation to this Agreement shall be
settled in accordance with the rules of commercial arbitration of the
International Chamber of Commerce by an arbitrator appointed in
accordance with the rules who shall be entitled to award specific
performance preliminary or final and/or damages. Any arbitration
shall take
- 7 -
<PAGE> 8
place in Paris, France, and shall be conducted in the English
language. The arbitration shall be governed in accordance with the
(1) language of the Agreement and (2) substantive law of the
Commonwealth of Massachusetts, as noted above, except to the extent
Massachusetts law conflicts with the language of this Agreement. In
which event this Agreement will prevail. Judgment upon the award
rendered may be entered in any court having jurisdiction thereof. All
proceedings shall be conducted in confidence: the parties agree to
provide such information and make available such employees, as the
arbitrator deems necessary for his or her determination. Each party
will be afforded an opportunity to examine the witnesses and documents
referred to or submitted by the other party as a part of such
proceedings and to submit a reasonable list of document requests,
interrogatories and requests for admission to which the other will
respond, if being understood that time is of the essence in the
completion of such proceedings. The arbitrator shall be required to
put his or her award and decision in writing and provide all parties
with a copy thereof.
IN WITNESS WHEREOF, this Agreement has been executed by both parties hereto as
of the day and year first above written.
OSRAM SYLVANIA PRODUCTS INC. SYLVANIA LIGHTING INTERNATIONAL B.V.
By: /s/ By: /s/ Carlos J. Piltsi
------------------------------- ----------------------------------
- 8 -
<PAGE> 1
EXHIBIT 10.40
THE UNDERSIGNED
1. Europese maatschappij voor fabricage en verkoop van
gideilampensonderdelen, Lommel, Belgium, hereinafter referred to as "Emgo"
of the one side
and
2. G.T.E. Sylvania, Geneve, Switzerland, acting in its own name and on its
own behalf as well as in the name and on behalf of its subsidiaries and
sistercompanies including Claude S.A. established in Europe, hereinafter
referred to as "Sylvania"
of the other side
HEREWITH DECLARE TO HAVE AGREED AS FOLLOWS:
<PAGE> 2
-2-
ARTICLE 1
DEFINITIONS
a) Subsidiary
Any company or other legal entity, present or future, in which Sylvania
respectively any shareholder of Emgo owns or controls, directly or
indirectly, at any time, more than fifty (50) per cent of the issued share
capital or more than fifty (50) per cent of the voting power therein and
with respect to which Sylvania respectively such shareholder of Emgo has
the power to direct its business activities. However, any such company
shall be deemed to be a subsidiary only for as long as such ownership,
power or control exists.
b) Sistercompany of Sylvania S.A. Geneva
Any company or other legal entity which is under the control of the same
entity as that which controls GTE Sylvania S.A. Geneva, which means that
such entity owns or controls, directly or indirectly, at any time more
than fifty (50) percent of the issued share capital or more than fifty (50)
percent of the voting power therein and with respect to which such entity
has the power to direct its business activities. However any such company
shall be deemed to be a sistercompany of GTE Sylvania as long as such
ownership, power or control exists.
c) Bulbs
Bulbs for all kinds of lamps and figuring in Emgo's manufacturing and
sales program as per annex I as amended from time to time.
d) Shareholder prices
The prices as invoiced by Emgo to its shareholderlampmanufacturers and/or
their subsidiaries for supplies of bulbs and fixed according to the
general rules and procedures as per annex II, and increased by the
annually established averaged uplift for packing and freight to
destinations of the EEC territory as per the date of the present agreement.
ARTICLE 2
PURCHASE/SUPPLY OF BULBS
Sylvania will purchase from Emgo and Emgo will supply to Sylvania in conformity
with the terms and conditions as set out in the present agreement, Sylvania's
requirements of bulbs for its lampmanufacturing facilities in Europe.
<PAGE> 3
-3-
The "minimum annual quantity" so to be supplied and purchased will be 120
million bulbs.
If, due to the level of Sylvania's sales, the requirements of bulbs for
Sylvania's lamp manufacturing facilities in Europe would not allow the
purchase from Emgo of this "minimum annual quantity" Sylvania will
purchase from Emgo such quantity of bulbs as to cover its requirements.
If Sylvania's sales of lamps would not allow the purchase of an annual
quantity of at least 100 million bulbs, the surcharge as stipulated in
article 8 will be revised in common agreement between the parties.
ARTICLE 3
ORDERING PROCEDURE
Orders for the supply of bulbs specified by type and quantity shall be
placed by Sylvania in conformity with the procedure, norms and
specifications set out in the Emgo catalogue, chapter 6 "Terms of
Delivery," (annex III).
ARTICLE 4
PACKING
The bulbs will be delivered by Emgo to Sylvania in packing according to
the procedures, norms and specifications set out in the Emgo catalogue,
points 4 "freight and insurance" and 10 "Packing of Bulbs" (paragraph 10.1
to and including 10.8). See annex III of the present agreement.
ARTICLE 5
QUALITY AND PERFORMANCE
The bulbs supplied by Emgo to Sylvania shall be of a quality and
performance equal to the standard quality and performance of bulbs
supplied by Emgo to its shareholder lampmanufacturers and their
subsidiaries in conformity with the norms and specifications set out in
the Emgo catalogue under chapter 8 "Quality" (annex III). Shipments
showing evident manufacturing defects will be replaced free of charge, by
Emgo after they have been returned by mutual agreement. Emgo will not
accept any other responsibility as described above.
<PAGE> 4
-4-
ARTICLE 6
DELIVERY
Emgo shall effect and Sylvania shall take delivery of all bulbs ordered by
Sylvania under this agreement at the agreed times, freight paid to
destination within EEC territory, insurance and handling costs from the
moment of delivery being for the account of Sylvania.
ARTICLE 7
FORCE MAJEURE
a) If Emgo is unable, due to force majeure (including without limitation the
direct or indirect results of: acts of God; fire; natural phenomena;
governmental regulations; acts, restrictions or omissions to act of any
governmental authority, domestic or foreign; strikes; labor disputes;
breakdown of or accidents to machinery; shortage of materials in the
market; civil commotion; delays in transportation and any other cause
beyond their reasonable control), to fulfil all their orders on the
scheduled delivery dates thereof (including orders placed by Emgo's
shareholder) any such cause shall be sufficient excuse for any failure or
delay in delivery. The rules set out in the Emgo catalogue under chapter
7 "Other terms" will be applicable (annex III).
b) If Sylvania is unable, due to force majeure as defined in a) above to take
delivery of any or all bulbs ordered on the scheduled delivery dates
thereof, any such cause shall be sufficient excuse for any failure or
delay to take delivery.
ARTICLE 8
PRICE/AUDIT
Emgo will supply the bulbs to Sylvania and Sylvania will purchase the
bulbs from Emgo at a price that is equivalent to the shareholder price
increased with a surcharge of 3 1/2%.
This price is based upon the purchase by Sylvania of the "minimum annual
quantity" of bulbs as mentioned in article 2 hereabove.
Sylvania is authorized after request and at its own expense to appoint an
external auditor acceptable to Emgo in order to control the correct
application by Emgo of the above described surcharge.
<PAGE> 5
-5-
ARTICLE 9
PAYMENT
Sylvania shall pay each invoice from Emgo for supply of bulbs within 30
days after date of invoice to the Bankers specified in the Emgo catalogue
under point 5 "Terms of Payment" (annex III).
ARTICLE 10
TERMINATION OF PREVIOUS ARRANGEMENTS
All arrangements between Sylvania and Emgo - and in particular the
agreements between the G.T.E.I. subsidiary Claude S.A. and Emgo dated
14.10.1966 and 24.4.1968 - shall be terminated on the day of entering into
force of the present agreement.
In consequence Emgo will repay to Claude S.A. within 30 days from the day
of entering into force of the present agreement an amount of B.frs. 15
million, - being the amount of the loan by Claude S.A. to Emgo - according
to the agreement of 24.4.1968.
Nothing in the foregoing shall prejudice the right of Claude S.A. to
interest in accordance with previous arrangements and agreements, on the
said loan prorated in respect of the total number of days in 1982 and, if
applicable in 1983, preceding repayment of the loan.
ARTICLE 11
ENTRANCE INTO FORCE, DURATION
The present agreement enters into force on the day of its signature by the
second party to sign this agreement, and is concluded for a fixed of 5
years. After expiration of this period it will be tacitly renewed each
<PAGE> 6
-6-
time for a new period of two years unless the present agreement is terminated
by either party by registered letter per the end of the original or any extended
period taking into account a 12 months' prior notice. However, in deviation of
the aforegoing paragraph, whenever during the continuance of this agreement,
Emgo will have to substantially invest to increase the capacity of its
bulbmaking machinery, Emgo will inform Sylvania accordingly by registered letter
and Sylvania will thereby be requested by Emgo to extend the present agreement
from that moment onwards with a further fixed period of 5 years. If Sylvania
would not be prepared to accept such extension of the agreement, Emgo may
forthwith terminate the present agreement with 18 months' prior notice in the
event that at the relevant time this agreement has a minimum of 18 months to
run. In the event that at the relevant time this agreement has less than 18
months to run, Sylvania shall have the right to require that this agreement runs
until the expiry of the fixed period specified in the first two sentences of
this article.
ARTICLE 12
Arbitration
All disputes arising between the parties in connection with this agreement shall
be settled in accordance with Swiss law by an arbitration court of three
members. The seat of the arbitration shall be Geneva. Each party shall appoint
one arbitrator and said arbitrators shall appoint the third one who shall act as
President. If any of the parties fails to appoint his arbitrator within 15 days
of the beginning of the proceedings, or if both arbitrators fail to appoint the
third one within 15 days of the last appointment, the necessary appointments
shall be effected by the Court of First Instance of the Canton of Geneva. The
Geneva rules of Civil procedure shall apply to the arbitration proceedings. The
award shall be final and binding upon the parties.
GENEVA LOMMEL
G.T.E. Sylvania E.M.G.O.
/s/ /s/
Date: 6-12-82 Date: 6-12-82
Lommel, 6th December 1982.
<PAGE> 7
BALEMDUK
B-3900 LOMMELL - BELGIE
N.V. EMGO TELECOM:
TELE:
TELEGRAMADRES: EMGO LOMMELL
- -------------------------------------------------------------------------------
EXPORT SELLING PRICES Page 5.1.
- -------------------------------------------------------------------------------
VALID FROM: 06.12.1982
- -------------------------------------------------------------------------------
The following prices are valid for your factory:
NAME : Gte Sylvania - Claude
PLACE : Tiehen, Lyon, Reims
COUNTRY : Belgium, France
Basis of delivery : Free destination.
(All prices in bfrs per 1,000 bulbs).
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Type Clear Frosted Satinated HS F FT T ( )
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A 80 2,359 4,631 4,800 -- -- -- --
A 80 1,741 2,758 2,852 -- -- -- --
A 70 1,341 2,346 -- -- -- -- --
A 69 811 1,206 1,519 2,346 -- -- --
A 60 708 960 1,325 -- -- -- --
A 40 551 -- -- -- -- -- --
B 35 585 945 -- -- -- -- --
B 35 644 1,003 -- -- -- -- --
B 30 615 1,790 -- -- -- -- --
BF 90 2,733 -- -- -- -- -- --
BF 75 2,345 -- -- -- -- -- --
BF 70 1,930 -- -- -- -- -- --
BF 55 1,649 -- -- -- -- -- --
BF 50 770 -- -- -- -- -- --
BW 50 2,279 3,967 -- -- -- -- --
BW 35 906 1,490 -- -- -- -- --
E 80 1,303 2,271 2,271 2,335 -- -- --
E 75 1,597 2,246 -- -- -- -- --
E 60 708 1,090 1,276 -- -- -- --
E 50 630 1,002 1,182 -- -- -- --
E 45 654 1,022 -- -- -- -- --
C 95 3,777 -- -- -- -- -- --
</TABLE>
EXPLANATION: F : Flushed. (1)
FT: Flushed, treated.
T : Treated.
HS: High Satinated.
<PAGE> 8
N.V. EMGO
- --------------------------------------------------------------------------------
EXPORT SELLING PRICES. Page 5.2.
- --------------------------------------------------------------------------------
Valid from: 06.12.1982
The following prices are valid for your factory:
NAME : Cte Sylvania - Claude
PLACE : Tienen, Lyon, Reime
COUNTRY : Belgium, France
Basis of delivery: Free destination.
(All prices: in bfrs per 1,000 bulbs).
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Type Clear Frosted Satinated HS F FT T ( )
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
G 40 635 1,264 -- -- -- -- -- --
G 45 794 -- -- -- -- -- -- --
P 45 607 906 -- -- 716 -- -- --
P 25 581 -- -- -- -- -- -- --
P 25 581 -- -- -- -- -- -- --
P 25 586 -- -- -- -- -- -- --
PC 45 1,014 -- -- -- -- -- -- --
PC 35 551 -- -- -- -- -- -- --
R 95 1,984 -- 4,266 4,472 -- -- -- --
R 85 2,841 -- -- 5,258 -- -- -- --
R 53 846 -- 2,879 2,879 -- -- -- --
R 50 846 -- 2,879 2,879 -- -- -- --
S 34 966 -- -- -- -- -- -- --
S 20 583 1,746 -- -- -- -- -- --
S 28 620 -- -- -- -- -- -- --
S 25 581 1,741 -- -- -- -- -- --
S 22 575 -- -- -- -- -- -- --
T 29 655 1,692 -- -- -- -- -- --
T 25 620 1,664 -- -- -- -- -- --
T 22 620 1,649 -- -- -- -- -- --
T 17 560 -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
EXPLANATION F : Flushed. (1):
FT: Flushed, Treated.
T : Treated.
HS: High Satinated.
- -------------------------------------------------------------------------------
<PAGE> 1
Exhibit 10.41
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT is entered into
as of May 18, 1998 (the "Agreement"), by and between Frank M. Ward ("Ward") and
SLI, INC., an Oklahoma corporation (the "Company").
WITNESSETH:
WHEREAS, the parties hereto are parties to that certain Employment
Agreement, dated December 4, 1995, whereby the Company agreed to employ Ward in
the capacity of President and Chief Executive Officer and Ward agreed to be so
employed (the "Employment Agreement");
WHEREAS, Ward and the Company desire to amend and restate the Employment
Agreement; and
WHEREAS, the terms, conditions and undertakings of this Agreement have
been submitted to, and duly approved and authorized by, the Company's Board of
Directors.
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
the sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Executive Employment. The Company agrees to employ Ward, and Ward
agrees to be so employed, in the capacity of President and Chief Executive
Officer. Employment shall be for a term of two (2) fiscal years, effective as of
January 5, 1998 and terminating January 2, 2000 (the "Executive Employment").
2. Duties. During the period of Executive Employment, Ward shall devote
full time to such employment. Ward shall perform duties customarily incident to
the office of President and Chief Executive Officer and all other duties the
Board of Directors may from time to time assign to him. Ward shall be entitled
to annual vacations in a manner commensurate with his status as a principal
executive, which shall not be less than the annual vacation period to which he
is presently entitled.
3. Compensation. For each of the two fiscal years commencing January 5,
1998, the Company shall pay to Ward as compensation for his
<PAGE> 2
-2-
services the sum of $500,000 per fiscal year. This amount shall be paid in
equal monthly installments. Ward shall also be eligible in each of the 1998 and
1999 fiscal years for an incentive bonus of $500,000 per fiscal year, upon
achievement by the Company of net income not less than thirty million dollars
($30,000,000) for fiscal 1998, and net income not less than forty-one million
dollars ($41,000,000) for fiscal year 1989, in each case, on a basis consistent
with the determination by the Company's independent auditors of the Company's
net income as reported in the Company's final audited consolidated statement of
income for fiscal 1997.
4. Expenses.
a. Reimbursement. The Company shall reimburse Ward for all
reasonable and necessary expenses incurred in carrying out his duties under
this Agreement. Ward shall present to the Company from time to time an
itemized account of such expenses in any form required by the Company.
b. Automobile. The Company recognizes Ward's need for an automobile
for business purposes and, therefore, the Company shall provide Ward with
an automobile, including all related maintenance, repairs, insurance, and
other costs. The automobile and related costs shall be comparable to those
which the Company presently provides Ward.
5. Disability. If Ward becomes disabled during the period of his
Executive Employment, his compensation shall continue at the same rate that it
was on the date of such disability. If such disability continues for a
continuous period of one (1) year, the Company, at its option, may thereafter,
upon written notice to Ward or his personal representative, terminate his
Executive Employment. For the purpose of this Agreement, disability shall mean
mental or physical illness or condition rendering Ward incapable of performing
his normal duties with the Company.
6. Death. If the Executive Employment should terminate due to the death
of Ward, then the Company shall pay to the estate of Ward, in addition to any
accrued compensation and benefits otherwise payable to Ward, any and all
amounts of regular salary compensation Ward would have received for the
remainder of the calendar month in which Ward dies, as if the Executive
Employment had continued until the end of such month.
7. Employee Benefits. This Agreement shall not be in lieu of any rights,
benefits and privileges to which Ward my be entitled as an
<PAGE> 3
- 3 -
employee of the Company under any retirement, pension, profit-sharing,
insurance, hospital or other plans which may now be in effect or which may
hereafter be adopted. Ward shall have the same rights and privileges to
participate in such plans and benefits as any other employee during his
Executive Employment.
8. Notices. All notices required to be given hereunder shall be given
in writing and delivered, personally or by certified mail, return receipt
requested, postage pre-paid, addressed to the parties as follows:
SLI, Inc.
500 Chapman Street
Canton, Massachusetts 02021
Frank M. Ward
500 Chapman Street
Canton, Massachusetts 02021
9. Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the Commonwealth of
Massachusetts. In the event of a breach of this Agreement, venue for any legal
proceedings shall be proper in the state or federal court in Boston,
Massachusetts.
10. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and supersedes all agreements previously made
between the parties relating to the subject matter of this Agreement.
11. Modification. This Agreement may be modified only by a written
instrument executed by the parties hereto.
12. Severability. If any provision of this Agreement is determined to be
invalid and/or unenforceable by a final decision of a court of competent
jurisdiction, the offending provision shall be severed and the remainder of the
Agreement shall survive and remain in full force and effect.
13. Non-Waiver. No delay or failure by either party to exercise any
right under this Agreement shall constitute a waiver of that or any other right.
14. Binding Effect. This Agreement shall inure to the benefit of, and be
binding upon, the Company, its affiliates, subsidiaries,
<PAGE> 4
- 4 -
successors and assigns. In addition, this Agreement shall inure to the benefit
of, and be binding upon Ward, his heirs, personal representatives, successors
and assigns; provided however, the performance owed by Ward under this
Agreement is personal to him and may not be assigned.
15. Headings. Headings used in this Agreement are for convenience only
and shall not be used to interpret or construe its provisions.
[The rest of this page is left intentionally blank]
<PAGE> 5
-5-
[Signature Page to Ward Employment Agreement]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the day and year first above written.
COMPANY:
SLI, INC.
By:
------------------------------
Frank M. Ward, President
WARD:
----------------------------------
FRANK M. WARD
<PAGE> 1
EXHIBIT 10.42
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is hereby made and entered
into as of the 1st day of May 1998, by and between SLI, Inc., and Oklahoma
corporation (the "Employer"), and Richard F. Parenti, a resident of the State of
Illinois (the "Employee").
WITNESSETH:
1. EMPLOYMENT. The Employer hereby employs the Employee and the Employee
hereby accepts such employment, upon the terms and subject to the conditions
set forth in this Agreement.
2. TERM. The term of the employment under this Agreement shall be for a four
year period beginning as of May 1, 1998 and terminating on April 30, 2002,
unless such employment is otherwise terminated as provided in paragraphs 8 and
9 of this Agreement.
3. COMPENSATION; REIMBURSEMENT, ETC.
(a) The basic compensation to the Employee shall be payable bi-weekly
based upon a calendar-year annual base salary of $125,000 (the "Annual Base
Salary"). Such salary shall be subject to an annual performance review but any
adjustment shall not result in an annual salary less than the Annual Base
Salary. Employee shall also be reimbursed for all reasonable expenses incurred
on behalf of Employer.
(b) The Employee shall be entitled to such other benefits as the Board
of Directors and/or the Compensation and Stock Option Committee may from time
to time provide to him.
(c) Employer has previously granted to Employee an option to purchase
75,000 shares of the Company's Common Stock. In the event Employer terminates
the employment of employee for any reason other than those specified in 9(a) or
if employee terminates his employment pursuant to 9(c) all outstanding options
will immediately vest.
4. DUTIES. The Employee is engaged as the Vice President of Finance of the
Employer, and he shall have such duties consistent with such office as may from
time to time be reasonably assigned to him by the Board of Directors of the
Employer and provided for in the bylaws of the Employer. Employee's office
shall be located at the Employer's facilities in Hoffman Estates, Illinois.
5. EXTENT OF SERVICES. During the term of his employment under this
Agreement, the Employee shall devote such time and efforts to the business of
the Employer as may be reasonably necessary in the normal course of business.
Employee agrees, if needed, to spend an average of at least four days per month
at the Company's headquarters in Canton, Massachusetts.
6. VACATION AND DAYS OFF. The Employee shall be entitled to such vacation
time during each fiscal year of the Employer as he may qualify for, in
accordance with any vacation policy from time to time established by the
Employer's Board of Directors. Notwithstanding the foregoing, the Employee
shall be entitled to an annual vacation period of not less than three (3)
weeks, during which time his compensation shall be paid in full.
<PAGE> 2
7. DISABILITY, ILLNESS AND INCAPACITY.
(a) During the term of this Agreement, for any period of disability,
illness or incapacity which renders the Employee at least temporarily unable to
perform the services required under this Agreement, the Employee shall receive
his full compensation as set forth in paragraph 3 of this Agreement, provided
however, if the Employees disability, illness or incapacity extends beyond a
period of ninety (90) consecutive days, the Employee shall not be entitled,
after the expiration of such ninety (90) day period, to any further
compensation under paragraph 3(a) until he returns to full-time service
hereunder, but he shall be entitled only to such disability payments as may be
provided by any disability insurance policy or policies, purchased by the
Employer.
(b) Successive periods of disability, illness or incapacity will be
considered separate periods unless the later period of disability, illness or
incapacity is due to the same or related cause.
(c) If and when the period of disability, illness or incapacity of the
Employee totals 90 days, his employment with the Employer shall terminate.
Notwithstanding the foregoing, if the Employee and the Employer agree, the
Employee may thereafter be employed by the Employer upon such terms as may be
mutually agreeable.
(d) Any dispute regarding the existence, extent or continuance of the
disability, illness or incapacity shall be resolved by the determination of a
majority of three competent doctors who are not employees of the Employer, one
of which shall be selected by the Employer, one of which shall be selected by
the Employee and a third selected by the other two doctors. The doctors' fees
and other charges associated with such determination shall be paid by the
Employer.
8. DEATH.
(a) All rights of the Employee hereunder shall terminate upon his death,
except that the Employer shall pay to the estate of the Employee such
compensation and other amounts as would otherwise have been payable to the
Employee through the end of the month in which his death occurs. The Employer
shall have no additional financial obligation under this Agreement to the
Employee or his estate.
9. OTHER TERMINATIONS.
(a) The Employer may terminate the employment of the Employee hereunder
without notice for any of the following reasons:
(i) Employee's failure to promptly and adequately perform the
duties assigned to him by the Employer pursuant to paragraph 4 above,
including but not limited to failure to follow the reasonable direction of
the Board of Directors of the Employer, or of any supervisors or superiors
of Employee;
(ii) Employee's material breach of any provision of this Agreement;
or
(iii) other good cause (as defined below).
(b) The term "good cause" as used in this Agreement shall include, but
shall not necessarily be limited to, habitual absenteeism, a pattern of conduct
which tends to hold the Employer up to ridicule in the community, conviction of
any crime of moral turpitude abuse of and substantial dependence on, as
reasonably determined by the Board of Directors of the Employer, on any
addictive substance, including but not limited
2
<PAGE> 3
to alcohol, amphetamines, barbiturates, methadone, cannabis, cocaine, PCP, THC,
LSD or illegal or narcotic drugs. If any determination of abuse and substantial
dependence by the Board of Directors is disputed by the Employee, the parties
hereto agree to abide by the decision of a panel of three physicians who are
not employees of the Employer, one of which shall be selected by the Employer,
one of which shall be selected by the Employee and a third selected by the
other two (2) doctors. The Employee agrees to make himself available for and
submit to examinations by such physicians as may be directed by the Employer.
Failure to submit to any such examination shall constitute a breach of a
material part of this Agreement. The doctors' fees ad other charges associated
with such determination shall be shared equally by the Employer and the
Employee.
(c) Employee may terminate this Agreement for "Good Reason" which shall
result from (i) the Employee is requested to relocate to a facility more than
35 miles from Chicago, Illinois or (ii) the Employer's material breach of any
of its obligations under this Agreement.
(d) If the Employee's employment with the Employer is terminated
pursuant to paragraph 9(a), the Employer shall pay to the Employee any
compensation earned but not paid to the Employee prior to such termination.
Such payment shall be in full and complete discharge of any and all liabilities
or obligations of the Employer to the Employee hereunder, and the Employee
shall be entitled to no further benefits under this Agreement, except as
otherwise specifically provided in paragraph 3 of this Agreement. If the
Employee's employment with Employer is terminated by Employer for a reason
other than as set forth under paragraph 9(a) or by Employee pursuant to
paragraph 9(c), Employer will compensate Employee as severance pay the monies
due Employee for the remainder of the term of this Agreement. The severance
will be payable in full at the Employee's current base salary at time of
termination.
10. CONFIDENTIALITY. The Employee agrees to keep in strict secrecy and
confidence any and all information the Employee assimilates or to which she has
access during his employment by the Employer and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of the
Employer. The Employee agrees that both during and after the term of his
employment by the Employer, he will not, without prior written consent of the
Employer, disclose any such confidential information to any third person,
partnership, joint venture, company, corporation or other organization.
11. WAIVER OR BREACH. The waiver by the Employer of a breach of any of the
provisions of this Agreement by the Employee shall not be construed as a waiver
of any subsequent breach by the Employee.
12. BINDING EFFECT, ASSIGNMENT. The rights and obligations of the Employer
under this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Employer. This Agreement is a personal
employment contract and the rights, obligations and interests of the Employee
hereunder may not be sold, assigned, transferred, pledged or hypothecated.
13. ENTIRE AGREEMENT. This Agreement and the option agreement containing the
terms and provisions of the Employee's Option contains the entire agreement and
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment, modification or discharge is sought.
14. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
15. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Massachusetts.
3
<PAGE> 4
16. NOTICES. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and if sent by certified or registered mail,
first class, return receipt requested, to the parties at the following address:
To the Employer: SLI, Inc.
500 Chapman Street
Canton, MA 02021
To the Employee: Richard Parenti
3100 W. Higgins Rd., #190
Hoffman Estates, Illinois 60195
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
___ day of ____________, 1998.
EMPLOYER:
SLI, INC.
ATTEST:
By:
- ------------------------------ ------------------------------
Frank M. Ward, President
EMPLOYEE:
Witness as to Employee:
- ------------------------------ ---------------------------------
Richard F. Parenti
4
<PAGE> 1
EXHIBIT 10.43
DATED 12th MAY, 1993
(1) SYLVANIA LIGHTING S.A.
(2) N. SCOULAR
_______________________________________
SERVICE AGREEMENT
_______________________________________
Draft 11:22/03/93
Clifford Chance
200 Aldersgate Street
London
EC1A 4JJ
Tel: 071 600 1000
Fax: 071 600 5555
Ref: JZB/SHJ/C0791/04327
<PAGE> 2
This Agreement is made on 12th May, 1993.
BETWEEN:
1) SYLVANIA LIGHTING S.A. incorporated under the laws of Switzerland, whose
principal place of business is situated at 20 route de pre-bois, 1215
Geneva 15 (Airport) Switzerland (the "Company"); and
2) NORMAN SCOULAR of Ash Green, Ladythorn Crescent, Bramhall, Cheshire SK7 2HB
(the "Executive").
WHEREAS the Company has invited the Executive to serve the Group as Chief
Executive Officer of the Company with effect from the date of this Agreement
(the "Effective Date") on the terms and conditions described in this Agreement
and the Executive has agreed to do so.
IT IS HEREBY AGREED AS FOLLOWS
1. INTERPRETATION
1.1. In this Agreement:
"Acquisition Agreement" means the amended and restated Stock Purchase
Agreement for the sale and purchase of IL dated as of 6th August 1992 and
made between GTE Corporation and GTE International Incorporated (1) and
Sylvania Lighting International B.V. (2);
"associated company" means a subsidiary and any other company which is for
the time being a holding company (as defined by the Companies Act 1985) of
the Company or another subsidiary of any such holding company;
"Board" means the Board of Management ("bestuur") for the time being of
Sylvania Lighting International B.V.;
"Budget" means the consolidated profit and loss account and balance sheet
and cash flow statements in relation to the Group to be prepared in respect
of each financial year of the Company which are approved and adopted by the
Board as the budget for the next financial year of Sylvania Lighting
International B.V.;
"Contractual Bonus" means the annual contractual bonus payable by the
Company to the Executive in accordance with the terms and conditions of
Clause 7.2 of this Agreement based upon the Group's financial performance
against the relevant year's Budget;
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"Discretionary Bonus" means the bonus which is calculated in accordance
with the criteria set out or referred to in, and which is payable by the
Company to the Executive in accordance with, the terms and conditions of
Clause 7.3 of this Agreement;
"Extraordinary Items" means in relation to the Group, any items which
should be treated as extraordinary items in the consolidated accounts of
the Group, in accordance with generally accepted accounting principles;
"Flowil Directors Agreement" means the agreement of even date herewith to
be entered into by the Executive (1) and Flowil International Lighting
(Holding) B.V. (2);
"Flowil International Lighting (Holding) B.V." means Flowil International
Lighting (Holding) B.V. a private limited liability company incorporated
under the laws of the Netherlands and established in Amsterdam whose
registered office is situated at "Atrium" Building, 2nd Floor,
Strawinskylaan 3037, 1077 ZX Amsterdam, The Netherlands;
"Group" means all or any of Sylvania Lighting International B.V. its
subsidiaries (including the Company) and associated companies from time to
time;
"GTE" means GTE Corporation, GTE Products Corporation and GTE International
Incorporated and each of their respective subsidiaries;
"IL" means the international component of the EPG lighting business of GTE
to be purchased by the Company pursuant to the terms and conditions of the
Acquisition Agreement;
"Profit" means the consolidated profits of the Group for the relevant
financial year before deductions in respect of taxation but after
deductions in respect of interest as shown in the audited consolidated
accounts of the Group calculated in accordance with all relevant Statements
of Standard Accounting Practice consistently applied for that period and
before extraordinary items;
"Remuneration Committee" means the committee of the Board appointed to deal
with, inter alia, the calculation of the Contractual Bonus and the
Discretionary Bonus and comprising of the Chairman of Sylvania Lighting
International B.V. from time to time and not less than two non-executive
directors of Sylvania Lighting International B.V. from time to time
designated by the Board to act on such committee;
"subsidiary" means subsidiary (as defined by the Companies Act 1985) for
the time being of Sylvania Lighting International B.V.;
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"Sylvania Directors Agreement" means the agreement of even date herewith
to be entered into by the Executive (1) and Sylvania Lighting International
B.V. (2);
"Sylvania Lighting International B.V." means Sylvania Lighting
International B.V., a private limited liability company incorporated under
the laws of the Netherlands and established in Amsterdam, the Netherlands
whose registered office is situate at Apollolaan 171, 1077 AS, Amsterdam,
PO Box 7301, 10007 JH Amsterdam;
"Tax" means any form of taxation, levy, duty, charge, contribution or
impost of whatever nature (including any fine, penalty, surcharge or
interest in relation thereto and including any payments to be made in
respect of social security liabilities and social charges) imposed by a
Taxation Authority;
"Taxation Authority" means any local, municipal, governmental, state,
federal or other body or authority (whether in the United Kingdom or
elsewhere) which imposes Tax.
1.2. The headings in this Agreement are for convenience only and shall not
affect the construction or interpretation of this Agreement.
2. APPOINTMENT AND EFFECTIVE DATE
2.1. This Agreement shall take effect on the Effective Date.
2.2. The Company shall employ the Executive, the Executive shall accept
employment by the Company and the Executive shall serve the Group as Chief
Executive Officer upon the terms and conditions set out in this Agreement
with effect from the Effective Date.
2.3. The Company undertakes to appoint the Executive (or to procure that the
Executive is appointed) as Chief Executive Officer of the Group upon the
Effective Date.
3. TERM
The employment of the Executive (subject to termination as provided below)
shall commence on the Effective Date and shall continue thereafter unless
and until terminated by either party giving to the other not less than
twelve months' notice in writing to expire at anytime on or after the
second anniversary of the Effective Date.
4. DUTIES AND POWERS
4.1. From the Effective Date, the Executive shall have such powers and duties
delegated to him by the Board as the Board may from time to time consider
necessary to enable the Executive to manage the Group on a worldwide and
comprehensive management basis. The Executive
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<PAGE> 5
may be required to spend at least one day per month at the operational
headquarters of each of Sylvania Lighting International B.V. and Flowil
International Lighting (Holding) B.V. in order to carry out administrative
and managerial functions in relation to each of the above-mentioned
companies.
4.2. The Executive shall at all times during the continuance of his employment
hereunder, exercise the powers and duties delegated to him in accordance
with the internal regulations of the Board from time to time in force.
5. OBLIGATIONS
During the continuance of this Agreement the Executive shall, unless
otherwise prevented by ill-health or accident or, in the case of Clause 5.1
only, unless agreed by the Board:-
5.1. Devote the whole of his time, skill, ability and attention during
business hours to the business of the Group;
5.2 Conform to and comply with the directions and regulations of the
Board;
5.3 Faithfully serve the Group and promote, develop and protect its
interests at all times.
6. INFORMATION
The Executive shall at all times promptly give to the Board all
information, advice and explanations as the Board may from time to time
require in connection with the affairs of the Group and as to the
employment of the Executive with the Company under this Agreement.
7. REMUNERATION
7.1. The Executive shall be entitled, by way of remuneration for his services
under this Agreement, to a basic salary (the "Basic Salary") of pound
sterling 175,000 per annum inclusive of any representation allowance
payable by the Company in respect of the Executive and inclusive of all
directors' fees payable to him under the articles of association of any
member of the Group. The Basic Salary shall be reduced on a pound sterling
1 for pound sterling 1 basis by any amount payable to the Executive by
Sylvania Lighting International B.V. and Flowil International Lighting
(Holding) B.V. under the terms of the Flowil Directors Agreement and the
Sylvania Directors Agreement. The Basic Salary, subject to any deductions
required by virtue of this Clause 7.1, by law or pursuant to the provisions
of Clause 7.4, shall be paid at monthly intervals on the last day of each
month in arrears to a bank account notified in writing by the Executive to
the Company. The Basic Salary will be revised annually from the Effective
Date in line
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<PAGE> 6
with the figure for the Retail Prices Index published by the Department of
Employment of the United Kingdom immediately prior to the date of each such
revision.
7.2. The Executive will be entitled to receive a Contractual Bonus being a sum
equal to 50% of the Basic Salary subject to satisfaction of the following
conditions:-
7.2.1. THE FIRST INSTALMENT OF THE CONTRACTUAL BONUS, being a sum equal to
one third of the total amount of the Contractual Bonus, shall be
payable to the Executive ON CONDITION THAT the Profit and net cash
flow from operating activities of the Group (as set out in FRS 1
(Financial Reporting Statements 1) on cash flow statements in force
from time to time for the six month period commencing on the first
date of the then current financial year of the Group in respect of
which the Contractual Bonus is calculated is equal to or exceeds the
figure shown for such six month period in the relevant year's
Budget. If the first instalment of the Contractual Bonus is payable
to the Executive, it shall be paid by the Company to the Executive
on the first salary payment date following after the date of the
meeting of the Board at which the Board approved the management
accounts of the Group for the said six month period.
7.2.2. THE SECOND INSTALMENT OF THE CONTRACTUAL BONUS, being a sum equal to
the total amounts of the Contractual Bonus (less any sum paid in the
first instalment) shall be payable to the Executive ON CONDITION
THAT the Profit and net cash flow from operating activities of the
Group (as set out in FRS 1 (Financial Reporting Statements 1) on
cash flow statements in force from time to time) for the then
current financial year of the Group in respect of which the
Contractual Bonus is calculated is equal to or exceeds the figure
shown in the relevant year's Budget. If the second instalment of the
Contractual Bonus is payable to the Executive, it shall be paid by
the Company to the Executive on the first salary payment date
following after the date of the meeting of the Shareholders of
Sylvania Lighting International B.V. at which the shareholders
adopted the audited accounts of the Group for the relevant financial
year of the Group by reference to which the Contractual Bonus was
calculated.
7.3. The Executive will be entitled to receive a Discretionary Bonus of 50% of
the Basic Salary in the event that the Remuneration Committee determines
in its sole discretion that such a payment is appropriate having regard to,
amongst other things, the Executive's performance. The Executive's
performance will be measured against, amongst other things:
7.3.1. Overall implementation of the Company's strategic plans;
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7.3.2. The quality of the relationship maintained with key licensors
and technical partners of those members of the Group; and
7.3.3 Management recruitment and development.
The Discretionary Bonus shall be paid, if appropriate, by the Company to
the Executive on the first salary payment date following after the date of
the meeting of the shareholders of the Company at which the shareholders
approved the accounts of the Group for the previous financial year of the
Group.
7.4 If the performance by the Executive of the duties to be carried out by him
pursuant to the terms of this Agreement (a) leads to the Executive being
assessed to pay Tax on part or all of the benefits accruing to the
Executive under this Agreement (including, for the avoidance of doubt, the
Basic Salary) to a Taxation Authority operating in a country other than the
United Kingdom; and (b) the economic effect on the Executive (as determined
by the Auditors of the Company from time to time) of the payment by the
Executive of such Tax is greater or less than it would otherwise have been
had the said Tax been calculated according to the principles and practices
imposed or adopted by the Taxation Authority operating in the United
Kingdom at that time on the basis that the Executive had been carrying out
the duties to be performed by him in the United Kingdom:
7.4.1. In the event that the amount so assessed is greater, the Company
shall pay to the Executive as soon as reasonably practicable
following either the date of such determination by such Auditors
or the date on which the Executive is due to pay such Tax,
whichever is the later, such amount is as determined by the said
Auditors being the amount required to compensate the Executive
for any increased payment (including any Tax liability thereon)
required to be made by him in respect thereof; and
7.4.2. In the event that the amount so assessed is less, the Company
shall deduct from the Basic Salary and, if necessary, any bonus
payments due to be made to the Executive pursuant to the
provisions of this Agreement as soon as reasonably practicable
following the date of such determination by the Auditors a sum
equal to the difference between the amount of any such reduced
payment required to be made to the relevant Taxation Authority in
respect thereof and the amount of any payment which would
otherwise be required to be made to the United Kingdom Taxation
Authority had the Executive been assessed to Tax by such
authority.
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7.4.3. Should the Company decide to implement any change which would
result in the Tax residency of the Executive being changed to
another Tax residence, the Company shall before implementing any
such change, consider the implications for the Executive of
implementing any such change and the Company may take such steps
as it considers to be in the best interests of the Company to
protect the Tax residency of the Executive.
7.5. The Executive agrees to take all reasonable and prudent steps to minimise
and/or reduce any liability to Tax to which the Executive may be subject
from time to time on the Basic Salary and any other benefits accruing to
the Executive pursuant to the provisions of this Agreement as a result of
his appointment hereunder.
8. PENSIONS AND PRIVATE MEDICAL INSURANCE
8.1. The Executive shall be entitled to become a member of a non-contributory
private retirement benefits plan with life cover of the Executive's
choosing and the Company shall pay the cost of such cover up to a maximum
amount in each year equal to 10% of the Basic Salary.
8.2. The Company shall pay for private medical insurance cover for the Executive
and the Executive's spouse and children while aged under 21 years and in
full-time education pursuant to a scheme of the Company's choosing with a
premium cost (which the Company shall pay) not exceeding 5% of the Basic
Salary in each year calculated on a pro rata basis. For the avoidance of
doubt, the Executive shall be responsible for any Taxation levied upon him
or his spouse or children as aforesaid in respect of such benefit, subject
to the provisions of Clause 7.4.
9. EXPENSES AND CAR
9.1. The cost of all reasonable travel and accommodation expenses of the
Executive incurred by the Executive whilst carrying out his functions and
duties hereunder will be borne by the Company.
9.2. The Company shall, subject to the provisions of Clause 9.3, provide for the
Executive's business and private use, an XJ6 Jaguar car or equivalent
vehicle. The car will be replaced every 3 years or 60,000 miles, whichever
is sooner. All costs of repair, maintenance, road tax and insurance and all
charges for petrol and oil used in the running of the car shall be paid by
the Company. It will be the responsibility of the Executive, at the
Company's expense, to maintain the car in good running order. The Executive
shall take good care of the car and ensure that the provisions and
conditions of any insurance policy relating to it are observed. The
Executive shall return the car and its keys to the Company immediately upon
termination of his employment, whatever the reason or basis for such
termination.
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<PAGE> 9
9.3. If the Executive so requests the Company from time to time, the
Company shall provide the Executive with a cash payment in lieu of the
provision of the vehicle referred to in Clause 9.2. The cash payment
shall be paid during the term of the Executive's employment hereunder
by the Company to the Executive at monthly intervals on the last day
of each month to a bank account notified in writing by the Executive
to the Company and shall be of such amount as is agreed on by the
Company and the Executive, or in default of agreement of such amount
as is determined by Arthur Andersen & Co., chartered accountants,
appointed at the request of either the Executive or the Company, whose
decision shall be final and binding on the parties (except in the case
of manifest error) and whose costs shall be borne equally by the
Company and the Executive.
10. HOLIDAYS
The Executive shall be entitled to 4 weeks annual holiday, in addition
to normal United Kingdom statutory holidays. Holiday entitlement shall
accrue on a pro rata basis each calendar year.
11. SECRETS AND CONFIDENTIAL INFORMATION
11.1. Except by written approval of the Board, the Executive shall not at
any time during or after the period of his employment under this
Agreement disclose the private affairs or secrets of any member of the
Group or any of their respective suppliers, agents, distributors or
customers, other than in relation to proper and necessary management
consultation, to anyone other than to members of the Board from time
to time.
11.2. Except by written approval of the Board, the Executive shall not at
any time during or after the period of his employment under this
Agreement make or procure that there is made any press, radio or
television statement, except where the content is wholly of a trade
nature in connection with products, components or technology of the
Group.
12. COMPANY PROPERTY
The Executive shall promptly, whenever requested by the Board, deliver
up to the Board all statistics, documents and working papers
concerning the business of any member of the Group or any of their
respective suppliers, agents, distributors or customers and any other
property of the Group in his possession. The Executive will not be
entitled to retain copies of any such documents.
13. INVENTIONS
13.1. It shall be part of the normal duties of the Executive at all times to
consider in what manner and by what new methods or devices the
products, services, procedures, equipment and systems of any member of
the Group might be improved. Any inventions, discovery, design,
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<PAGE> 10
design right or literary work made by the Executive or involving the
Executive during his employment under this Agreement shall be the
absolute property of the relevant member of the Group and must be
disclosed immediately to the Board.
13.2. Where any discovery or innovation made by the Executive pursuant to
the provisions of Clause 13.1 could be protected by, for example,
obtaining patent protection the Executive shall give and supply all
such information, data, drawings and assistance as may be required to
enable the Company to obtain such protection at the Company's expense.
14. GROUNDS FOR TERMINATION
14.1. The Company may terminate the Executive's employment at any time
without compensation or notice or payment in lieu of notice in only
the following circumstances:-
14.1.1. if the Executive has an interim receiving order determined
against him, becomes bankrupt or makes any composition or
enters into any deed of arrangement with his creditors or
has any equivalent order made or takes any equivalent action
in any jurisdiction; or
14.1.2. if the Executive becomes of unsound mind or becomes a
patient under the Mental Health Act 1983 or any equivalent
legislation in any jurisdiction; or
14.1.3. if the Executive is convicted of a criminal offence (other
than an offence under road traffic legislation for which a
fine or non-custodial penalty is imposed); or
14.1.4. if the Executive is guilty of any gross default or gross
misconduct in connection with or affecting the business of
any member of the Group to which he is required by this
Agreement to render services; or
14.1.5. in the event of any material breach by the Executive of the
terms of this Agreement: for the purposes of this sub-clause
14.1.5 only, a breach shall be a "material breach" if the
reputation, prospects or commercial activities of any member
of the Group and/or the Group as a whole is materially
adversely affected thereby; or
14.1.6. if the Executive is disqualified from holding office in
another company in which he is concerned or interested
because of wrongful trading under the Insolvency Act 1986 or
any equivalent legislation in any jurisdiction; or
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14.1.7. if the Executive is convicted of an offence under the
Companies Securities (Insider Dealing) Act 1985 or under any
other present or future statutory enactment or regulations
relating to insider dealings or any equivalent legislation,
enactments or regulations in any jurisdiction; or
14.1.8. if the Executive resigns as a director of any member of the
Group otherwise than at the request of the Company.
14.2. Upon the termination by whatever means of this Agreement the Executive
shall not without the consent of the Company at any time thereafter
represent himself still to be connected with or interested in the
business of the Group except and for so long only as the Executive
remains the beneficial owner of any shares in the capital of Sylvania
Lighting International B.V. and then only in respect of his capacity
as such a shareholder, and in no other capacity.
14.3. The Company hereby acknowledges that if this Agreement is terminated
by the Company other than as a result of any of the circumstances set
out in Clause 14.1:-
14.3.1. AT ANY TIME PRIOR TO THE FIRST ANNIVERSARY OF THE EFFECTIVE
DATE, the Executive shall be entitled to receive
compensation for loss of office calculated from the date of
such termination up to and including the date of the second
anniversary of the Effective Date, free and clear of any set
off or other deductions; or
14.3.2. AT ANY TIME AFTER THE FIRST ANNIVERSARY OF THE EFFECTIVE
DATE BUT PRIOR TO THE SECOND ANNIVERSARY OF THE EFFECTIVE
DATE, the Executive shall be entitled to receive
compensation for loss of office calculated in respect of the
full twelve month period free and clear of any set off or
other deductions regardless of the date of termination of
the Executive's employment within the said twelve month
period.
The Executive hereby acknowledges that in the event that this
Agreement is terminated by the Company at any time other than as a
result of any of the circumstances set out in Clause 14.1 any
compensation for loss of office which the Executive may thereby be
entitled to receive shall take into account only those benefits
referred to in Clauses 7, 8 and 9 of this Agreement.
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15. SICKNESS
15.1. Subject to the provisions of Clause 15.3, if the Executive is
prevented at any time from performing his duties under this Agreement
due to any illness or other like cause incapacitating the Executive
from attending to his duties, he shall, if so requested by the Board,
furnish the Board with medical evidence of such incapacity.
15.2. If the Executive continues to be so incapacitated for a period of 9
months, the Board shall be entitled to terminate the employment of the
Executive under this Agreement.
15.3. In the case of frequent or prolonged absence of the Executive as
determined by the Board, the Board may ask the Executive for medical
evidence of his future fitness for work. If this evidence shows the
Executive is unfit for work, in the reasonable opinion of the Board,
the Company may terminate the Executive's employment hereunder by
serving due notice.
15.4. The Company shall, at its own expense, arrange for reasonable
permanent health insurance cover for the Executive pursuant to a
scheme of the Company's choosing having regard to the position
occupied by the Executive in the Company and the terms of his
appointment hereunder.
16. PROVISIONS AFTER TERMINATION
The Executive hereby agrees that he will not at any time after
termination of this Agreement, either personally or by his agent or on
behalf of any other person directly or indirectly:
16.1. Interfere with or do business with any person, firm or company who has
at any time during the twelve month period immediately prior to such
termination done business with any member of the Group; or
16.2. endeavour to entice away from the Company any person who has at any
time during the two year period immediately prior to such termination
been employed or engaged by any member of the Group in a managerial
capacity.
17. RESTRICTIVE COVENANTS
The Executive covenants with the Company that he will not:
17.1. at any time whilst he is employed under this Agreement either alone or
jointly with or as manager, agent, consultant or employee of any
person, firm or company directly or indirectly carry on or be engaged
in any other activity or business; nor
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17.2. for the period of 12 months after ceasing to be employed under this
Agreement (howsoever cessation arises and whether or not in breach of
this Agreement) either alone or jointly with or as manager, agent,
consultant or employee of any person, firm or company directly or
indirectly carry on or be engaged in any activity or business which
shall be in competition with the business of manufacturing and selling
lighting products or fixtures carried on by any member of the Group at
the date of such cessation of employment or which has as its
predominant trade the business of manufacturing and selling lighting
products or fixtures.
18. HOLDING OF SHARES OR INDEBTEDNESS IN OTHER COMPANIES
Without prejudice to the provisions of Clause 17, this Agreement shall
not prevent the Executive from holding or being otherwise interested
in any shares or instrument of indebtedness in any other company
whilst the employment of the Executive hereunder continues, provided
that (without the prior written approval of the Board) the Executive's
interest in such shares or instrument of indebtedness does not extend
to more than 3 per cent of the total amount of such shares or such
indebtedness which is from time to time in issue or outstanding (as
the case may be) and provided also that the Executive has no role in
the management of any such company or its Board of Directors and such
company is not engaged in any business which is of a similar nature to
or competitive with that carried on by any member of the Group.
19. GRIEVANCE
In the event the Executive wishes to seek redress of any grievance
relating to his employment, he should lay his grievance in writing
before the Board who will offer the Executive the opportunity of a
full and fair hearing, before giving a final and binding decision.
20. NOTICES
20.1. Any notice required or permitted to be given under this Agreement
shall be given in writing delivered personally or sent by first class
post pre-paid recorded delivery (air mail if overseas) or by telex to
the party due to receive such notice at, in the case of the Company,
its registered office from time to time and, in the case of the
Executive his address as set out in this Agreement (or such address as
he may have notified to the Company in accordance with this Clause).
20.2. Any notice delivered personally shall be deemed to be received when
delivered to the address provided in Clause 20.1 and any notice sent
by pre-paid recorded delivery post shall be deemed (in the absence of
evidence of earlier receipt) to be received 2 days after posting (6
days if sent air mail) and in proving the time of despatch it shall be
sufficient to show that the envelope containing such notice was
properly addressed, stamped and posted. A notice
-12-
<PAGE> 14
sent by telex shall be deemed to have been received on receipt by the
sender of the correct "answerback".
21. MISCELLANEOUS
21.1. This Agreement is governed by and shall be construed in accordance
with the laws of England.
21.2. This Agreement contains the entire understanding between the parties
and supersedes all previous agreements and arrangements (if any)
relating to the employment of the Executive by the Company (which
shall be deemed to have been terminated by mutual consent).
21.3. The Company undertakes to procure that if the Executive is appointed
to act as a director under the articles of association of any member
of the Group (other than Sylvania Lighting International B.V. and
Flowil International Lighting (Holding) B.V.) from time to time such
company shall indemnify the Executive in his capacity as a director of
such company on substantially similar terms to the indemnity set out
in Clauses 7 of each of the Flowil Directors Agreement and the
Sylvania Directors Agreement.
-13-
<PAGE> 15
AS WITNESS the hand of the parties or their duly authorised representatives,
the day and year first before written.
SIGNED BY EDWARD BARTLETT AND /s/ Edward Bartlett
ROBERT SCHAPPI /s/ Robert Schappi
for and on behalf of
SYLVANIA LIGHTING S.A.
in the presence of:-
Signature of Witness: /s/ Marie-Christine Metral
Name of Witness: MARIE-CHRISTINE METRAL
Address of Witness: 99, CHEMIN DE CORBAZ
74160 COLLONAES-SOUS-SALEVE
FRANCE
Occupation: SECRETARY
SIGNED by NORMAN SCOULAR /s/ Norman Scoular
in the presence of:-
Signature of Witness: /s/ Gordon Anderson
Name of Witness: GORDON ANDERSON
Address of Witness: 4, PLYMOUTH DRIVE
BRAMHALL
CHESHIRE
Occupation: MANAGING DIRECTOR
-14-
<PAGE> 1
EXHIBIT 10.44
DATED 12th MAY, 1993
(1) SYLVANIA LIGHTING INTERNATIONAL B.V.
(2) N. SCOULAR
---------------------------------------------------------
EXECUTIVE
DIRECTOR'S CONTRACT
---------------------------------------------------------
Draft 4: 2/3/93
Clifford Chance
200 Aldersgate Street
London
EC1A 4JJ
Tel: 071 600 1000
Fax: 071 600 5555
Ref: JZB/SHJ/C0791/04327
<PAGE> 2
This Agreement is made on 12th May, 1993.
BETWEEN:
1) SYLVANIA LIGHTING INTERNATIONAL B.V., a private limited liability company
(beslotenvennootschap met beperkte aansprakelijkheld) incorporated under
the laws of the Netherlands and established in Amsterdam, the Netherlands
whose registered office situated at Apollolaan 171, 1077 AS, Amsterdam, PO
Box 7301, 10007 JH Amsterdam (the "Company"); and
2) NORMAN SCOULAR of Ash Green, Ladythorn Crescent, Bramhall, Cheshire SK7 2HB
(the "Director").
WHEREAS the Company has invited the Director to serve the Company as an
executive director with effect form the Completion Date (the "Effective Date")
on the terms and conditions described in this Agreement and the Director had
agreed to do so.
IT IS HEREBY AGREED AS FOLLOWS
1. INTERPRETATION
1.1. In this Agreement:
"Articles" means the new articles of association of the Company in the
agreed form to be adopted by the Company immediately prior to the
Completion Date;
"associated company" means a subsidiary and any other company which is for
the time being a holding company (as defined by the Companies Act 1985) of
the Company or another subsidiary of any such holding company;
"Board" means the Board of Management ("bestuur") for the time being of the
Company;
"Completion Date" has the meaning given in the Subscription and
Shareholders Agreement;
"Group" means all or any of the Company and its subsidiaries and associated
companies from time to time;
"Subscription and Shareholders Agreement" means the agreement of even date
herewith between Citicorp Capital Investors Europe Limited and Other
relating to a subscription for shares in the capital of the Company;
-1-
<PAGE> 3
"Service Agreement" means the agreement to be entered into on even date
herewith between Sylvania Lighting S.A. (1) and the Director (2) relating
to the appointment of the Director as Chief Financial Officer of the Group;
"subsidiary" means subsidiary (as defined by the Companies Act 1985) for
the time being of the Company;
1.2. The headings in this Agreement are for convenience only and shall not
affect the construction or interpretation of this Agreement.
2. APPOINTMENT AND EFFECTIVE DATE
This Agreement shall take effect on the Effective Date.
3. TERM
The appointment of the Director shall commence on the Effective Date and
shall continue thereafter unless and until terminated automatically, upon
the termination of the Service Agreement.
4. REMUNERATION
4.1. The Director shall be entitled, by way of director's fees in respect of his
appointment under this Agreement, to a sum of pound sterling 10,000 per
annum (the "Fee"). The Fee, subject to any deductions required by law,
shall be paid at monthly intervals on the last day of each month in arrears
to a bank account notified in writing by the Director to the Company. The
Fee shall be revised by the Board from time to time.
5. TERMINATION
Upon the termination by whatever means of this Agreement the Director shall
at the request of the Company immediately following such termination resign
from office as a director of the Company and from such offices held by him
in associated companies as may be so requested and in the event of his
failure so to do the Company is hereby irrevocably authorised by the
Director to appoint some person in his name and on his behalf to sign and
deliver such resignation or resignations to the Company and to each of the
associated companies of which the Director is at the material time a
director or other officer. For the avoidance of doubt, the Director shall
not be entitled to claim compensation because of his resignation as a
director of the Company or any associated companies by virtue of the
operation of this Clause 5.
-2-
<PAGE> 4
6 NOTICES
6.1. Any notice required or permitted to be given under this Agreement
shall be given in writing delivered personally or sent by first class post
pre-paid recorded delivery (air mail if overseas) or by telex to the party
due to receive such notice at, in the case of the Company, its registered
office from time to time and, in the case of the Director his address as
set out in this Agreement (or such address as he may have notified to the
Company in accordance with this Clause).
6.2. Any notice delivered personally shall be deemed to be received when
delivered to the address provided in Clause 21.1 and any notice sent by
pre-paid recorded delivery post shall be deemed (in the absence of evidence
of earlier receipt) to be received 2 days after posting (6 days if sent air
mail) and in proving the time of despatch it shall be sufficient to show
that the envelope containing such notice was properly addressed, stamped
and posted. A notice sent by telex shall be deemed to have been received on
receipt by the sender of the correct "answerback".
7. INDEMNITY
The Company will at all times and in all respects indemnify and keep
indemnified the Director and his heirs, executors and administrators and
each of them from and against all losses, damages, liabilities, actions,
claims, costs or expenses of any kind whatsoever which may be suffered,
incurred or sustained by them or by any of them and which may in any way
arise out of or in connection with:-
7.1. the appointment of the Director as a director of the Company or his tenure
of such office; or
7.2. any act done, concurred in or omitted to be done in good faith by the
Director or by any other officer, servant or agent of the Company in or
about or in connection with the performance by the Director of any of his
functions as a director of the Company or the performance or purported
performance by any other such person of any of his functions as officer,
servant or agent of the Company (as the case may be) whether or not the
Director or such other person was acting in the scope of his authority,
contract or employment at the time except any loss, damage, liability,
action, claim, cost or expense which may result directly form the
Director's own bad faith including, without limiting the generality of the
foregoing, the Director's own wilful dishonesty or wilful default which
dishonesty or default constitutes or results directly in a material breach
of the terms of the appointment of the Director as a director of the
Company of his tenure of such office.
-3-
<PAGE> 5
8. MISCELLANEOUS
8.1. This Agreement is governed by and shall be construed in accordance with the
laws of England.
8.2. This Agreement contains the entire understanding between the parties and
supersedes all previous agreements and arrangements (if any) relating to
the appointment of the Director as a director of the Company by the Company
(which shall be deemed to have been terminated by mutual consent).
-4-
<PAGE> 6
AS WITNESS the hand of the parties or their duly authorised representatives, the
day and year first before written.
SIGNED BY MARINUS SWAANEN ) /s/ James F. Joy
for and on behalf of AND ) -----------------------
SYLVANIA LIGHTING JAMES F. JOY ) Director
INTERNATIONAL B.V. )
in the presence of:- ) /s/ Marinus Swaanen
-----------------------
Director
Signature of Witness: /s/ Lyda Sitbon /s/ Petronella Kerkhoven
------------------------
Name of Witness: Lyda Sitbon Petronella Kerkhoven
Address of Witness: Gruedu Niger 76 Ch. des Mollies
75012 Paris CH 1293 Bellevue
Occupation: Secretary --
SIGNED by NORMAN SCOULAR )
in the presence of:- ) /s/ Norman Scoular
-----------------------
Signature of Witness: /s/ Gordon Anderson
Name of Witness: Gordon Anderson
Address of Witness: 4, Plymouth Drive
Bramhall
Cheshire
Occupation: Managing Director
-5-
<PAGE> 1
EXHIBIT 10.45
DATED 12th MAY, 1993
(1) FLOWIL INTERNATIONAL LIGHTING
(HOLDING) B.V.
(2) N. SCOULAR
_______________________________________
EXECUTIVE
DIRECTOR'S CONTRACT
_______________________________________
Clifford Chance
200 Aldersgate Street
London EC1A 4JJ
Tel: 071 600 1000
Fax: 071 600 5555
Ref: JZB/SHJ/CO791/04327
<PAGE> 2
This Agreement is made on 12 May, 1993.
BETWEEN:
1) FLOWIL INTERNATIONAL LIGHTING (HOLDING) B.V., a private limited liability
company (beslotenvennootschap met beperkte aansprakelijkheld) incorporated
under the laws of the Netherlands whose registered office is situated at
"Atrium" Building, 2nd Floor, Strawinskylaan 3037, 1077 ZX, Amsterdam, The
Netherlands (the "Company"); and
2) NORMAN SCOULAR of Ash Green, Ladythorn Crescent, Bramhall, Cheshire SK7 2HB
(the "Director").
WHEREAS the Company has invited the Director to serve the Company as an
executive director with effect from the Completion Date (the "Effective Date")
on the terms and conditions described in this Agreement and the Director has
agreed to do so.
IT IS HEREBY AGREED AS FOLLOWS
1. INTERPRETATION
1.1. In this Agreement:
"Articles" means the new articles of association of the Company in the
agreed form to be adopted by the Company immediately prior to the
Completion Date;
"associated company" means a subsidiary and any other company which is for
the time being a holding company (as defined by the Companies Act 1985) of
the Company or another subsidiary of any such holding company;
"Board" means the Board of Management ("bestuur") from time to time of
Sylvania Lighting International B.V.;
"Completion Date" has the meaning given in the Subscription and
Shareholders Agreement;
"Group" means all or any of Sylvania Lighting International B.V. and its
subsidiaries and associated companies from time to time;
"Service Agreement" means the agreement to be entered into an even date
herewith between Sylvania Lighting S.A. (1) and the Director (2) relating
to the appointment of the Director as Chief Financial Officer of the
Group;
-1-
<PAGE> 3
"Subscription and Shareholders Agreement" means the agreement of even date
herewith between Citicorp Capital Investors Europe Limited and Others
relating to a subscription for shares in the capital of Sylvania Lighting
International B.V.;
"subsidiary" means subsidiary (as defined by the Companies Act 1985) for
the time being of the Company;
"Sylvania Lighting International B.V." means a private limited liability
company incorporated under the laws of the Netherlands and established in
Amsterdam, the Netherlands whose registered office is at Apollolaan
171,1077 AS, Amsterdam, P O Box 7301, 10007, JH Amsterdam;
1.2. The headings in this Agreement are for convenience only and shall not
affect the construction or interpretation of this Agreement.
2. APPOINTMENT AND EFFECTIVE DATE
This Agreement shall take effect on the Effective Date.
3. TERM
The appointment of the Director shall commence on the Effective Date and
shall continue thereafter unless and until terminated automatically, upon
the termination of the Service Agreement.
4. REMUNERATION
The Director shall be entitled, by way of directors fees in respect of his
appointment under this Agreement, to a sum of pound sterling 10,000 per
annum (the "Fee"). The Fee, subject to any deductions required by law,
shall be paid at monthly intervals on the last day of each month in arrears
to a bank account notified in writing by the Director to the Company. The
Fee shall be revised by the Board from time to time.
5. TERMINATION
Upon the termination by whatever means of this Agreement the Director shall
at the request of the Company immediately following such termination resign
from office as a director of the Company and from such offices held by him
in associated companies as may be so requested and in the event of his
failure so to do the Company is hereby irrevocably authorised by the
Director to appoint some person in his name and on his behalf to sign and
deliver such resignation or resignations to the Company and to each of the
associated companies of which the Director is at the material time a
director or other officer. For the avoidance of doubt, the Director shall
not be entitled to claim compensation because of his
- 2 -
<PAGE> 4
resignation as a director of the Company or any associated companies by
virtue of the operation of this Clause 5.
6. NOTICES
6.1 Any notice required or permitted to be given under this Agreement shall
be given in writing delivered personally or sent by first class post
pre-paid recorded delivery (air mail if overseas) or by telex to the
party due to receive such notice at, in the case of the Company, its
registered office from time to time and, in the case of the Director his
address as set out in this Agreement (or such address as he may have
notified to the Company in accordance with this Clause).
6.2 Any notice delivered personally shall be deemed to be received when
delivered to the address provided in Clause 21.1 and any notice sent by
pre-paid recorded delivery post shall be deemed (in the absence of
evidence of earlier receipt) to be received 2 days after posting (6 days
if sent air mail) and in proving the time of despatch it shall be
sufficient to show that the envelope containing such notice was properly
addressed, stamped and posted. A notice sent by telex shall be deemed to
have been received on receipt by the sender of the correct "answerback".
INDEMNITY
7. The Company will at all times and in all respects indemnify and keep
indemnified the Director and his heirs, executors and administrators and
each of them from and against all losses, damages, liabilities, actions,
claims, costs or expenses of any kind whatsoever which may be suffered,
incurred or sustained by them or by any of them and which may in any way
arise out of or in connection with:-
7.1 the appointment of the Director as a director of the Company or his
tenure of such office; or
7.2 any act done, concurred in or omitted to be done in good faith by the
Director or by any other officer, servant or agent of the Company in or
about or in connection with the performance by the Director of any of his
functions as a director of the Company or the performance or purported
performance by any other such person of any of his functions as officer,
servant or agent of the Company (as the case may be) whether or not the
Director or such other person was acting in the scope of his authority,
contract or employment at the time except any loss, damage, liability,
action, claim, cost or expense which may result directly from the
Director's own bad faith including, without limiting the generality of
the foregoing, the Director's own willful dishonesty or willful default
which dishonesty or default constitutes or results directly in a material
breach of the terms of the appointment of the Director as a director of
the Company or his tenure of such office.
- 3 -
<PAGE> 5
8. MISCELLANEOUS
8.1 This Agreement is governed by and shall be construed in accordance with
the laws of England
8.2 This Agreement contains the entire understanding between the parties and
supersedes all previous agreements and arrangements (if any) relating to
the appointment of the Director as a director of the Company by the
Company (which shall be deemed to have been terminated by mutual
consent).
-4-
<PAGE> 6
AS WITNESS the hand of the parties or their duly authorised representatives,
the day and year first before written.
SIGNED BY James F. Joy ) /s/ James F. Joy
for and on behalf of )
FLOWIL INTERNATIONAL LIGHTING )
(HOLDING) B.V. in the presence of:- )
Signature of Witness: /s/ Lydia Sitbon
Name of Witness: Lydia Sitbon
Address of Witness: Grue du Niger
75012 Paris
Occupation: Secretary
SIGNED by NORMAN SCOULAR )
in the presence of:- ) /s/ Norman Scouler
Signature of Witness: /s/ Gordon Anderson
Name of Witness: Gordon Anderson
Address of Witness: 4, Plymouth Drive
Bramhall
Cheshire
Occupation: Managing Director.
-5-
<PAGE> 1
EXHIBIT 10.46
AMENDMENT AGREEMENT
This amendment agreement made the 22 day of March 1994 between
(1) SYLVANIA LIGHTING S.A., incorporated under the laws of Switzerland, whose
principal place of business is situated at 20, Route de Pre-Bois, 1215
Geneva 15 (Airport) Switzerland (the "Company");
(2) NORMAN SCOULAR of Ash green, Ladythorn Crescent, Bramhall, Cheshire SK7 2HB
(the "Executive");
(3) SYLVANIA LIGHTING INTERNATIONAL B.V., a private limited liability
company incorporated under the laws of The Netherlands and established in
Amsterdam, The Netherlands whose registered office is situated at
Appollalaan 171, 1077 AS, Amsterdam, PO Box 7301, 10007 JH Amsterdam
("SLI"); and
(4) FLOWIL INTERNATIONAL LIGHTING (HOLDING) B.V., a private limited liability
company incorporated under the laws of The Netherlands whose registered
office is situated at "Atrium" Building, 2nd Floor, Strawinskylaan 3037,
1077 ZX, Amsterdam, The Netherlands ("Flowil").
amends in the following terms a Service Agreement dated 12 May 1993 made between
the Company and the Executive (the "Agreement") and an Executive Director's
Contract dated 12th May 1993 made between SLI and the Executive (the "SLI
Executive Director's Contract") and an Executive Director's Contract dated 12th
May 1993 made between Flowil and the Executive (the "Flowil Executive
Director's Contract").
All capitalised terms used herein but not otherwise defined shall have the
meanings assigned to them in the Agreement.
IT IS HEREBY AGREED AS FOLLOWS
1. Clause 7.1 of the Agreement shall have deleted from the ninth line of the
Clause the words ". . .or pursuant to the provisions of Clause 7.4. . ."
and there shall be inserted in the ninth line of Clause 7.1 between ". .
.7.1. . ." and ". . .by law. . ." the word "or".
2. Clause 7.4 (including for the avoidance of doubt Clauses 7.4.1 and 7.4.2)
of the Agreement shall be deleted and replaced with the following words:-
"7.4 If the Executive engages the professional services of an accountant
to give personal tax advice in connection with the Executive's
earnings received as part of his employment with the Company the
<PAGE> 2
reasonable cost and fees of such accountant shall be paid by the
Company".
3. Clause 8.2 of the Agreement shall have deleted from its seventh and eighth
lines the words "..subject to the provisions of Clause 7.4".
4. The definition of "Service Agreement" given in the "SLI Executive
Director's Contract" and the "Flowil Executive Director's Contract" shall
be deemed to be defined as comprising the Agreement and this amendment
agreement.
5. Except as provided in this amendment agreement all other terms and
conditions set forth under the Agreement, the "SLI Executive Director's
Contract" and the "Flowil Executive Director's Contract" shall remain
unmodified and in full force and effect.
AS WITNESS the hand of the parties or their duly authorised
representatives, the day and year first before written.
SIGNED by JC BOTTS )
for and on behalf of )
SYLVANIA LIGHTING S.A. )
in the presence of:-- )
Signature of Witness:
Name of Witness: I. JUCHLER
Address of Witness: 126 Hampstead Way
London NW11 7XJ
Occupation: Secretary
<PAGE> 3
SIGNED by NORMAN SCOULAR )
in the presence of: )
Signature of Witness:
Name of Witness: JANET CLARK
Address of Witness: 18 Chemin Des Vignes
1291 Commuany
Switzerland
Occupation: Secretary
SIGNED by JC BOTTS )
for and on behalf of )
SYLVANIA LIGHTING INTERNATIONAL B.V.)
Signature of Witness:
Name of Witness: I. JUCHLER
Address of Witness: 126 Hampstead Way
London NW11 7XJ
Occupation: Secretary
SIGNED by JC BOOTS )
for and on behalf of )
FLOWIL INTERNATIONAL LIGHTING (HOLDING) B.V.)
Signature of Witness:
Name of Witness: I. JUCHLER
Address of Witness: 126 Hampstead Way
London NW11 7XJ
Occupation: Secretary
AS WITNESS the hand of the parties or their duly authorised
representatives, the day and year first before written.
SIGNED by JC BOTTS )
for and on behalf of )
SYLVANIA LIGHTING S.A.)
in the presence of:- )
Signature of Witness:
Name of Witness: I. JUCHLER
Address of Witness: 126 Hampstead Way
London NW11 7XJ
Occupation: Secretary
<PAGE> 1
EXHIBIT 10.47
DATED 20TH FEBRUARY 1996
(1) SYLVANIA LIGHTING S.A
(2) NORMAN SCOULAR
(3) SYLVANIA LIGHTING INTERNATIONAL B.V.
(4) FLOWIL INTERNATIONAL LIGHTING (HOLDING) B.V.
______________________________________
SECOND AMENDMENT
AGREEMENT
______________________________________
================================================================================
Dibb Lupton Broomhead
125 London Wall
LONDON
EC2Y 5AE
Tel: 0345 26 27 28
Fax: 0171 600 5580
<PAGE> 2
SECOND AMENDMENT AGREEMENT
This second amendment agreement made the 20th day of February 1996 between
(1) SYLVANIA LIGHTING S.A., incorporated under the laws of Switzerland, whose
principal place of business is situated at 20 Route de Pre-Bois, 1215
Geneva 15 (Airport), Switzerland (the "Company");
(2) NORMAN SCOULAR of Ash Green, Ladythorn Crescent, Bramhall, Cheshire SK7 2HB
(the "Executive");
(3) SYLVANIA LIGHTING INTERNATIONAL B.V., a private limited liability company
incorporated under the laws of The Netherlands and established in
Amsterdam, The Netherlands, whose registered office is situated at
Appollalaan 171, 1077 AS, Amsterdam, PO Box 7301, 10007 JH, Amsterdam, The
Netherlands ("SLI"); and
(4) FLOWIL INTERNATIONAL LIGHTING (HOLDING) B.V., a private limited liability
company incorporated under the laws of The Netherlands whose registered
office is situated at "Atrium" Building, 2nd Floor, Strawinskylaan 3037,
1077 ZX, Amsterdam, The Netherlands ("Flowil")
amends in the following terms a Service Agreement dated 12 May 1993 (as amended
by an amendment agreement dated 22 March 1994) made between the Company and the
Executive (the "Agreement") and an Executive Director's Contract dated 12 May
1993 made between SLI and the Executive (the "SLI Executive Director's
Contract") and an Executive Director's Contract dated 12 May 1993 made between
Flowil and the Executive (the "Flowil Executive Director's Contract").
All capitalised terms used herein but not otherwise defined shall have the
meanings assigned to them in the Agreement.
<PAGE> 3
IT IS HEREBY AGREED AS FOLLOWS:
1. Clause 3 of the Agreement shall be deleted and replaced with the
following words:-
"3. TERM
3.1 The employment of the Executive (subject to termination as provided
below) shall commence on the Effective Date and save as provided
hereafter shall continue thereafter unless and until terminated by:-
3.1.1 the Executive giving to the Company not less than six months'
notice in writing to expire at any time; or
3.1.2 the Company giving to the Executive not less than twelve
months' notice in writing to expire at any time.
3.2 Subject to Clause 3.3, in the event that any company or company under
its control acquires after the date hereof, but before a Successful
Listing (as defined in Clause 3.4), such rights as make the Company,
SLI or Flowil a subsidiary (as defined by Section 736 of the Companies
Act 1985 as amended by the Companies Act 1989) of that company then
the Agreement shall continue unless and until terminated by:-
3.2.1 the Executive giving to the Company not less than twelve
months' notice in writing to expire at any time; or
3.2.2 the Executive giving notice of deemed immediate termination by
the Company in the circumstances described in Clause 14.4; or
2
<PAGE> 4
3.2.3 the Company terminating or giving notice pursuant to Clause
14.3.
3.3 The period of notice referred to in Clause 3.2 shall not apply in the
event of a Successful Listing (as defined in Clause 3.4), when the
provisions of Clause 3.1 shall apply.
3.4 For the purpose of this Agreement a Successful Listing means:-
3.4.1 the admission (or re-admission after suspension) of any
shares of the Company, SLI or Flowil or any holding company
(as defined in Section 736 of the Companies Act 1985 as
amended by the Companies Act 1989) of the Company, SLI or
Flowil which holds 100% of the Company's, SLI's or Flowil's
shares to the Official List of The London Stock Exchange
Limited or on the primary list of any recognised investment
exchange (as such term is used in the United Kingdom Financial
Services Act 1986) and such admission or re-admission becoming
effective; or
3.4.2 the granting (or the re-granting after suspension) of an
application by the Company, SLI or Flowil or any holding
company (as defined in Section 736 of the Companies Act 1985
as amended by the Companies Act 1989) of the Company, SLI or
Flowil which holds 100% of the Company's, SLI's or Flowil's
shares of permission to deal in any of its shares on The
Alternative Investment Market of The London Stock Exchange
Limited or on the secondary market of any recognised
investment exchange (as such term is used in the United
Kingdom
3
<PAGE> 5
Financial Services Act 1986) and such permission becoming
effective.
For the avoidance of doubt, the expression "re-admission after
suspension" and "re-granting after suspension" are to be read and
construed in the context of a reorganised investment exchange (other
than The London Stock Exchange Limited) as being references to the
nearest equivalent procedure by which listing or the grant of
permission to deal can be obtained in accordance with the rules of
such relevant recognised investment exchange."
2. There shall be inserted in the first line of Clause 11.1 after the word
"Board" the words "save as provided in Clause 14.7". There shall be
inserted in the second line of Clause 11.1 after the word "employment" the
words "howsoever or whensoever terminating".
3. Clauses 14.1.4 and 14.1.5 of the Agreement shall be deleted and replaced
with the following words:-
"14.1.4 if the Executive is guilty of any gross default or gross
misconduct in connection with or affecting the business of
any member of the Group to which he is required by this
Agreement to render services which the Executive:-
(a) fails to immediately on receipt of written notice by
the Company (the "Notice") to stop the action regarded
by the Company as constituting gross default or gross
misconduct; and
(b) fails within a reasonable time of the receipt of the
Notice to remedy or otherwise make good the action
regarded by
4
<PAGE> 6
the Company as constituting gross default or gross
misconduct; or
14.1.5 in the event of any material breach by the Executive of the
terms of this Agreement which the Executive fails within 30
days of written notice by the Company to remedy: for the
purposes of this sub-clause 14.1.5 only, a breach shall be a
"material breach" if the reputation, prospects or commercial
activities of any member of the Group and/or the Group as a
whole is materially adversely affected thereby; or"
4. Clause 14.3 of the Agreement shall be deleted and replaced with the
following words:-
"14.3 The Company hereby acknowledges that in the event that:-
14.3.1 any company or any company under its control acquires after
the date hereof, but before a Successful Listing (as defined
in Clause 3.4), such rights as make the Company, SLI or
Flowil a subsidiary (as defined by Section 736 of the
Companies Act 1985 as amended by the Companies Act 1989) of
that company; and
14.3.2 this Agreement is terminated
(i) with immediate effect, other than as a result of any of
the circumstances set out in Clause 14.1; or
(ii) by way of notice by the Company; or
5
<PAGE> 7
(iii) in the circumstances described in Clause 14.4; then
14.3.3 the Executive's employment with the Company shall cease from
the date of such termination or the giving of such notice
and in such event the parties shall release each other of
any notice period as to termination under this Agreement
insofar as it shall not require the Executive to work any
period of notice whatsoever and the Executive shall be
entitled to receive compensation within 24 hours of such
termination, to include without limitation payment in lieu
of statutory and contractual notice, on the termination of
this Agreement. Such compensation for loss of office shall
be calculated from the date of such termination for a
twenty-four month period free and clear of any set off or
other deductions whatsoever but subject to being paid net of
tax PROVIDED ALWAYS THAT such compensation shall be
calculated for each twelve month period for which
compensation is paid by reference to the remuneration paid
to the Executive by the Company in the most recently
completed twelve month financial year preceding such
termination to include, without limitation, all remuneration
paid by the Company to the Executive whether or not under
the terms of this Agreement and, other than discretionary
payments made to the Executive outside the terms of this
Agreement, such compensation for termination shall take into
account only
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those benefits referred to in Clauses 7, 8 and 9 of this
Agreement (comprising, for the avoidance of doubt, basic pay
and all bonuses whether they are contractual or
discretionary and all payments or allowances for or in lieu
of pensions, car and medical benefits) PROVIDED ALWAYS THAT
the Executive abides by Clauses 11, 13, 16 and 17 of this
Agreement, save as provided otherwise in Clause 14.7, and
without prejudice to the Company's right to claim for
further loss and damage for breach of such Clauses or such
other relief as it sees fit.
14.4 For the purposes of this Agreement, the SLI Executive Director's
Contract, the Flowil Executive Director's Contract and the Amendment
Agreement dated 22 March 1994, in the event that after the events
described in Clause 14.3.1 the Company unilaterally imposes a
variation of the Executive's duties or management powers (in
determining what constitutes a variation, reference shall be made to
the actual delegation of duties or powers in the period from
29 January 1993 to the date of the Executive's notice under this
Clause) then this Agreement shall be deemed terminated by the
Company pursuant to Clause 14.3.3 PROVIDED ALWAYS THAT the Executive
notifies the Company of his intention to rely on this Clause within
7 days of the said variation.
14.5 The Executive hereby acknowledges that in the event that this
Agreement is terminated by the Company at any time other than as a
result of any of the circumstances set out in Clause 14.1 the
compensation for termination payable to the
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Executive shall, other than discretionary payments made to the
Executive outside the terms of this Agreement, take into account
only those benefits referred to in Clauses 7, 8 and 9 of this
Agreement (comprising, for the avoidance of doubt, basic pay and all
bonuses whether they are contractual or discretionary and all
payments or allowances for or in lieu of pensions, car and medical
benefits).
14.6 The parties in entering into the provisions relating to compensation
in Clauses 14.3, 14.4 and 14.5 record their intention as being that
such compensation will be paid by way of liquidated damages and
having taken legal advice consider the damages to be a genuine
pre-estimate of loss to the Executive.
14.7 The compensation payments which in those circumstances set out in
this Clause 14 shall be made to the Executive shall be made by the
Company within 24 hours of termination of this Agreement by the
Company and shall be paid by telegraphic transfer into an account of
the Executive's nomination. In the event of non-payment in whole or
part of the compensation due to the Executive within such 24 hour
period:-
14.7.1 the Executive shall be entitled to charge the Company
interest on the sum unpaid from the due date until the
actual date of payment (as well after as before judgement)
at a rate equal to 2% per annum above the National
Westminster Bank Plc base rate for the period; and
14.7.2 the Executive shall be immediately released from all of his
obligations under
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Clause 11 (Secrets and Confidential Information), Clause 16
(Provisions after Termination) and Clause 17 (Restrictive
Covenants (as amended hereunder)) of this Agreement.
5. There shall be inserted in the first paragraph of Clause 16 after the words
"The Executive hereby agrees that he will not at any time after termination
of this Agreement" the words "howsoever or whensoever arising, save as
provided in Clause 14.7, "and there shall be inserted at the end of the
first paragraph after the words "...other persons directly or indirectly."
the words "for a period of twenty-four months after termination".
6. In consideration of the agreement of the Company to pay compensation
pursuant to Clause 14 the Executive has agreed to extend the period of
certain restrictions under the Agreement from twelve months to twenty-four
months following termination. Accordingly, there shall be deleted from the
first line of Clause 17.2 the words "12 months" and inserted in their
place the words "24 months" and there shall be inserted after the end of
the parenthesis in the second line of Clause 17.2 the words "save as
provided in Clause 14.7". There shall be added the following sub-clauses
to Clause 17:-
"17.3 For the period of twenty-four months after ceasing to be employed
under this Agreement howsoever and whensoever terminating, save as
provided in Clause 14.7, either alone or jointly with, or as
manager, agent, consultant or employee of any person, firm or
company directly or indirectly solicit or endeavour to entice away
the custom of any person, firm or company who during the twelve
months prior to the termination of the Agreement was a customer or
potential customer of the Company and/or any company in the Group
and (in the case of the customer) from
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whom he had obtained business or to whom he had provided services on
behalf of the Company and/or any company in the Group or (in the
case of a potential customer) with whom he had dealt with a view to
obtaining business.
17.4 For the period of twenty-four months after ceasing to be employed
under this Agreement howsoever and whensoever terminating, save as
provided in Clause 14.7, either alone or jointly with, or as
manager, agent, consultant or employee of any person, firm or
company directly or indirectly deal with any person, firm or company
who during the twelve months prior to the termination of the
Agreement was a customer or potential customer of the Company and/or
any company within the Group and (in the case of the customer) from
whom he had obtained business or to whom he had provided services on
behalf of the Company and/or any company in the Group or (in the
case of a potential customer) with whom he had dealt with a view to
obtaining business.
17.5 The restrictions contained in this Clause are considered by the
parties to be reasonable in all the circumstances, save for in those
circumstances set out in Clause 14.7. Each sub-clause constitutes an
entirely separate and independent restriction and the duration,
extent and application of each of the restrictions are no greater
than is necessary for the protection of the interests of the Company
and any other company in the Group."
7. There shall be inserted at the end of Clause 19 the following:-
"In the event of disciplinary proceedings, any disciplinary decision will
be taken by the Board, or the Chairman if the Board so delegates."
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8. A new Clause 22 shall be incorporated into the Agreement as follows:-
"22. INDEMNITY
The Company will at all times and in all respects indemnify and keep
indemnified the Executive and his heirs, executors and
administrators and each of them from and against all losses,
damages, liabilities, actions, claims, costs or expenses of any kind
whatsoever which may be suffered, incurred or sustained by them or
by any of them and which may in any way arise out of or in
connection with:-
22.1 the appointment of the Executive as a director of the Company
or his tenure of such officer; or
22.2 any act done, concurred in or omitted to be done in good faith
by the Executive or by any other officer, servant or agent of
the Company in or about or in connection with the performance
by the Executive of any of his functions as a director of the
Company or the performance or purported performance by any
other such person of any of his functions as officer, servant
or agent of the Company (as the case may be) whether or not
the Executive or such other person was acting in the scope of
his authority, contract or employment at the time except any
loss, damage, liability, action, claim, cost or expense which
may result directly from the Executive's own bad faith
including, without limiting the generality of the foregoing,
the Executive's own wilful dishonesty or wilful default which
dishonesty or default constitutes or results directly in a
material breach of the terms of the
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appointment of the Executive as a director of the Company or
his tenure of such office."
9. The following Schedule shall be deemed to be incorporated into the
Agreement.
THE SCHEDULE
Written statement of main terms and conditions of employment as required by
Section 1 of the Employment Protection (Consolidation) Act 1978.
1. CONTINUOUS PERIOD OF EMPLOYMENT
The Executive's continuous period of employment began on 29 January
1993. No employment of the Executive with any previous employer counts
as part of the Executive's employment.
2. JOB TITLE
The job title of the Executive is Chief Executive Officer. His duties
will be in accordance with Clause 4.1 of this Agreement.
3. PLACE OF WORK
The Executive's place of work is in accordance with Clause 4.1 of this
Agreement.
4. REMUNERATION
See Clauses 7, 8 and 9 of this Agreement.
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5. HOURS OF WORK
The Executive shall work such hours as may be reasonably required for
the proper performance of his duties.
6. HOLIDAYS
See Clause 10 of this Agreement.
7. NOTICE PERIOD
See Clauses 3 and 14 of this Agreement.
8. SICK PAY
There are no other terms and conditions relating to incapacity for
work apart from those set out in Clause 15 of this Agreement.
9. RETIREMENT
The normal age of retirement is 65.
10. PENSIONS
See Clause 8 of this Agreement. No contracting out certificate is in
force.
11. GRIEVANCE PROCEDURE
See Clause 19 of this Agreement.
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12. DISCIPLINARY RULES
See Clause 19 of this Agreement.
There are no other disciplinary rules relating to the appointment of
the Executive other than those provided for in this Agreement.
13. MISCELLANEOUS
13.1 There are no collective agreements in force which affect the
terms and conditions of this Agreement.
13.2 The Executive will be required to work in the United Kingdom,
Holland and Switzerland at varying times and for varying
durations at the discretion of the Company and will be paid
his remuneration pursuant to Clauses 7, 8 as 9 in English
pounds sterling, to the extent that the remuneration pursuant
to those clauses is received in cash.
10. The deemed commencement date of this second amendment agreement shall
be 12 May 1995.
11. Except as provided in this second amendment agreement all other terms
and conditions set forth under the Agreement (as amended by an
amendment agreement dated 22 March 1994), the SLI Executive Director's
Contract and the Flowil Executive Director's Contract shall remain
unmodified and in full force and effect.
AS WITNESS the hand of the parties or their duly authorised
representatives, the day and year first above written.
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SIGNED By EDWARD P. BARTLETT )
for and on behalf of: )
SYLVANIA LIGHTING S.A. )
in the presence of: )
Signature of Witness:
Name of Witness: M. Ch. METRAL
Address of Witness: Las Saphirs, 5
Ch. des Landes
F-74160 BOSSEY
Occupation: Secretary
SIGNED By NORMAN SCHOULAR )
in the presence of: )
Signature of Witness:
Name of Witness: H. BRAND
Address of Witness: 24, rue Adrien Lachenal
CH-1207 Geneva
Occupation: Secretary
SIGNED By JOHN BOTTS & JAMES JOY )
for and on behalf of: )
SYLVANIA LIGHTING )
INTERNATIONAL B.V. )
in the presence of: )
Signature of Witness:
Name of Witness: D.J. BARBOUR
Address of Witness: 7 Hogan Mens Porteus Rd.
London N21UP
Occupation: Chartered Accountant
SIGNED By JOHN BOTTS & JAMES JOY )
for and on behalf of: )
FLOWIL INTERNATIONAL )
LIGHTING (HOLDING) B.V. )
in the presence of: )
Signature of Witness:
Name of Witness: D.J. BARBOUR
Address of Witness: 7 Hogan Mens Porteus Rd.
London N21UP
Occupation: Chartered Accountant
15
<PAGE> 1
Exhibit 23.1(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Data" to the use of our report dated January 9,
1998, except for the 1998 stock split as described in Note 2 and subsequent
event in Note 16, as to which the dates are February 11, 1998 and May 15, 1998,
respectively, with respect to the consolidated financial statements and schedule
of SLI, Inc. (formerly Chicago Miniature Lamp, Inc.) and to the use of our
report dated March 20, 1998 with respect to the consolidated financial
statements of Sylvania Lighting International B.V., included in Amendment No. 1
to the Registration Statement (Form S-1) and related Prospectus of SLI, Inc.
(formerly Chicago Miniature Lamp, Inc.) for the registration of 12,506,250
shares of its common stock.
/s/ Ernst & Young LLP
Chicago, Illinois
May 18, 1998
<PAGE> 1
Exhibit 23.1(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated December 31, 1997, with respect to the financial
statements of Chicago Miniature Lamp (Canada), Inc. included in Amendment No. 1
to the Registration Statement (Form S-1) and related Prospectus of SLI, Inc.
(formerly Chicago Miniature Lamp, Inc.) for the registration of 12,506,250
shares of its common stock.
/s/ Hards Pearson
Chartered Accountants
Barrie, Canada
May 18, 1998
