<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
CHICAGO MINIATURE LAMP, 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
CHICAGO MINIATURE LAMP, 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. [ ]
------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) FEE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per
share................................ 12,506,250 shares $38.00 $475,237,500 $140,195
=========================================================================================================================
</TABLE>
(1) Includes 1,631,250 shares that the Underwriters have the option to purchase
solely to cover over-allotments, if any.
(2) Estimated solely for the purpose of determining the registration fee and
calculated in accordance with Rule 457(c) under the Securities Act on the
basis of the last reported price of the Company's Common Stock on March 30,
1998, as reported by Nasdaq.
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DUE DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED APRIL 2, 1998
10,875,000 Shares
CHICAGO MINIATURE LAMP, INC.
Common Stock
($.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
Chicago Miniature Lamp, 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 March 31, 1998, the reported last sale
price of the Common Stock on The Nasdaq Stock Market's National Market
(the "Nasdaq National Market") was $38.875 per share. Application is being made
to list the Common Stock on The New York Stock Exchange.
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 SALOMON SMITH BARNEY
BEAR, STEARNS & CO. INC. LEHMAN BROTHERS
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 "CML" refer to Chicago Miniature Lamp, 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 13 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"), 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. For Fiscal 1997, on a pro forma
basis after giving effect to the PLP and SLI acquisitions, the Company's net
sales and operating income would have been $755.4 million and $41.6 million,
respectively. In addition, for Fiscal 1997, on a pro forma basis after giving
effect to the PLP and SLI 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.
With the addition of SLI, 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, 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. The Company has 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.
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.
1
<PAGE> 5
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, a large user of ballasts with no ballast manufacturing capability, is
expected to produce significant 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.
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. The Company has also adjusted the product mix manufactured by
certain acquired companies in an effort to improve profitability, although in
certain cases such actions have had the short-term effect of reducing the net
sales of such acquired companies. Given that certain of these recently acquired
businesses have been operating at significantly lower margins than the Company's
base business, these acquisitions have resulted in temporary contraction of
consolidated margins. Management believes that the recent acquisition of SLI,
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.
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 2,625,000 shares
Shareholders........................................ -----------
Total....................................... 10,875,000 shares
===========
Common Stock to be outstanding after the
Offering(a)......................................... 37,704,978 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."
Existing Nasdaq National Market symbol................ CHML
Proposed NYSE symbol.................................. SLI
</TABLE>
- ---------------
(a) Excludes 3,377,777 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
----------------------------------------------------------------------
ACTUAL
------------------------------------------------------- PRO FORMA(a)
2/27/94(b) 11/27/94(c) 12/3/95 12/1/96 11/30/97 11/30/97
---------- ----------- ------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(d):
Net sales........................ $24,894 $31,729 $57,402 $94,171 $329,959 $755,364
Cost of products sold............ 17,860 21,113 36,726 61,147 231,933 505,523
------- ------- ------- ------- -------- --------
Gross margin................... 7,034 10,616 20,676 33,024 98,026 249,832
Selling, general and
administrative expenses........ 8,028 7,777 8,462 14,552 65,549 203,112
Restructuring costs.............. -- -- -- -- 5,115 5,115
------- ------- ------- ------- -------- --------
Operating income (loss)........ (994) 2,839 12,214 18,472 27,362 41,605
Net Income (loss).............. $(1,635) $ 1,110 $ 8,465 $13,436 $ 20,941 $ 32,097
======= ======= ======= ======= ======== ========
Earnings per common share(e)..... $ (0.09) $ 0.06 $ 0.41 $ 0.55 $ 0.73 $ 0.98
======= ======= ======= ======= ======== ========
Weighted average shares
outstanding(e)................. 18,744 18,744 20,880 24,357 28,761 32,883
======= ======= ======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF NOVEMBER 30, 1997
-------------------------
ACTUAL AS ADJUSTED(f)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA(d):
Working capital............................................. $117,606 $279,262
Total assets................................................ 651,661 798,496
Short-term debt............................................. 14,821 --
Long-term debt, less current portion........................ 185,434 40,000
Stockholders' equity........................................ 166,051 473,141
</TABLE>
- ---------------
(a) Gives effect to the following as if each had occurred on December 2, 1996:
(i) the PLP and SLI acquisitions and (ii) the issuance of 4,122,000 shares
of Common Stock in the Offering, which is the number of shares necessary to
raise net proceeds equal to $160,255,000 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) Gives effect to the Offering and the application of the estimated net
proceeds to the Company therefrom as if the Offering had occurred on
November 30, 1997. See "Use of Proceeds," "Business-Acquisitions" and the
Pro Forma Consolidated Statement of Operations Data and related notes
thereto included elsewhere in this Prospectus.
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) 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
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
The Company has 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 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 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 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. 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.
LABOR RELATIONS
At November 30, 1997, 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
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, 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. See "Management" and "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. 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 37,704,978 shares of
Common Stock outstanding. Of these shares, all of the 10,875,000 shares sold in
the Offering and 16,337,993 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 10,491,985 shares
are deemed "restricted shares" as defined by Rule 144 under the Securities Act.
Of such restricted shares, 10,337,485 shares are currently eligible for sale
pursuant to Rule 144, subject to certain restrictions, and 154,500 shares will
become eligible for sale pursuant to Rule 144, subject to certain restrictions,
at various times between September 1998 and March 1999. 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. 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
9
<PAGE> 13
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 $307 million
(approximately $353 million if the Underwriters' over-allotment option is
exercised in full). This assumes a public offering price of $38.875 per share of
Common Stock, the last reported sales price of the Common Stock on the Nasdaq
National Market on March 31, 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 $160 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 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 is currently negotiating for
the purchase of two additional companies in the lighting business. If
consummated, the acquisitions would cost approximately $9 million in the
aggregate, payable in cash and shares of Common Stock. 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.
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.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has traded on the over-the-counter market and is
included for quotation on the Nasdaq National Market. 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............................................... 31.92 20.30
Second Quarter (through March 31, 1998)..................... 39.38 32.00
</TABLE>
Such market quotations reflect inter-dealer prices, without retail
mark-ups, mark-downs or commissions and may not necessarily represent actual
transactions. Application is being made to list the Common Stock on The New York
Stock Exchange.
10
<PAGE> 14
As of February 28, 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. 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.
CAPITALIZATION
The following table sets forth the capitalization of the Company at
November 30, 1997, and at November 30, 1997, 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 NOVEMBER 30, 1997
------------------------
ACTUAL AS ADJUSTED
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, less current portion(a)..................... $185,434 $ 40,000
Stockholders' equity:
Common Stock, $.01 par value; 100,000,000 shares authorized
29,301,979 issued and outstanding, 37,551,979 shares as
adjusted(b)............................................... 293 376
Additional paid-in capital.................................. 126,835 433,842
Retained earnings........................................... 45,218 45,218
Currency translation adjustment............................. 2,377 2,377
Less: Treasury stock at cost(c)............................. (8,672) (8,672)
-------- --------
Total stockholders' equity........................ $166,051 $473,141
Total capitalization.............................. $351,485 $513,141
======== ========
</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) Excludes 3,455,776 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.
11
<PAGE> 15
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 acquisitions and (ii) the issuance of 4,122,000 shares of Common
Stock in the Offering, which is the number of shares necessary to raise net
proceeds equal to $160,255,000 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
FOR PLP FOR SLI PLP AND SLI OFFERING
COMPANY PLP(a) ACQUISITION SLI(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 -- 203,112 -- 203,112
Restructuring costs.. 5,115 -- -- -- -- 5,115 -- 5,115
------- ------ ---- -------- ------- -------- ------ --------
Operating income... 27,362 (103) 75 8,595 5,676 41,605 -- 41,605
Interest income...... (4,082) -- -- -- -- (4,082) -- (4,082)
Interest expense..... 5,238 -- -- 2,776 -- 8,014 (5,686)(e) 2,328
Other expense
(income)........... (2,326) (5) -- 1,111 -- (1,220) -- (1,220)
------- ------ ---- -------- ------- -------- ------ --------
Income before income
taxes.............. 28,532 (98) 75 4,708 5,676 38,893 5,686 44,579
Income taxes......... 7,591 (35) 28(f) 3,784 (150)(g) 11,218 1,264(h) 12,482
------- ------ ---- -------- ------- -------- ------ --------
Net income......... $20,941 $ (63) $ 47 $ 924 $ 5,826 $ 27,675 $4,422 $ 32,097
======= ====== ==== ======== ======= ======== ====== ========
Earnings per common
share.............. $ 0.73 $ 0.98
======= ========
Weighted average
shares
outstanding........ 28,761 32,883(i)
======= ========
</TABLE>
- ---------------
(a) Two months of Power Lighting Products operations have been included. Ten
months of operating results of Power Lighting Products are included in the
Company's Consolidated Financial Statements from January 30, 1997, the date
of acquisition.
(b) Nine months of SLI operations have been included. Three months of operating
results of SLI are included in the Company's Consolidated Financial
Statements from September 1, 1997, the date of acquisition.
(c) Depreciation expense has been adjusted to reflect revised estimated useful
lives and revaluation of fixed assets to fair market value as if the
acquisition of Power Lighting Products had occurred on December 2, 1996.
(d) Depreciation expense has been adjusted to reflect revised estimated useful
lives and revaluation of fixed assets to fair market value as if the
acquisition of SLI had occurred on December 2, 1996.
(e) Interest expense has been adjusted to reflect the decrease in interest
expense resulting from the repayment of $160,255,000 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.
(f) The adjustment gives effect to an effective tax rate of approximately 31%
applied to the pre-tax earnings of Power Lighting Products and related pro
forma adjustments.
(g) The adjustment gives effect to an effective tax rate of approximately 20%
applied to the pre-tax earnings of SLI and related pro forma adjustments.
(h) Income tax expense has been adjusted to reflect a pro forma consolidated
effective tax rate of approximately 28%.
(i) Pro forma weighted average shares outstanding has been adjusted to reflect
the issuance of 4,122,000 shares of Common Stock in the Offering, which is
the number of shares necessary to raise net proceeds equal to the
$160,255,000 of outstanding debt to be repaid, as if such issuance had
occurred on December 2, 1996.
12
<PAGE> 16
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.
<TABLE>
<CAPTION>
NINE
YEAR MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED YEAR ENDED
2/27/94(A) 11/27/94(B) 12/3/95 12/1/96 11/30/97
---------- ----------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(C):
Net sales................................. $24,894 $31,729 $57,402 $ 94,171 $329,959
Cost of products sold..................... 17,860 21,113 36,726 61,147 231,933
------- ------- ------- -------- --------
Gross margin.............................. 7,034 10,616 20,676 33,024 98,026
Selling, general and administrative
expenses................................ 8,028 7,777 8,462 14,552 65,549
Restructuring costs....................... -- -- -- -- 5,115
------- ------- ------- -------- --------
Operating income (loss)................. (994) 2,839 12,214 18,472 27,362
Interest expense, net..................... 502 936 803 301 1,156
Other (income) expense, net............... (92) (7) (47) (1,294) (2,326)
------- ------- ------- -------- --------
Income (loss) before income taxes......... (1,404) 1,910 11,458 19,465 28,532
Income taxes(d)........................... 231 800 2,993 6,029 7,591
------- ------- ------- -------- --------
Net Income (loss)....................... $(1,635) $ 1,110 $ 8,465 $ 13,436 $ 20,941
======= ======= ======= ======== ========
Net Income (loss) per common share(e)..... $ (0.09) $ 0.06 $ 0.41 $ 0.55 $ 0.73
======= ======= ======= ======== ========
Weighted average shares outstanding(e).... 18,744 18,744 20,880 24,357 28,761
======= ======= ======= ======== ========
BALANCE SHEET DATA AT END OF PERIOD(C):
Working capital........................... $(1,507) $ (270) $ 9,923 $ 98,308 $117,606
Total assets.............................. 14,644 32,929 59,630 212,002 651,661
Short-term debt........................... 3,849 9,114 65 25,174 14,821
Long-term debt, less current portion...... 3,628 9,015 3,147 5,607 185,434
Stockholders' equity...................... 1,435 2,673 34,921 151,164 166,051
</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.
13
<PAGE> 17
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 13
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 has 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 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, a privately held company
headquartered in Geneva, Switzerland, for $161.5 million in cash. SLI 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 (i) has acquired a lighting company
engaged in the manufacture of lamps for $25 million, (ii) has entered into an
agreement to acquire the remaining outstanding capital stock of Electro-Mag for
375,000 shares of Common Stock of the Company, (iii) has entered into a letter
of intent to acquire a manufacturer of miniature lamps for approximately $2
million and (iv) is negotiating to purchase another lighting company for
approximately $7 million.
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.
14
<PAGE> 18
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 Bruckner, ten months
of Power Lighting Products and three months of SLI. 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.
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>
YEAR ENDED
----------------------------
12/3/95 12/1/96 11/30/97
------- ------- --------
<S> <C> <C> <C>
Net sales................................................... 100.0% 100.0% 100.0%
Cost of products sold....................................... 64.0 64.9 70.3
----- ----- -----
Gross margin.............................................. 36.0 35.1 29.7
Selling, general and administrative expenses................ 14.7 15.4 19.8
Restructuring costs......................................... -- -- 1.6
----- ----- -----
Operating income.......................................... 21.3 19.7 8.3
Interest expense, net....................................... 1.4 .3 .4
Other (income) expense...................................... (.1) (1.3) (.7)
----- ----- -----
Income before income taxes.................................. 20.0 20.7 8.6
Income taxes................................................ 5.2 6.4 2.3
----- ----- -----
Net income................................................ 14.8 14.3 6.3
===== ===== =====
</TABLE>
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 acquisitions and to a lesser
extent, growth in market share and customer development. The PLP and SLI
acquisitions accounted for $223.7 million of the increase in net sales. 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 acquisitions. Gross margin, as a
percentage of net sales, decreased from 35.1% for the year ended December 1,
1996 to 29.7% for Fiscal 1997, due primarily to the impact of the lower gross
margin of the ballast business of Power Lighting Products, 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 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 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.
15
<PAGE> 19
Restructuring costs. During Fiscal 1997, 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 operations, reduce
operating cost structures and improve future operating results. 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. The Company
believes this restructuring, along with restructuring plans developed and
accrued at the time of the acquisition of SLI, will improve the integration of
SLI 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. 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 acquisitions ($65.0 million), the repurchase of
Common Stock ($8.7 million) and for other capital expenditures.
Other income. Other income increased from $1,294,000 in the year ended
December 1, 1996 to $2,326,000 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, to which CML
Fiberoptics had contributed substantially all of its assets. 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. 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.
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,
16
<PAGE> 20
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 and
cash used in investing activities totaled $189.3 million. The investing
activities primarily included (i) the Bruckner and Power Lighting Products
acquisitions in connection with which the Company paid an aggregate amount of
approximately $25.0 million and (ii) the SLI 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.
In connection with the acquisition of SLI, 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. 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. As of November 30,
1997, the Company had available borrowings of approximately $66.6 million under
the revolving credit facility, and the face amount of letters of credit issued
and outstanding under the revolving credit facility totaled approximately $3.4
million. See "Description of Certain Indebtedness" and Note 1 of Notes to the
Company's Consolidated Financial Statements.
17
<PAGE> 21
Subsequent to Fiscal 1997, the Company has acquired a lighting company
engaged in the manufacture of lamps for $25 million. The cash was provided by
the Company's revolving credit facility and operating cash flow. The Company is
currently negotiating for the purchase of two additional lighting companies
which, if consummated, will cost, an aggregate of approximately $9 million in
the aggregate. In addition, the Company has entered into an agreement to
purchase the remaining outstanding shares of capital stock of Electro Mag for
375,000 shares of the Company's Common Stock.
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 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 foreseeable future.
NET OPERATING LOSS CARRY FORWARDS
SLI had net operating loss ("NOL") carryforwards for tax purposes of
approximately $135,977,000 at November 30, 1997, of which approximately
$37,900,000 expire through 2007 and $98,077,000 do not expire. Approximately 25%
of these NOL carryforwards relate to operations in France (which 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, it is expected that the Company's
operations will experience certain seasonal patterns. Generally, SLI'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
18
<PAGE> 22
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.
19
<PAGE> 23
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 14 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, 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. In addition, operating income increased from $12.2 million to
$27.4 million over the same period. For Fiscal 1997, on a pro forma basis after
giving effect to the PLP and SLI acquisitions, the Company's net sales and
operating income would have been $755.4 million and $41.6 million, respectively.
In addition, for Fiscal 1997, on a pro forma basis after giving effect to the
PLP and SLI 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.
With the addition of SLI, 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, 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. The Company has 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 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, a
20
<PAGE> 24
large user of ballasts with no ballast manufacturing capability, is expected to
produce significant 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.
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 administrative functions,
vertical integration with existing operations and leveraging of combined
purchasing power. The Company has also adjusted the product mix manufactured by
certain acquired companies in an effort to improve profitability, although in
certain cases such actions have had the short-term effect of
21
<PAGE> 25
reducing the net sales of such acquired companies. Given that these recently
acquired businesses have been operating at significantly lower margins than the
Company's base business, these acquisitions have resulted in temporary
contraction of consolidated margins. Management believes that the recent
acquisition of SLI, 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.
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,
lighting
(CML-Delaware)(a) 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
including lamps and fixtures
</TABLE>
22
<PAGE> 26
<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 (i) has acquired a lighting company
engaged in the manufacture of lamps for $25 million, (ii) has entered into an
agreement to acquire the remaining outstanding capital stock of Electro-Mag for
375,000 shares of Common Stock of the Company, (iii) has entered into a letter
of intent to acquire a manufacturer of miniature lamps for approximately $2
million and (iv) is negotiating to purchase another lighting company for
approximately $7 million.
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
23
<PAGE> 27
public buildings. Continued demand will be dependent upon economic growth,
especially industrial and 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. 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 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-
24
<PAGE> 28
Spot," which has been supplemented with a miniature 50 millimeter line
voltage lamp, SLI has demonstrated leadership in product development in
this area.
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.
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. The Company's customers currently include wholesalers, OEMs,
retailers, architects, designers and contractors whereas, prior to the PLP and
SLI 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 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
The Company has 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
25
<PAGE> 29
Company's manufacturing capabilities include lamp forming and cutting, socket
manufacturing, glass and plastic fiber drawing, lamp equipment manufacturing,
plastic injection molding, and the 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 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 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, the Company's research and
development expenditures increased to $1,926,000 for Fiscal 1997. On a pro forma
basis after giving effect to the PLP and SLI acquisitions, the Company's
research and development expenditures would have been $9,268,000 for Fiscal
1997. SLI'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'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 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 no longer
has the right to receive new Osram technology and know-how although SLI
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.
26
<PAGE> 30
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 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.
27
<PAGE> 31
THE PLP AND SLI 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. In September 1997, the Company consummated the purchase of all of the
outstanding shares of capital stock of SLI, 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
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 is an integrated designer and manufacturer of lighting systems which
are comprised of lamps and fixtures. SLI 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's product portfolio is sold under several brands,
most notably the Sylvania name, for which SLI has rights in all regions with the
exception of the United States, Canada, Mexico and Puerto Rico. SLI 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 conducts its operations in over 30
countries through sales and distribution facilities.
JOINT VENTURE
In April 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 which,
if exercised, will result in each party having a 50% ownership interest. The
purpose of the joint venture arrangement is to expand fiberoptic activities in
North America. Schott,
28
<PAGE> 32
headquartered in Mainz, Germany, is one of the world's largest manufacturers 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.
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's operations and management believes that it generally has a good
relationship with its unionized and non-unionized employees.
29
<PAGE> 33
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.
30
<PAGE> 34
(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.
31
<PAGE> 35
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
Richard F. Parenti..................... 44 Vice President Finance, Secretary and
Chief Accounting Officer
Linda A. Moulton....................... 42 Treasurer
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, a subsidiary of the Company,
since its acquisition in September 1997 and has served as the Chief Executive
Officer of SLI 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.
Linda A. Moulton joined the Company as Treasurer in December 1997, coming
from State Street Bank (Boston), where since 1993 she headed the Large Corporate
Department, which was made up of a group of lending professionals that
concentrated on specialized companies with sales exceeding $150 million. From
1990 to 1993, she was a Vice-President and a manager of the Boston branch of The
Daiwa Bank, Ltd. Ms. Moulton has worked in banking and finance for more than 15
years. She has a Bachelor of Science degree in Psychology from Brown University
and a Masters degree in International Affairs from Columbia University.
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
32
<PAGE> 36
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.
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 under the Stock Option
Plan. The Special 1997 Stock Option Plan (the "Special Option Plan") is
administered by a separate committee with the right to make grants of options
under the Special Option Plan (the "Special Option
33
<PAGE> 37
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 and its subsidiaries.
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
$18.67 per share. Such option vests over a five year period and expires in
September 2007.
(d) Mr. Goldstein resigned from his positions as a director and officer of the
Company in January 1998.
(e) Mr. Goldstein became an executive officer of the Company in September 1995.
34
<PAGE> 38
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(A)
OPTIONS IN PRICE EXPIRATION ------------------------------
NAME GRANTED(B) FISCAL YEAR ($/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
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
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.
35
<PAGE> 39
(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 salary of the Chief Executive Officer, Frank M. Ward, has been
established by the Board of Directors to be $500,000 for the current fiscal
year, with a $500,000 discretionary performance bonus based upon the Company
meeting certain financial targets. Mr. Ward's prior three-year employment
agreement with the Company expired at the end of Fiscal 1997. The Company
anticipates that Mr. Ward will enter into a new employment agreement which will
reflect this compensation. This employment agreement will likely be on terms
similar to Mr. Ward's previous employment agreement, pursuant to which he
received employee health benefits and automobile and expense allowances. The
current salary of Norman Scoular is $500,000 per year with $500,000 in a
discretionary performance bonus, based upon the Company meeting certain
financial targets.
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 receive
all employee benefits, rights and privileges under any retirement, pension,
profit-sharing, insurance, hospital or other plans that may now be in effect or
that may be later adopted. 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 by
giving him notice in writing. 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.
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.
36
<PAGE> 40
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth as of March 31, 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 *
Linda A. Moulton(g)................. 15,100 * -- 15,100 *
Werner A. Arnold(h)................. 307,500 1.0 150,000 157,500 *
Donald S. Dewsnap................... 20,925 * -- 20,925 *
Frederick B. Howard................. -- * -- -- *
Richard E. Ingram(i)................ 37,950 * -- 40,950 *
All directors and
executive officers as
a group (8 persons)............... 12,786,880 43.4% 1,500,000 11,286,880 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 15,000 shares subject to options exercisable within 60 days of the
date of this Prospectus.
(h) 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.
(i) Includes 3,450 shares owned by Mr. Ingram, 34,500 shares owned by Richard
E. Ingram as trustee of the Donna C. Ingram Trust.
37
<PAGE> 41
DESCRIPTION OF CERTAIN INDEBTEDNESS
REVOLVING CREDIT FACILITY
In connection with the SLI 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 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 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 required to comply with specified financial ratios
and tests, including a minimum net worth test and minimum interest coverage and
maximum leverage ratios. The Company is 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.
38
<PAGE> 42
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 37,551,979
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.
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 37,704,978 shares of
Common Stock outstanding. Of these shares, all of the 10,875,000 shares sold in
the Offering and 16,337,993 shares of Common Stock currently outstanding will be
freely tradable without restriction or further registration under the Securities
Act. The remaining 10,491,985 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
39
<PAGE> 43
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 150,000 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 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.
40
<PAGE> 44
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, Smith Barney Inc., Bear, Stearns & Co. Inc. and Lehman
Brothers 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......................
Smith Barney Inc. ..........................................
Bear, Stearns & Co. Inc. ...................................
Lehman Brothers 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.
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
41
<PAGE> 45
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,
penalty bids and "passive" market making in accordance with Regulation M under
the Securities and Exchange Act of 1934 (the "Exchange Act"). 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. In "passive" market making, market makers in
the securities who are Underwriters or prospective underwriters may, subject to
certain limitations, make bids for or purchases of the securities until the
time, if any, at which a stabilizing bid is made. 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".
42
<PAGE> 46
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 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.
43
<PAGE> 47
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.
44
<PAGE> 48
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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
CHICAGO MINIATURE LAMP (CANADA), INC.
Auditors' Report............................................ F-23
Financial Statements
Balance Sheets as of November 30, 1997 and December 1,
1996...................................................... F-24
Statements of Income for the years ended November 30, 1997
and December 1, 1996 and for the 244 days ended December
3, 1995................................................... F-25
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-26
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-27
Notes to Financial Statements............................... F-28
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
Report of Independent Auditors.............................. F-32
Consolidated Financial Statements
Consolidated Balance Sheets as of August 31, 1997, December
31, 1996 and December 31, 1995............................ F-33
Consolidated Statements of Income for the eight months ended
August 31, 1997 and for the years ended December 31, 1996
and 1995.................................................. F-34
Consolidated Statements of Stockholders' Equity for the
eight months ended August 31, 1997 and for the years ended
December 31, 1996 and 1995................................ F-35
Consolidated Statements of Cash Flows for the eight months
ended August 31, 1997 and for the years ended December 31,
1996 and 1995............................................. F-36
Notes to Consolidated Financial Statements.................. F-37
</TABLE>
F-1
<PAGE> 49
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Chicago Miniature Lamp, Inc.
We have audited the accompanying consolidated balance sheets of 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 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, as to
which the date is, February 11, 1998
F-2
<PAGE> 50
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> 51
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, as adjusted for 1998 stock
split described in Note 2............................. $ .73 $ .55 $ .41
----------- ----------- -----------
Weighted-average shares outstanding, as adjusted for
1998 stock split described in Note 2.................. 28,760,505 24,357,099 20,880,169
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 52
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> 53
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> 54
CHICAGO MINIATURE LAMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND ACQUISITIONS
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). In January 1997, the Company entered into a joint venture
agreement with Schott Corporation forming Schott CML Fiberoptics L.L.C. In
connection with the joint venture agreement, the Company contributed
substantially all the assets of Fiberoptics and approximately $300,000 cash in
exchange for 51% of the units of the joint venture.
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) for $161.5 million in cash financed with the Company's cash and a new
credit facility (Note 4). SLI is an integrated designer, manufacturer, and
seller of lighting
F-7
<PAGE> 55
CHICAGO MINIATURE LAMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
systems. SLI 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 allocations are based on preliminary information and
are subject to adjustment.
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> 56
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 periodically assesses
whether a change in circumstances has occurred subsequent to an acquisition
which would indicate whether the future useful life of an asset should be
revised. The Company considers the future earnings potential of the acquired
business in assessing the recoverability of goodwill.
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. 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.
F-9
<PAGE> 57
CHICAGO MINIATURE LAMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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.
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 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.
F-10
<PAGE> 58
CHICAGO MINIATURE LAMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 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.
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.
Reclassifications
Certain amounts in the 1996 and 1995 financial statements have been
reclassified to conform with the 1997 presentation.
F-11
<PAGE> 59
CHICAGO MINIATURE LAMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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
F-12
<PAGE> 60
CHICAGO MINIATURE LAMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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> 61
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> 62
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 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 (see Note 1) and has been reduced
through the utilization of NOL carryforwards of $2,211,000. SLI has NOL
carryforwards for tax purposes of approximately $135,977,000 at November 30,
1997, of which approximately $37,900,000 expire through 2007 and $98,077,000 do
not expire. Approximately 25% of these NOL carryforwards relate to operations in
France (which 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.
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.
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> 63
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 operations, reduce operating cost structure and
improve future operating results. 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 or transfer of certain
assets.
Additionally, the Company approved a restructuring plan as part of the SLI
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. At November 30, 1997, liabilities for approximately $16.2 million in
severance costs and $8.2 million for facility-related costs remained on the
balance sheet. The Company expects to substantially complete its termination of
employees and consolidation of facilities by the end of fiscal 1999.
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.
F-16
<PAGE> 64
CHICAGO MINIATURE LAMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
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.
F-17
<PAGE> 65
CHICAGO MINIATURE LAMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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>
355,765 options were exercisable at November 30, 1997, at a weighted
average exercise price of $10.175.
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 Chicago Miniature Lamp,
Inc. (formerly Industrial Devices, Inc.) and substantially all employees of
Fredon. As a result of the SLI 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>
F-18
<PAGE> 66
CHICAGO MINIATURE LAMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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%.
F-19
<PAGE> 67
CHICAGO MINIATURE LAMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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 November 30, 1997 and December 1, 1996, the Company had foreign currency
forward contracts with notional amounts totaling $28.8 million and $8 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 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>
F-20
<PAGE> 68
CHICAGO MINIATURE LAMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 acquisition in fiscal 1997 expanded operations
of the Company to include Western Europe, Latin America, and Australia.
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>
F-21
<PAGE> 69
CHICAGO MINIATURE LAMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
F-22
<PAGE> 70
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-23
<PAGE> 71
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-24
<PAGE> 72
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-25
<PAGE> 73
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-26
<PAGE> 74
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-27
<PAGE> 75
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-28
<PAGE> 76
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-29
<PAGE> 77
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-30
<PAGE> 78
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-31
<PAGE> 79
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
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-32
<PAGE> 80
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-33
<PAGE> 81
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-34
<PAGE> 82
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-35
<PAGE> 83
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-36
<PAGE> 84
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-37
<PAGE> 85
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 periodically assesses whether a change in circumstances has occurred
subsequent to an acquisition which would indicate whether the future useful life
of an asset should be revised. The Company considers the future earnings
potential of the acquired business in assessing the recoverability of goodwill.
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 excess of fair value of identifiable net
assets acquired over the purchase price related to the business acquisition.
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 carrying value of the
intangible assets is regularly reviewed by management to determine if there has
been any permanent impairment in value.
F-38
<PAGE> 86
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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-39
<PAGE> 87
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-40
<PAGE> 88
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.
The significant items comprising deferred tax assets and liabilities are
tax loss carryforwards, reserves, and differences between book and tax bases of
depreciable assets. A valuation allowance of approximately L31 million, L30
million and of L26 million, respectively, has been recorded at August 31, 1997
and December 31, 1996 and 1995.
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.
F-41
<PAGE> 89
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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 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.
F-42
<PAGE> 90
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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-43
<PAGE> 91
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-44
<PAGE> 92
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.
15. SUBSEQUENT EVENTS
Effective September 1, 1997, Chicago Miniature Lamp, Inc. acquired all the
outstanding capital stock of SLI.
F-45
<PAGE> 93
------------------------------------------------------
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........... 10
Dividend Policy....................... 11
Capitalization........................ 11
Pro Forma Consolidated Statement of
Operations Data..................... 12
Selected Condensed Consolidated
Financial Data...................... 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 14
Business.............................. 20
Management............................ 32
Certain Transactions.................. 36
Principal and Selling Shareholders.... 37
Description of Certain Indebtedness... 38
Description of Capital Stock.......... 39
Shares Eligible for Future Sale....... 39
Underwriting.......................... 41
Notice to Canadian Residents.......... 42
Legal Matters......................... 43
Experts............................... 43
Available Information................. 44
Index to Financial Statements......... F-1
</TABLE>
======================================================
Chicago Miniature
Lamp, Inc. LOGO
CHICAGO MINIATURE LAMP, INC.
10,875,000 Shares
Common Stock
(par value $.01 per share)
PROSPECTUS
CREDIT SUISSE FIRST BOSTON
SALOMON SMITH BARNEY
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
------------------------------------------------------
<PAGE> 94
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......................................
Blue Sky Fees and Expenses..................................
Legal Fees and Expenses.....................................
Accounting Fees and Expenses................................
Miscellaneous...............................................
----------
Total............................................. $
==========
</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. Mr. Werner acquired such shares for
investment and the Company relied on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933, as amended, in connection with the
issuance of such shares.
(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.
The Shares issued in (a) and (b) 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*
3.2 -- 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)
</TABLE>
II-1
<PAGE> 95
<TABLE>
<S> <C> <C>
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)
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**
</TABLE>
II-2
<PAGE> 96
<TABLE>
<S> <C> <C>
10.33 -- Amended and Restated Credit Agreement dated as of October 30, 1997*
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**
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)*
</TABLE>
- ---------------
* Filed herewith.
** To be filed by Amendment.
(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.
(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.
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.
II-3
<PAGE> 97
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> 98
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 April 2, 1998.
CHICAGO MINIATURE LAMP, INC.
By: /s/ FRANK M. WARD
------------------------------------
Frank M. Ward
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Frank M. Ward his true and lawful
attorney-in-fact and agent, with full power of restitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission granting unto said attorney-in-fact and agent
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
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>
/s/ FRANK M. WARD Chief Executive Officer April 2, 1998
- ----------------------------------------------------- and Director
Frank M. Ward
/s/ RICHARD F. PARENTI Chief Accounting Officer April 2, 1998
- -----------------------------------------------------
Richard F. Parenti
Director
- -----------------------------------------------------
Werner A. Arnold
/s/ DONALD S. DEWSAP Director April 2, 1998
- -----------------------------------------------------
Donald S. Dewsap
Director
- -----------------------------------------------------
Frederick Howard
/s/ RICHARD INGRAM Director April 2, 1998
- -----------------------------------------------------
Richard Ingram
/s/ NORMAN SCOULAR Director April 2, 1998
- -----------------------------------------------------
Norman Scoular
</TABLE>
II-5
<PAGE> 99
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
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, 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, 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 3.1(b)
"CERTIFICATE OF INCORPORATION"
OF
CHICAGO MINIATURE LAMP, INC.
ARTICLE I
NAME
The name of the Corporation is CHICAGO MINIATURE LAMP, INC.
ARTICLE II
REGISTERED OFFICE AND AGENT
The registered office of the Corporation in the State of Oklahoma is
located at 800 Kennedy Building, Tulsa, Oklahoma 74103. The Corporation's
registered agent at that office is Gary H. Baker.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Oklahoma.
ARTICLE IV
CAPITALIZATION
The aggregate number of the authorized shares, itemized by class,
series, if any, and par value within a class, is a follows:
<TABLE>
<CAPTION>
Class Number of Shares Series Par Value
----- ---------------- ------ --------
<S> <C> <C> <C>
Common 100,000,000 N/A $.01
Preferred 5,000,000 N/A $.01
</TABLE>
Total Number of Shares Authorized: 105,000,000
Total Authorized Capital: $1,050,000
The Board of Directors shall have full and complete authority to establish all
attributes, powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limita-
2
<PAGE> 2
tions or restrictions thereof, as contemplated in and permitted by Section 1032
of Title 18 of the Oklahoma Statues.
ARTICLE V
NO CUMULATIVE VOTING OR PREEMPTIVE RIGHTS
The holders of record of the Common Stock shall have one vote for each
share held of record. Cumulative voting for the election of directors or
otherwise is not permitted.
No holder of record of Common Stock shall have a preemptive right or be
entitled as a matter of right to subscribe for or purchase (i) any shares of
capital stock of the Corporation of any class whatsoever, or (2) warrants,
options or rights of the Corporation, or (3) securities convertible into, or
carrying warrants, options or rights to subscribe for or purchase, capital stock
of the Corporation of any class whatsoever, whether now or hereafter authorized
or outstanding.
ARTICLE VI
AMENDMENT OF BYLAWS
The Board of Directors of the Corporation is expressly authorized and
empowered to make, alter, amend or repeal the bylaws of the Corporation or to
adopt new bylaws.
ARTICLE VII
POSSIBLE CONFLICTS OF INTEREST
No agreement or transaction involving the Corporation or any other
corporation, partnership, association or other entity in which the Corporation
owns an interest or any properties thereof in which one or more director or
officer of the Corporation has a financial interest shall be void or voidable
solely for this reason or solely because such directors or officers are present
at or participate in the contract or transaction that is approved.
ARTICLE VIII
INDEMNIFICATION
To the fullest extent allowed by the laws of Oklahoma as in effect from
time to time, the Corporation shall indemnify any
3
<PAGE> 3
person (and the heirs, executors and administrators of such person) who is or
was a director, officer, employee or agent of the Corporation, or who, at the
request of this Corporation, is or was a director, officer, employee, agent,
partner, or trustee, as the case may be, of any other corporation, foreign or
domestic, or of any partnership, proprietorship, trust, association or other
entity in which this Corporation owns an interest, against any and all
liabilities and reasonable expenses incurred by him in connection with or
resulting from any claim, action, suit or proceeding, whether brought by or in
the right of the Corporation or otherwise and whether civil, criminal,,
administrative or investigative in nature, or in connection with an appeal
relating thereto, in which he has become involved as a party or is threatened
to be made a party or otherwise, by reason of being or having been such as
director, officer, employee or agent.
ARTICLE IX
NO DIRECTOR LIABILITY IN CERTAIN CASES
--------------------------------------
To the maximum extent permitted by law, no director of the Corporation
shall be liable to the Corporation or its shareholders for monetary damages for
breach of fiduciary duty as a director, provided that this provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its shareholders, (ii) for acts
or omission not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 1053 of Title 18 of Oklahoma
Statutes as in effect from time to time for unlawful payment of dividends or
stock redemptions, or (iv) for any transaction from which the director an
improper personal benefit.
ARTICLE X
CERTAIN COMPROMISES
-------------------
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
shareholders or any class of them, any court of equitable jurisdiction within
the State of Oklahoma, on the application in a summary way of this Corporation
or of any creditor or shareholder thereof, or on the application of any
receiver or receivers appointed for this Corporation under the provisions of
Section 1106 of Title 18 of the Oklahoma Statutes as in effect from time to
time or on the application of trustees in dissolution or of any receiver or
receivers appointed for this Corporation under the provisions of Section 1100
of Title 18 of the
4
<PAGE> 4
Oklahoma Statutes as in effect from time to time, may order a meeting of the
creditors or class of creditors, and/or of the shareholder or class of
shareholders of this Corporation, as the case may be, to be summoned in such
manner as the court directs. If a majority in number representing
three-fourths (3/4ths) in value of the creditors or class of creditors, and/or
of the shareholders or class of shareholders of this Corporation, as the case
may be, agree to any compromise or arrangement and to any reorganization of
this Corporation as consequence of such compromise or arrangement, the
compromise or arrangement and the reorganization shall, if sanctioned by the
court to which the application has been made, be binding on all the
shareholders or class of shareholders of this Corporation, as the case may be,
and also on this Corporation."
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by its President and attested by its Secretary this 17th day of
December, 1996.
CHICAGO MINIATURE LAMP, INC., an
Oklahoma Corporation
By: /s/ Frank M. Ward
---------------------------------
Frank M. Ward, President
ATTEST:
/s/ Ronald S. Goldstein
- ------------------------------
Ronald S. Goldstein, Secretary
5
<PAGE> 1
EXHIBIT 10.1(c)
EXHIBIT A
CHICAGO MINIATURE LAMP, INC.
SPECIAL 1997 STOCK OPTION PLAN
SECTION 1. PURPOSE
This Special 1997 Stock Option Plan (the "Plan") is intended as a
performance incentive for employees of those Subsidiaries (as hereinafter
defined) of CHICAGO MINIATURE LAMP, INC., an Oklahoma corporation (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, to enable the persons to whom options are granted hereunder
(an "Optionee" or "Optionees") to acquire or increase a proprietary interest in
the success of the Company and its Subsidiaries.. The Company intends that this
purpose will be effected by the granting of stock options ("Options") under the
Plan. As used in the Plan, the term "Subsidiary" shall mean, with respect to
the Company, any corporation or other entity, a majority (by number of votes) of
whose outstanding equity interests of any class or classes are at the time of
determination owned by the Company or by a Subsidiary of the Company, if the
holders of such equity interests (a) are ordinarily, in the absence of
contingencies, entitled to vote for the election of a majority of the directors
(or persons performing similar functions) of the issuer thereof, even though the
right so to vote has been suspended by the happening of any such contingency, or
(b) are at the time entitled, as such holders, to vote for the election of a
majority of the directors (or persons performing similar functions) of the
issuer thereof, whether or not the right so to vote exists by reason of the
happening of a contingency.
SECTION 2. OPTIONS TO BE GRANTED AND ADMINISTRATION
2.1 Administration by the Board. This Plan shall be administered by the
Board of Directors of the Company (the "Board"). The Board shall have full and
final authority to operate, manage and administer the Plan on behalf of the
Company. This authority includes, but is not limited to: (i) the power to
grant Options conditionally or unconditionally; (ii) the power to prescribe the
form or forms of the instruments evidencing options granted under this Plan;
(iii) the power to interpret the Plan; (iv) the power to provide regulations for
the operation of the incentive features of the Plan, and otherwise to prescribe
regulations for interpretation, management and administration of the Plan; (v)
the power to delegate responsibility for Plan operation, management and
administration on such terms, consistent with the Plan, as the Board may
establish; (vi) the power to delegate to other persons the responsibility for
performing ministerial acts in furtherance of the Plan's purpose; and (vii) the
power to engage the services of persons or organizations in furtherance of the
Plan's purpose, including, but not limited to, banks, insurance companies,
brokerage firms and consultants.
In addition, as to each Option, the Board shall have full and final
authority in its discretion: (i) to determine the number of shares subject to
each Option; (ii) to determine the time or times at which Options will be
granted; (iii) to determine the time or times when each Option shall become
exercisable and the duration of the exercise period, which shall not exceed the
limitations specified in Section 5.1.1; and (iv) to determine the option price
for the shares subject to each Option, which price shall be subject to the
applicable requirements, if any, of Section 5.1.4 hereof.
2.2 Appointment and Proceedings of Committee. The Board may appoint a
Stock Option Committee (the "Committee") which shall consist of one or three
Members of the Board. The Board may from time to time appoint members of the
Committee in substitution for or in addition to the member or members
previously appointed, and may fill vacancies, however caused, in the
Committee. If the Committee has more than one member, it shall select one of
its members as its chairman. The Committee shall hold its meetings at such
times and places as it, or Chairman, as the case may be, shall deem advisable.
If the Committee has more than one member, a majority of its members shall
constitute a quorum, and all actions of the Committee shall be taken by a
majority of its members. Any action of the Committee may be taken by a written
instrument signed by the Committee, or if the Committee has more than one
member, by all of its members, and any action so taken shall be as fully
effective as if it had been taken by a vote of a majority of the members at a
meeting duly called and held.
<PAGE> 2
2.3 Powers of Committee. Subject to the provisions of this Plan and the
approval of the Board, the Committee shall have the power to make
recommendations to the Board as to whom Options should be granted, the number of
shares to be covered by each Option, the time or times of grant of Option, and
the terms and conditions of each Option. In addition, the Committee shall have
authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan, and to exercise the administrative and
ministerial powers of the Board with regard to aspects of the Plan, other than
the granting of Options. The interpretation and construction by the Committee
of any provisions of the Plan or of any Option and the exercise of any power
delegated to it hereunder shall be final, unless otherwise determined by the
Board. No member of the Board or the Committee shall be liable for any action
or determination made in good faith respect to the Plan or any Option.
SECTION 3. STOCK
3.1 Shares Subject to Plan. The stock subject to the Options shall be
shares of the Company's authorized but unissued common stock, par value $.01 per
share ("Common Stock"). The total number of shares that may be issued pursuant
to Options shall not exceed an aggregate of 2,000,000 shares of Common Stock.
3.2 Lapsed or Unexercised Options. Whenever any outstanding Option
expires, is cancelled or is otherwise terminated (other than by exercise), the
shares of Common Stock allocable to the unexercised portion of such Option shall
be restored to the Plan and be available for the grant of other Options.
SECTION 4. ELIGIBILITY.
4.1 Eligible Optionees. Options may be granted under the Plan 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 Plan.
SECTION 5. TERMS OF THE OPTION GRANTS
5.1 Mandatory Terms. Each grant of an Option under the Plan (an "Option
Grant") shall contain such provisions as the Board or the Committee shall from
time to time deem appropriate, and shall include provisions relating to the
exercise, payment of exercise price, adjustments or changes in the Company's
capitalization and the effect of a merger, consolidation, liquidation, sale or
other disposition of or involving the Company. Option Grants need not be
identical, but each Option Grant by appropriate language shall include the
substance of all of the following provisions:
5.1.1 Expiration. Notwithstanding any other provision of the Plan
or of any Option Grant, each Option shall expire on the date specified in the
Option Grant, which date shall not be later than the tenth anniversary of the
date as of which the Option was granted.
5.1.2 Exercise. Each Option shall be deemed exercised when (i)
the Company has received written notice of such exercise in accordance with the
terms of the Option, (ii) full payment of the aggregate option price of the
shares of Common Stock as to which the Option is exercised has been made, and
(iii) arrangements that are satisfactory to the Board or the Committee in its
sole discretion have been made for the Optionee's payment to the Company of the
amount that is necessary for the Company or Subsidiary employing the Optionee to
withhold in accordance with applicable tax withholding requirements. Unless
further limited by the Board or the Committee in any Option Grant, the option
price of any shares of Common Stock purchased shall be paid in cash, by
certified or official bank check, by money order, with shares of Common Stock or
by a combination of the above; provided further, however, that the Board or the
Committee in its sole discretion may accept a personal check in full or partial
payment of any shares of Common Stock. If the exercise price is paid in whole
or in part with shares, the value of the shares surrendered shall be their fair
market value on the date the Option is exercised as determined in accordance
with Section 5.1.4 hereof. No Optionee shall be deemed to be a holder of any
shares of Common Stock subject to an Option unless and until a stock certificate
or certificates for
<PAGE> 3
such shares of Common Stock are issued to such person(s) under the terms of the
Plan. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is
issued, except as expressly provided in Section 6 hereof.
5.1.3 Events Causing Immediate Exercise. Unless otherwise provided
in any Option Grant, each outstanding Option shall become immediately fully
exercisable:
5.1.3.1 If there occurs any transaction (which shall include
a series of transactions occurring within 60 days or occurring pursuant to a
plan), that has the result that stockholders of the Company immediately before
such transaction cease to own at least 51 percent of the voting stock of the
Company or of any entity that results from the participation of the Company in a
reorganization, consolidation, merger, liquidation or any other form of
corporate transaction;
5.1.3.2 If the stockholders of the Company shall approve a
plan of merger, consolidation, reorganization, liquidation or dissolution in
which the Company does not survive (unless the approved merger, consolidation,
reorganization, liquidation, or dissolution is subsequently abandoned); or
5.1.3.3 If the stockholders of the Company shall approve a
plan for the sale, lease, exchange or other disposition of all or substantially
all the property and assets of the Company (unless such plan is subsequently
abandoned).
The Board or the Committee may in its sole discretion 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.
5.1.4 Purchase Price. The price at which shares may be purchased
under any Option shall be specified by the Board at the time such 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 Option is granted, but shall not
be less than the par value of shares of Common Stock.
For the purpose of the Plan, the "fair market value" per share of Common
Stock on any date of reference shall be the Closing Price of the Common Stock
of the Company which is referred to in clause (i), (ii) or (iii) below, on the
business day immediately preceding such date, or if not referred to in clause
(i), (ii) or (iii) below, "fair market value" per share of Common Stock shall
be such value as shall be determined by the Board or the Committee, unless the
Board or the Committee in its sole discretion shall determine otherwise in a
fair and uniform manner. For this purpose, the Closing Price of the Common
Stock on any business day shall be (i) if the Common Stock is listed or
admitted for trading on any United States national securities exchange, or if
actual transactions, are otherwise reported on a consolidated transaction
reporting system, the last reported sale price of Common Stock on such exchange
or reporting system, as reported in any newspaper of general circulation, (iii)
if the Common Stock is quoted on the National Association of Securities Dealers
Automated Quotations System ("NASDAQ"), or any similar system of automated
dissemination of quotations of securities prices in common use, the mean
between the closing high bid and low asked quotations for such day of Common
Stock on such system, or (iii) if neither clause (i) or (ii) is applicable,
the mean between the high bid and low asked quotations for the Common Stock as
reported by the National Quotation Bureau, Incorporated if at least two
securities dealers have inserted both bid and asked quotations for Common Stock
on at least five of the ten preceding days.
5.1.5 Transferabililty of Options. Options shall be transferrable
to the extent, and only to the extent, expressly provided in the Option Grant
with respect thereto.
5.1.6 Termination of Employment or Death of Optionee. Except as
may be otherwise expressly provided in the Option Grant with respect thereto,
Options shall terminate on the earlier to occur of
5.1.6.1 the date of expiration thereof stated in the Option
Grant with respect thereto, or
<PAGE> 4
5.1.6.2 other than in the case of death of the Optionee or
disability of the Optionee within the meaning of Section 22(e)(3) of the United
States Internal Revenue Code ("disability"), 90 days after termination of the
employment or other relationship between the Company or any of the Subsidiaries
and the Optionee, unless such termination provision is waived by resolution
adopted by the Board within 30 days of the termination of such relationship.
Except as may otherwise be expressly provided in the applicable Option
Grant, in the event of the death of an Optionee while in an employment or other
relationship with the Company and before the date of expiration of an Option,
such Option shall terminate on the earlier of such date of expiration or 180
days following the date of such death. After the death of the Optionee, his
executors, administrators or any person or persons to whom such Option may be
transferred by will or by laws of decent and distribution, shall have the right,
at any time prior to such time of termination, to exercise such Option to the
extent the Optionee was entitled to exercise such Option immediately prior to
the Optionee's death.
Except as may otherwise be expressly provided in the applicable Option
Grant, if an Optionee's employment or other relationship with the Company
terminates because of a disability, such Optionee's Option shall terminate on
the earlier of the date of expiration thereof or 180 days following the
termination of such relationship; and unless by its terms it sooner terminates
and expires during such 180 day period, the Optionee may exercise that portion
of such Option which is exercisable at the time of termination of such
relationship.
An employment relationship between the Company and the Optionee shall be
deemed to exist during any period during which the Optionee is employed by the
Company or any Subsidiary. Whether authorized leave of absence or absence on
military or government service shall constitute termination of the employment
relationship between the Company and the Optionee shall be determined by the
Board at the time thereof.
5.1.7 Rights of Optionees. No Optionee shall be deemed for any
purpose to be the owner of any shares of Common Stock subject to any Option
unless and until (i) the Option shall have been exercised pursuant to the terms
thereof, (ii) the Company shall have issued and delivered the shares of the
Optionee, and (iii) the Optionee's name shall have been entered as a stockholder
of record on the books of the Company. Thereupon, the Optionee shall have full
voting, dividend and other ownership rights with respect to such shares of
Common Stock.
5.2 Certain Optional Terms. The Board may in its discretion provide,
upon the grant of any Option hereunder, that the Company shall have an option to
repurchase all or any number of shares purchased upon exercise of such Option.
The repurchase price per share payable by the Company shall be such amount or be
determined by such formula as is fixed by the Board at the time the Option for
the shares subject to repurchase was granted. The Board may also provide that
the Company shall have a right of first refusal with respect to the transfer or
proposed transfer of any shares purchased upon exercise of an Option granted
hereunder. In the event the Board shall grant Options subject to repurchase
rights or rights of first refusal in favor of the Company as described in this
Section 5.2, (a) the Option Grant with respect to such Option shall set forth in
its terms and provisions the terms of such repurchase rights or rights of first
refusal (and if not set forth in such Option Grant, such rights shall not
apply), and (b) the certificate or certificates representing the shares
purchased pursuant to such Option shall carry a legend satisfactory to counsel
for the Company referring to the Company's rights with respect thereto.
SECTION 6. ADJUSTMENT OF SHARES OF COMMON STOCK
6.1 Increase or Decrease of Outstanding Shares. If at any time while the
Plan is in effect or unexercised Options are outstanding, there shall be any
increase or decrease in the number of issued and outstanding shares of Common
Stock through the declaration of a stock dividend or through any
recapitalization resulting in a stock split-up, combination or exchange of
shares of Common Stock, then and in such event (i) appropriate adjustment shall
be made in the maximum number of shares of Common Stock available for grant
under the Plan, so that the same percentage of the Company's issued and
outstanding shares of Common Stock shall continue to be subject to being so
optioned, and (ii) appropriate adjustment shall be made in the number of
<PAGE> 5
shares and the exercise price per share of Common Stock thereof then subject to
any outstanding Option, so that the percentage of the Company's issued and
outstanding shares of Capital Stock shall remain subject to purchase at the
same aggregate exercise price.
6.2 Discretionary Adjustment. Subject to the specific terms of any
Option Grant, the Board or the Committee may change the terms of Options
outstanding under the Plan, with respect to the option price or the number of
shares of Common Stock subject to the Options, or both, when, in the sole
discretion of the Board or the Committee, such adjustments become appropriate
by reason of a corporate transaction described in Section 5.1.3 hereof.
6.3 Conversion of Shares. Except as otherwise expressly provided
herein, the issuance by the Company of shares of its capital stock of any
class, either in connection with direct sale or upon the exercise rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to the number of
or exercise of shares of Common Stock then subject to outstanding Options
granted under the Plan.
6.4 General. Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company or debt
securities, or preferred or preference stock that would rank above the shares
subject to outstanding Options; (iv) the dissolution or liquidation of the
Company; (v) any sale, transfer or assignment of all or any part of the assets
or business of the Company; or (vi) any other corporate act or proceeding,
whether of a similar character or otherwise.
SECTION 7. AMENDMENT OF THE PLAN
The Board may amend the Plan at any time and from time to time. Rights
and obligations under any Option granted before any amendment of the Plan shall
not be altered or impaired by such amendment, except with the consent of the
Optionee.
SECTION 8. NON-EXCLUSIVITY OF THE PLAN
The adoption of the Plan by the Board shall not be construed as creating
any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitations, the
granting of stock options otherwise than under the Plan, and such arrangements
may be either applicable generally or only in specific cases.
SECTION 9. GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW
The obligation of the Company to sell and deliver shares of Common Stock
with respect to Options granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable securities
laws, and the obtaining of all such approvals by government agencies as may be
deemed necessary or appropriate by the Board or the Committee. All shares sold
under the Plan shall bear appropriate legends. The Plan shall be governed by
and construed in accordance with the laws of the State of Oklahoma.
SECTION 10. EFFECTIVE DATE OF THE PLAN
The effective date of the Plan is September 8, 1997, the date of which it
was approved by the Board. No option may be granted under the Plan after the
tenth anniversary of such effective date.
<PAGE> 1
EXHIBIT 10.33
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
October 30, 1997
among
CHICAGO MINIATURE LAMP, INC.,
ITS DOMESTIC SUBSIDIARIES,
THE GUARANTORS PARTY HERETO,
THE SPECIAL CREDIT PARTIES PARTY HERETO,
THE LENDERS PARTY HERETO,
ABN AMRO BANK N.V.,
CORESTATES BANK, N.A.,
and
FIRST UNION NATIONAL BANK
as Co-Agents,
FLEET NATIONAL BANK as Manager
and
BANKBOSTON, N.A.,
as Administrative and Documentary Agent
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
Table of Contents
-----------------
<TABLE>
<S> <C> <C> <C> <C>
ARTICLE I....................................................................................................... 1
Definitions............................................................................................ 1
1.1 Defined Terms........................................................................ 1
1.2 Classification of Loans and Borrowings............................................... 25
1.3 Terms Generally...................................................................... 25
1.4 Accounting Terms; GAAP............................................................... 26
1.5 Multiple Borrowers................................................................... 26
ARTICLE II...................................................................................................... 26
The Credits............................................................................................ 26
2.1 Revolving Credit Commitments......................................................... 26
2.2 Loans and Borrowings................................................................. 27
2.3 Requests for Borrowings.............................................................. 28
2.4 Letters of Credit and Bank Guaranties................................................ 29
2.5 Funding of Borrowings................................................................ 33
2.6 Interest Elections................................................................... 37
2.7 Termination and Reduction of Commitments............................................. 38
2.8 Swing Loan Facility.................................................................. 39
2.9 Repayment of Loans; Evidence of Debt................................................. 42
2.10 Prepayment of Loans.................................................................. 43
2.11 Fees................................................................................. 46
2.12 Interest............................................................................. 48
2.13 Alternate Rate of Interest........................................................... 49
2.14 Increased Costs...................................................................... 49
2.15 Break Funding Payments............................................................... 50
2.16 Taxes................................................................................ 51
2.17 Payments Generally: Pro Rata Treatment; Sharing of Set-Offs.......................... 52
2.18 Mitigation Obligations; Replacement of Lenders....................................... 54
ARTICLE III..................................................................................................... 55
Guaranty by Guarantors................................................................................. 55
3.1 The Guaranty......................................................................... 55
3.2 Obligations Unconditional............................................................ 56
3.3 Reinstatement........................................................................ 56
3.4 Subrogation.......................................................................... 57
3.5 Remedies............................................................................. 57
3.6 Instrument for the Payment of Money.................................................. 57
3.7 Continuing Guaranty.................................................................. 57
3.8 Rights of Contribution............................................................... 57
3.9 General Limitation on Guaranty Obligations........................................... 58
3.10 Release of Collateral and Guaranties................................................. 58
ARTICLE IV...................................................................................................... 59
Representations and Warranties......................................................................... 59
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C> <C> <C>
4.1 Organization; Powers................................................................. 59
4.2 Authorization; Enforceability........................................................ 59
4.3 Governmental Approvals; No Conflicts................................................. 59
4.4 Financial Condition; No Material Adverse Change...................................... 59
4.5 Properties........................................................................... 61
4.6 Litigation and Environmental Matters................................................. 61
4.7 Compliance with Laws and Agreements.................................................. 62
4.8 Investment and Holding Company Status................................................ 62
4.9 Taxes................................................................................ 62
4.10 ERISA................................................................................ 62
4.11 Disclosure........................................................................... 63
4.12 Capitalization....................................................................... 63
4.13 Subsidiaries......................................................................... 63
4.14 Material Indebtedness, Liens and Agreements.......................................... 64
4.15 Federal Reserve Regulations.......................................................... 65
4.16 Burdensome Restrictions.............................................................. 65
4.17 Force Majeure........................................................................ 65
4.18 Labor Relations...................................................................... 65
ARTICLE V....................................................................................................... 66
Conditions............................................................................................. 66
5.1 Effective Date....................................................................... 66
5.2 Each Extension of Credit............................................................. 73
ARTICLE VI...................................................................................................... 73
Affirmative Covenants.................................................................................. 74
6.1 Financial Statements and Other Information........................................... 74
6.2 Notices of Material Events........................................................... 75
6.3 Existence; Conduct of Business....................................................... 76
6.4 Payment of Obligations............................................................... 76
6.5 Maintenance of Properties; Insurance................................................. 77
6.6 Books and Records; Inspection Rights................................................. 77
6.7 Fiscal Year.......................................................................... 77
6.8 Compliance with Laws................................................................. 77
6.9 Compliance with Agreements........................................................... 78
6.10 Use of Proceeds...................................................................... 78
6.11 Certain Obligations Respecting Restricted Subsidiaries and
Special Credit Parties............................................................... 78
6.12 ERISA................................................................................ 79
6.13 Environmental Matters; Reporting..................................................... 80
6.14 Conforming Leasehold Interests; Matters Relating to Additional
Real Property Collateral............................................................. 80
6.15 Additional Security Interests........................................................ 81
6.16 Refinancing of Existing Credit Agreements............................................ 81
6.17 Adequate Capital..................................................................... 81
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C> <C> <C>
ARTICLE VII..................................................................................................... 82
Negative Covenants..................................................................................... 82
7.1 Indebtedness......................................................................... 82
7.2 Liens................................................................................ 82
7.3 Contingent Liabilities............................................................... 84
7.4 Fundamental Changes.................................................................. 84
7.5 Investments; Hedging Agreements...................................................... 85
7.6 Restricted Junior Payments........................................................... 85
7.7 Transactions with Affiliates......................................................... 86
7.8 Restrictive Agreements............................................................... 86
7.9 Certain Financial Covenants.......................................................... 86
7.10 Lines of Business.................................................................... 87
7.11 Calculation of Financial Covenants................................................... 87
ARTICLE VIII.................................................................................................... 88
Events of Default...................................................................................... 88
8.1 Events of Default.................................................................... 88
8.2 Receivership......................................................................... 91
ARTICLE IX...................................................................................................... 92
The Administrative Agent............................................................................... 92
9.1 Appointment and Authorization........................................................ 92
9.2 BankBoston's Rights as Lender........................................................ 92
9.3 Duties As Expressly Stated........................................................... 92
9.4 Reliance By Administrative Agent..................................................... 93
9.5 Action Through Sub-Administrative Agents............................................. 93
9.6 Resignation of Administrative Agent and Appointment of
Successor Administrative Agent....................................................... 93
9.7 Lenders' Independent Decisions....................................................... 94
9.8 Obligations of Co-Agents and Manager................................................. 94
ARTICLE X....................................................................................................... 94
Miscellaneous.......................................................................................... 94
10.1 Notices.............................................................................. 94
10.2 Waivers; Amendments.................................................................. 95
10.3 Expenses; Indemnity: Damage Waiver................................................... 96
10.4 Successors and Assigns............................................................... 98
10.5 Survival.............................................................................101
10.6 Counterparts; Integration; Effectiveness.............................................102
10.7 Severability.........................................................................102
10.8 Right of Setoff......................................................................102
10.9 Governing Law; Jurisdiction; Consent to Service of Process...........................102
10.10 WAIVER OF JURY TRIAL.................................................................103
10.11 Headings.............................................................................104
10.12 Successor Facility...................................................................104
</TABLE>
iii
<PAGE> 5
SCHEDULES & EXHIBITS
Schedule 2 Special Credit Party Amounts
Schedule 2.1 List of Lenders and Revolving Credit Commitments
Schedule 4.5 Proprietary Rights; Real Property Assets
Schedule 4.6 Disclosed Matters
Schedule 4.11 Management Structure
Schedule 4.12 Capitalization
Schedule 4.13 Subsidiaries
Schedule 4.14 Material Indebtedness, Liens and Agreements
Schedule 5.1 Exceptions
Schedule 7.1 Local Indebtedness of Foreign Subsidiaries
Schedule 7.7 Transactions with Affiliates
Schedule 7.8 Restrictive Agreements
Schedule 7.13 Operating Account Exceptions
Exhibit A Form of Pledge Agreement
Exhibit B Form of Security Agreement, including Perfection
Certificate attached as Schedule I
Exhibit C Form of Intellectual Property Security Agreement
Exhibit D Form of Hazardous Materials Indemnity Agreement
Exhibit E Form of Certificate of Financial Officer
Exhibit F Form of Compliance Certificate
Exhibit G Form of Opinion of Counsel to Credit Parties
Exhibit H Form of Assignment and Acceptance
iv
<PAGE> 6
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of October 30, 1997 among
CHICAGO MINIATURE LAMP, INC., and CERTAIN SUBSIDIARIES PARTIES HERETO, as
Borrowers, THE GUARANTORS PARTIES HERETO, THE SPECIAL CREDIT PARTIES PARTY
HERETO, THE LENDERS PARTY HERETO, THE CO-AGENTS PARTY HERETO, comprised of ABN
AMRO BANK N.V., CORESTATES BANK, N.A., and FIRST UNION NATIONAL BANK, FLEET
NATIONAL BANK as Manager, and BANKBOSTON, N.A., as Administrative and
Documentary Agent.
The Borrowers, the Guarantors, the Special Credit Parties, the Lenders,
identified on SCHEDULE 2.1 thereto, and the Administrative Agent entered into a
Credit Agreement dated as of September 8, 1997 (the "Prior Agreement") whereby
the Borrowers requested and the Lenders agreed to extend certain credit
facilities to the Borrowers and the Special Credit Parties (as restricted under
the terms of the Prior Agreement). The Guarantors are Foreign Subsidiaries of
CML and will benefit directly and indirectly from the extension of such credit
facilities to the Borrowers and may be Special Credit Parties receiving direct
Loans as further provided in the Prior Agreement. As a precondition to making
any extensions of credit thereunder, the Lenders required and the Guarantors and
the Special Credit Parties agreed, together with the Borrowers, to execute the
Prior Agreement as Guarantors and/or Special Credit Parties.
The Credit Parties, the Lenders, listed on SCHEDULE 2.1 hereto and the
Administrative Agent wish to amend and restate the Prior Agreement to permit ABN
AMRO Bank N.V., CoreStates Bank, N.A., and First Union National Bank to serve as
Co-Agents, Fleet National Bank to serve as Manager and additional Lenders to
join as parties thereto and to make certain other modifications to the Prior
Agreement as set forth herein. The Prior Agreement shall be superseded and
replaced in its entirety by the terms of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms have the
meanings specified below:
"ACQUISITION" means any transaction, or any series of related transactions,
consummated after the date hereof, by which (i) any Credit Party acquires the
business of, or all or substantially all of the assets of, any firm, or
corporation which is not a Credit Party, or any division of such firm or
corporation, located in a specific geographic area or areas, whether through
purchase of assets, purchase of stock, merger or otherwise or (ii) any
Person that was not theretofore a Subsidiary of a Credit Party becomes a
Subsidiary of a Credit Party; provided that the acquisition by any Credit Party
of an Unrestricted Subsidiary (including any firm or corporation that becomes an
Unrestricted Subsidiary as a result of such acquisition) which satisfies all of
the
<PAGE> 7
conditions for designation as an Unrestricted Subsidiary set forth in this
Agreement shall not be deemed to be an "Acquisition."
"ADDITIONAL MORTGAGED PROPERTY" has the meaning assigned to such term in
Section 6.14(b).
"ADJUSTED BASE RATE" means, for any day, a rate per annum equal to the
greater of (a) the base rate announced by the Administrative Agent at its head
offices from time to time and in effect on such day, and (b) the Federal Funds
Effective Rate in effect on such day PLUS 1/2 of 1%. Any change in the Adjusted
Base Rate due to a change in such base rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in such
base rate or the Federal Funds Effective Rate, respectively.
"ADJUSTED LIBO RATE" means, with respect to any LIBOR Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.
"ADMINISTRATIVE AGENT" means BankBoston, N.A. in its capacity as
administrative and documentary agent for the Lenders hereunder.
"ADMINISTRATIVE QUESTIONNAIRE" means an Administrative Questionnaire in a
form supplied by the Administrative Agent.
"AFFILIATE" means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
Notwithstanding the foregoing, (a) no individual shall be an Affiliate solely by
reason of his or her being a director, officer or employee of any Credit Party
and (b) none of the Credit Parties shall be Affiliates.
"ALTERNATIVE CURRENCY" means Deutsche Mark, Pounds Sterling, Canadian
Dollars, Mexican Pesos and Japanese Yen and such other currency which may be
made available by the Administrative Agent in its sole discretion to any
Borrower or Special Credit Party, so long as any such currency is freely
transferrable and convertible into Dollars and is traded on the inter-bank
currency deposits market which the Administrative Agent customarily funds
Alternative Currency Loans.
"ALTERNATIVE CURRENCY AMOUNT" means with respect to each Borrowing made,
continued or issued (or to be made, continued or issued) in an Alternative
Currency, the amount of such Alternative Currency which is equivalent to the
principal amount in Dollars of such Borrowing at the most favorable spot
exchange rate determined by the Administrative Agent to be available to its
London branch at approximately 11:00 a.m. (London time) two (2) Business Days
before such Borrowing is made, continued or issued (or to be made, continued or
issued). When used with respect to any other sum expressed in Dollars,
"Alternative Currency Amount" shall mean the amount of such Alternative Currency
which is equivalent to the amount so expressed in Dollars at the most favorable
spot exchange rate determined by the Administrative Agent to be available to it
at the relevant time.
2
<PAGE> 8
"ALTERNATIVE CURRENCY LOANS" means all Revolving Credit Loans made,
continued or issued in an Alternative Currency.
"APPLICABLE MARGIN" means, for any Type of Loans for any Payment Period (as
defined below), the respective rates indicated below for Loans of such Type
opposite the applicable Leverage Ratio indicated below for such Payment Period
(or as provided in the final paragraph of this definition, for part of a Payment
Period):
<TABLE>
<CAPTION>
Applicable Margin Applicable margin
Range of for LIBOR Loan for Base Rate Loans
Leverage Ratio (% per annum) (% per annum)
-------------- ------------ -------------
<S> <C> <C>
Greater than or equal to 1.75% 0.75%
3.25 to 1
Greater than or equal to 1.50% 0.50%
2.50 to 1 but less than 3.25
to 1
Greater than or equal to 1.25% 0.25%
2.00 to 1 but less than 2.50
to 1
Greater than or equal to 1.5 1.00% 0.00%
to 1 but less than 2.00 to 1
Less than 1.5 to 1 0.75% 0.00%
</TABLE>
For purposes hereof, a "PAYMENT PERIOD" means (i) initially, the period
commencing on the Effective Date to and including the last day of the first
fiscal quarter of the Borrowers in the Borrowers' fiscal year 1998 (the "INITIAL
PAYMENT PERIOD") and (ii) thereafter, the period commencing on the day
immediately succeeding the last day of the prior Payment Period to but not
including the seventh Business Day after the earlier of (x) the due date of the
next Compliance Certificate required to be delivered by the Borrowers to the
Administrative Agent pursuant to Section 6.1(d) concurrently with the delivery
by the Borrowers of the quarterly financial statements required by Section
6.1(b) or (y) the date of the actual receipt by the Administrative Agent of such
Compliance Certificate. Subject to and in accordance with the final paragraph of
this definition, the Applicable Margin shall be effective for each Payment
Period (or in the circumstances described in the final paragraph of this
definition, such portion of a Payment Period) whether or not such Payment Period
coincides with an Interest Period for LIBOR Borrowing.
The Leverage Ratio for the Initial Payment Period shall be deemed to be
greater than or equal to 2.50 to 1 but less than 3.25 to 1. The Leverage Ratio
for any Payment Period after the Initial Payment Period shall be determined on
the basis of the Compliance Certificate required to be delivered to the
Administrative Agent pursuant to Section 6.1(d) concurrently with the delivery
by the Borrowers of the quarterly financial statements required by Section
6.1(b) setting forth, among other things, a calculation of the Leverage Ratio as
at the last day of the fiscal quarter immediately preceding such Payment Period
(i.e. the Leverage Ratio set forth in the
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<PAGE> 9
Compliance Certificate delivered pursuant to Section 6.1(d) that is delivered
together with the financial statements for the fourth fiscal quarter of 1997
shall be used to determine the Applicable Margin with respect to the first
Payment Period that follows the Initial Payment Period, the Leverage Ratio set
forth in the Compliance Certificate delivered pursuant to Section 6.1(d) that is
delivered together with the financial statements for the first fiscal quarter of
1998 shall be used to determine the Applicable Margin with respect to the second
Payment Period that follows the Initial Payment Period, and so forth); provided
that upon delivery by the Borrowers of the Compliance Certificate required to be
delivered by Section 6.1(d) concurrently with the delivery of the annual
financial statements required by Section 6.1(a), the Applicable Margin shall be
adjusted retroactively, as of the first day of the then current fiscal year of
the Borrowers, based on the calculation of the Leverage Ratio pursuant to such
Compliance Certificate and financial statements. In the event of a retroactive
adjustment in the determination of the Applicable Margin in favor of the
Borrowers, the amount of interest thereby refundable to the Borrowers shall be
applied on the date of such retroactive adjustment, to prepay interest payable
on the Revolving Credit Loans. If the retroactive adjustment is in favor of the
Lenders, the amount of interest due to the Lenders shall be paid in full to the
Administrative Agent within five (5) days after written notice of such
adjustment is provided to the Borrowers. Notwithstanding the foregoing, the
Borrowers shall include a request for any downward adjustment of the Applicable
Margin with the Compliance Certificate required to be delivered by the Borrowers
pursuant to Section 6.1(d) concurrently with the delivery by the Borrowers of
the annual financial statements required by Section 6.1(a) and, in any event,
the Administrative Agent and the Lenders shall not be required to make any
downward adjustment until a request of the Borrowers shall have been received
and unless such request is received within three months after the date of
delivery of such Compliance Certificate.
Anything in this Agreement to the contrary notwithstanding, the Applicable
Margin shall be the highest rates provided for above (i) during any period when
an Event of Default shall have occurred and be continuing, or (ii) if the
certificate of a Financial Officer shall not be delivered when required by
Section 6.1(d) (but only, in the case of this clause (ii), with respect to the
portion of such Payment Period prior to the delivery of such certificate).
"APPLICABLE PERCENTAGE" means (a) with respect to any Revolving Credit
Lender for purposes of Sections 2.4, 2.5 and 2.8, the percentage of the total
Revolving Credit Commitments represented by such Lender's Revolving Credit
Commitment and (b) with respect to any Lender in respect of any indemnity claim
under Section 10.3(c) arising out of an action or omission of the Administrative
Agent under this Agreement, the percentage of the total Commitments or Loans of
all Classes hereunder represented by the aggregate amount of such Lender's
Commitment or Loans of all Classes hereunder.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into
by a Lender and an assignee (with the consent of any party whose consent is
required by Section 10.4), and accepted by the Administrative Agent, in the form
of EXHIBIT H annexed hereto or any other form approved by the Administrative
Agent.
"BANKBOSTON" means BankBoston, N.A., a national banking association.
4
<PAGE> 10
"BANK GUARANTY DISBURSEMENTS" means any payment made under any Bank
Guaranty.
"BANK GUARANTIES" means so called bank guaranties issued by the non-U.S.
branches of the Issuing Lender on behalf of any Credit Party as permitted by the
applicable banking laws of the jurisdiction of issuance and as permitted under
the banking laws of the United States as to overseas branches of national banks.
"BASE RATE" when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are denominated in
(i) with respect to the Sterling Overdraft Facility, Sterling and bear interest
at a rate determined by reference to the Sterling base loan rate announced by
the Administrative Agent at its London offices from time to time and in effect
on such day and (ii) Dollars and bear interest at a rate determined by reference
to the Adjusted Base Rate.
"BASIC DOCUMENTS" means the Loan Documents, the Sylvania Acquisition
Agreement and any related agreement.
"BOARD" means the Board of Governors of the Federal Reserve System of the
United States of America.
"BORROWERS" means CML and each of its Domestic Subsidiaries.
"BORROWING" means Loans of the same Type, made, converted or continued on
the same date and, in the case of LIBOR Loans, as to which a single Interest
Period is in effect.
"BORROWING REQUEST" means a request by CML for a Borrowing in accordance
with Section 2.3.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or other day on
which commercial banks in Boston, Massachusetts are authorized or required by
law to remain closed; provided that, when used in connection with a LIBOR Loan,
the term "BUSINESS DAY" shall also exclude any day on which banks are not open
for dealings in U.S. dollar deposits in the London interbank market.
"CAPITAL EXPENDITURES" means, for any period, the sum for the Credit
Parties (determined on a consolidated basis without duplication in accordance
with GAAP) of the aggregate amount of expenditures (including the aggregate
amount of Capital Lease Obligations incurred during such period) made to acquire
or construct fixed assets, plant and equipment (including renewals, improvements
and replacements, but excluding repairs) during such period computed in
accordance with GAAP; provided that such term shall not include any such
expenditures in connection with any replacement or repair of Property affected
by a Casualty Event.
"CAPITAL LEASE OBLIGATIONS" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and
5
<PAGE> 11
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"CASUALTY EVENT" means, with respect to any Property of any Person, any
loss of or damage to, or any condemnation or other taking of, such Property for
which such Person or any of its Subsidiaries receives insurance proceeds, or
proceeds of a condemnation award or other compensation.
"CHANGE IN LAW" means (a) the adoption of any law, rule or regulation after
the date of this Agreement, (b) any change in any law, rule or regulation or in
the interpretation or application thereof by any Governmental Authority after
the date of this Agreement or (c) compliance by any Lender or the Issuing Lender
(or, for purposes of Section 2.14(b), by any lending office of such Lender or by
such Lender's or the Issuing Lender's holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
"CLASS" when used in reference to any Loan, Borrowing or Commitment, refers
to whether such Loan, the Loans comprising such Borrowing or the Loans that a
Lender holding such Commitment is obligated to make, are Revolving Credit Loans
or Swing Loans.
"CML" means Chicago Miniature Lamp, Inc., an Oklahoma corporation.
"CO-AGENTS" means ABN AMRO Bank N.V., Corestates Bank, N.A., and First
Union National Bank in their capacity as co-agents for the Lenders hereunder.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COLLATERAL" means, collectively, all of the Property (including capital
stock) in which Liens are purported to be granted pursuant to the Collateral
Documents as security for all obligations of the Credit Parties hereunder.
"COLLATERAL DOCUMENTS" means the Pledge Agreements, the Security
Agreements, the Intellectual Property Security Agreements, the Mortgages, and
all other instruments or documents delivered by any Credit Party pursuant to
this Agreement or any of the other Loan Documents in order to grant to the
Administrative Agent, on behalf of the Lenders, a Lien on any real, personal or
mixed property of that Credit Party as security for any of its obligations
hereunder and under any Hedging Agreement.
"COMMITMENTS" means the Revolving Credit Commitments and the Swing Loan
Commitment, as applicable.
"COMPLIANCE CERTIFICATE" means a certificate signed by a Financial Officer,
in substantially the form of EXHIBIT F hereto, (i) certifying as to whether a
Default has occurred and, if a Default has occurred, specifying the details
thereof and any action taken or proposed to be taken with respect thereto, (ii)
setting forth reasonably detailed calculations demonstrating compliance with
Section 7.9 (including a statement of the Leverage Ratio for purposes of the
6
<PAGE> 12
definition of Applicable Margin), and (iii) stating whether any change in GAAP
or in the application thereof has occurred since the date of the audited
financial statements referred to in Section 4.4 and, if any such change has
occurred, specifying the effect of such change on the financial statements
accompanying such certificate.
"CONFORMING LEASEHOLD INTEREST" means any Recorded Leasehold Interest as to
which the lessor has agreed in writing for the benefit of the Administrative
Agent (which writing has been delivered to the Administrative Agent), whether
under terms of the applicable lease, under the terms of Landlord Consent and
Estoppel, or otherwise, to the matters described in the definition of "Landlord
Consent and Estoppel" which interest, if a subleasehold interest or
sub-subleasehold interest, is not subject to any contrary restrictions contained
in a superior lease or sublease.
"CONSOLIDATED CASH FLOW COVERAGE RATIO" means, as at any date, the ratio of
(a) EBITDA for the period of four consecutive fiscal quarters ending on or most
recently ended prior to such date MINUS Capital Expenditures for such period
MINUS the amount of any income taxes actually paid in cash for such period to
(b) all Debt Service for the Credit Parties (determined on a consolidated basis
without duplication in accordance with GAAP) for such period.
"CONSOLIDATED INTEREST COVERAGE RATIO" means, as at any date, the ratio of
(a) EBITDA for the period of four consecutive fiscal quarters ending on or most
recently ended prior to such date to (b) Consolidated Interest Expense of the
Credit Parties (determined on a consolidated basis without duplication in
accordance with GAAP) for such periods.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the sum, for the
Credit Parties (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) all interest in respect of
Indebtedness accrued or capitalized during such period (whether or not actually
paid during such period) PLUS (b) the net amounts payable (or MINUS the net
amounts receivable) under Hedging Agreements accrued during such period (whether
or not actually paid or received during such period) including fees, but
excluding (i) reimbursement of legal fees and other similar transaction costs
and (ii) payments required by reason of the early termination of Hedging
Agreements in effect on the date hereof PLUS (c) all fees, including letter of
credit fees and expenses, incurred hereunder after the Effective Date.
"CONSOLIDATED NET WORTH" means, at any date of determination, the
consolidated total assets of the Credit Parties (determined on a consolidated
basis without duplication in accordance with GAAP) MINUS consolidated total
liabilities of the Credit Parties (determined on a consolidated basis without
duplication in accordance with GAAP).
"CONSOLIDATED SUBSIDIARY" means, for any Person, each Subsidiary of such
Person (whether now existing or hereafter created or acquired), the financial
statements of which shall be (or should have been) consolidated with the
financial statements of such Person in accordance with GAAP.
"CONTROL" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise
7
<PAGE> 13
voting power, by contract or otherwise. "CONTROLLING" and "CONTROLLED" have
meanings correlative thereto.
"CREDIT PARTIES" means the Borrowers, the Guarantors and the Special Credit
Parties and for purposes of Sections 6.1 and 7.9 and the calculation of the
Applicable Margin (and all defined terms used in each such Section and in the
definition of Applicable Margin) shall include all Unrestricted Subsidiaries.
"DEBT SERVICE" means, for any period, the sum, for the Credit Parties
(determined on a consolidated basis without duplication in accordance with GAAP)
of the following: (a) all regularly scheduled payments or regularly scheduled
mandatory prepayments of principal of any Indebtedness (including the principal
component of any payments in respect of Capital Lease Obligations, but excluding
any prepayments pursuant to Section 2.10) made during such period PLUS (b) all
Consolidated Interest Expense for such period.
"DEFAULT" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"DISCLOSED MATTERS" means the actions, suits and proceedings and the
environmental matters disclosed in SCHEDULE 4.6 annexed hereto.
"DISPOSITION" means any sale, assignment, transfer or other disposition of
any property (whether now owned or hereafter acquired) by any Credit Party to
any other Person other than another Credit Party excluding (a) the granting of
Liens to the Administrative Agent on behalf of the Lenders pursuant to the
Collateral Documents and (b) any sale, assignment, transfer or other disposition
of (i) any property sold or disposed of in the ordinary course of business and
on ordinary business terms, (ii) any property no longer used or useful in the
business of the Credit Parties and (iii) any Collateral under and as defined in
the Collateral Documents pursuant to an exercise of remedies by the
Administrative Agent thereunder.
"DISPOSITION INVESTMENT" means, with respect to any Disposition, any
promissory notes or other evidences of indebtedness or Investments received by
any Credit Party in connection with such Disposition.
"DOLLARS" or "$" refers to lawful money of the United States of America.
"DOLLAR AMOUNT" means (a) with respect to each Loan made or continued (or
to be made or continued), or each Letter of Credit issued (or to be issued), in
Dollars, the principal amount thereof and (b) with respect to each Loan made or
continued (or to be made or continued), or each Letter of Credit and each Bank
Guaranty issued (or to be issued), in an Alternative Currency, the amount of
Dollars which is equivalent to the principal amount of such Borrowing at the
most favorable spot exchange rate determined by the Administrative Agent at
approximately 11:00 a.m. (Boston time) two (2) Business Days before such
Borrowing is made, continued or issued (or to be made, continued or issued).
When used with respect to any other sum expressed in an Alternative Currency,
"Dollar Amount" shall mean the amount of Dollars which is equivalent to the
amount so expressed in such Alternative Currency at the most
8
<PAGE> 14
favorable spot exchange rate determined by the Administrative Agent to be
available to it at the relevant time.
"DOMESTIC SUBSIDIARY" means a Subsidiary of CML which is not a Foreign
Subsidiary.
"EBITDA" means, for any period, (x) Net Income for the Credit Parties
determined on a consolidated basis without duplication in accordance with GAAP
for such period and 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)
(except to the extent received or paid in cash by the Credit Parties) income or
loss attributable to equity in Affiliates for such period, but (z) excluding
from this calculation (i) any extraordinary and unusual gains or losses during
such period and (ii) the proceeds of any Casualty Events and Dispositions.
"EFFECTIVE DATE" means the date on which the conditions specified in
Section 5.1 are satisfied (or waived in accordance with Section 10.2).
"EFFECTIVE DATE MORTGAGE" has the meaning assigned to such term in Section
5.1(f)(i).
"EFFECTIVE DATE MORTGAGE POLICIES" has the meaning assigned to such term in
Section 5.1(f)(vi).
"EFFECTIVE DATE MORTGAGED PROPERTY" has the meaning assigned to such term
in Section 5.1(f)(i).
"ENVIRONMENTAL LAWS" means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material or to health
and safety matters.
"ENVIRONMENTAL LIABILITY" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of any Credit Party directly or indirectly resulting
from or based upon (a) violation of any Environmental Law, (b) the generation,
use, handling, transportation, storage, treatment or disposal of any Hazardous
Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.
"EQUITY RIGHTS" means, with respect to any Person, any subscriptions,
options, warrants, commitments, preemptive rights or agreements of any kind
(including any stockholders' or voting trust agreements) for the issuance or
sale of, or securities convertible into, any additional shares of capital stock
of any class, or partnership or other ownership interests of any type in, such
Person.
9
<PAGE> 15
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA AFFILIATE" means any entity (whether or not incorporated) that,
together with CML, is treated as a single employer under Section 414(b), (c),
(m) or (o) of the Code.
"ERISA EVENT" means (a) any "reportable event", as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to any Pension Plan,
(b) the existence with respect to any Pension Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived, (c) the filing pursuant to Section 412(d) of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Pension Plan, (d) the incurrence by CML or any of
its ERISA Affiliates of any liability under Title IV of ERISA with respect to
the termination of any Pension Plan, (e) the receipt by CML or any ERISA
Affiliate from the PBGC or a plan administrator of any notice relating to an
intention to terminate any Pension Plan or Pension Plans or to appoint a trustee
to administer any Pension Plan or (f) the receipt by CML or any ERISA Affiliate
of any notice, or the receipt by any of Multiemployer Plan from CML or any ERISA
Affiliate of any notice of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"EVENT OF DEFAULT" has the meaning assigned to such term in Section 8.1.
"EXCLUDED TAXES" means, with respect to the Administrative Agent, any
Lender, the Issuing Lender or any other recipient of any payment to be made by
or on account of any obligation of the Borrowers hereunder, (a) income, net
worth or franchise taxes imposed on (or measured by) its net income or net worth
by the United States of America, or by the jurisdiction under the laws of which
such recipient is organized or in which its principal office is located or, in
the case of any Lender, in which its applicable lending office is located or in
which it is taxable solely on account of some connection other than the
execution, delivery or performance of this Agreement or the receipt of income
hereunder, (b) any branch profits taxes imposed by the United States of America
or any similar tax imposed by any other jurisdiction in which the Borrowers are
located and (c) in the case of a Foreign Lender (other than an assignee pursuant
to a request by the Borrowers under Section 2.18(b)), any withholding tax that
is imposed on amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party to this Agreement or is attributable to such Foreign
Lender's failure or inability to comply with Section 2.16(e), except to the
extent that such Foreign Lender's assignor (if any) was entitled, at the time of
assignment, to receive additional amounts from the Borrowers with respect to
such withholding tax pursuant to Section 2.16(a).
"EXISTING CREDIT AGREEMENT" means the Amended Restated Credit Agreement
dated as of October 30, 1996 among the Borrowers, Boatman's National Bank of
Oklahoma (now known as NationsBank, N.A.) as agent and lender and The First
National Bank of Boston, (now BankBoston, N.A.) as lender and any other
outstanding loans, advances, letters of credit and other agreements or
facilities among the Borrowers and Boatman's National Bank of Oklahoma (now
known as NationsBank, N.A.), The First National Bank of Boston (now BankBoston,
N.A.)
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<PAGE> 16
or any other financial institution and any other agreement providing for loans
or advances to any Credit Party prior to the date hereof.
"FACILITIES" means any and all real property (including all buildings,
fixtures or other improvements located thereon) now or hereafter or heretofore
owned, leased, operated or used by any Credit Party or any of their respective
predecessors.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of Boston, or, if such rate is not so published
for any day that is a Business Day, the average (rounded upwards, if necessary,
to the next 1/100 of 1%) of the quotations for such day for such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it.
"FINANCIAL OFFICER" means the chief financial officer, principal accounting
officer, treasurer or controller of CML.
"FIRST PRIORITY" means, with respect to any Lien purported to be created in
any Collateral pursuant to any Security Document, that such Lien is the most
senior Lien (other than Liens permitted pursuant to Section 7.2 to the extent
not perfected by filing of any UCC financing statements) to which such
Collateral is subject.
"FLOOD HAZARD PROPERTY" means a Mortgaged Property located in an area
designated by the Federal Emergency Management Agency as having special flood or
mud slide hazards.
"FOREIGN LENDER" means any Lender that is organized under the laws of a
jurisdiction other than that in which CML is located. For purposes of this
definition, the United States of America, each State thereof and the District of
Columbia shall be deemed to constitute a single jurisdiction.
"FOREIGN SUBSIDIARY" means any Subsidiary of CML organized in a
jurisdiction other than the United States of America, any State thereof, or the
District of Columbia.
"FUNDED DEBT" means, for any Person, the Indebtedness of such Person as
described in clauses (a), (b) and (c) of the definition of "Indebtedness."
"GAAP" means generally accepted accounting principles, as in effect from
time to time, in the United States of America.
"GOVERNMENTAL AUTHORITY" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
11
<PAGE> 17
"GUARANTY" means a guaranty, an endorsement, a contingent agreement to
purchase or to furnish funds for the payment or maintenance of, or otherwise to
be or become contingently liable under or with respect to, the Indebtedness,
other obligations, net worth, working capital or earnings of any Person, or a
guaranty of the payment of dividends or other distributions upon the stock or
equity interests of any Person, or an agreement to purchase, sell or lease (as
lessee or lessor) property, products, materials, supplies or services primarily
for the purpose of enabling a debtor to make payment of such debtor's
obligations or an agreement to assure a creditor against loss, and including
causing a bank or other financial institution to issue a letter of credit or
other similar instrument for the benefit of another Person, but excluding
endorsements for collection or deposit in the ordinary course of business. The
terms "GUARANTY" and "GUARANTIED" used as a verb shall have a correlative
meaning.
"GUARANTIED OBLIGATIONS" has the meaning assigned to such term in Section
3.1.
"GUARANTORS" means the Foreign Subsidiaries which are also Restricted
Subsidiaries and any parent of CML organized by its shareholders.
"HAZARDOUS MATERIALS" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"HEDGING AGREEMENT" means any interest rate cap agreement, interest rate
swap agreement, interest rate collar agreement, interest rate insurance, foreign
currency exchange agreement, commodity price protection agreement or other
interest, currency exchange rate or commodity price hedging arrangement.
"INDEBTEDNESS" means, for any Person, without duplication: (a) obligations
created, issued or incurred by such Person for borrowed money (whether by loan,
advance, the issuance and sale of debt securities or the sale of Property to
another Person subject to an understanding or agreement, contingent or
otherwise, to repurchase such Property from such Person); (b) obligations of
such Person to pay the deferred purchase or acquisition price of Property or
services, other than trade accounts payable (other than for borrowed money)
arising, and accrued expenses incurred, in the ordinary course of business so
long as such trade accounts are payable within 90 days after the date the
respective goods are delivered or the respective services are rendered; (c)
Capital Lease Obligations of such Person; (d) obligations of such Person in
respect of letters of credit or similar instruments issued or accepted by banks
and other financial institutions for the account of such Person; (e)
Indebtedness of others secured by a Lien on the Property of such Person, whether
or not the respective indebtedness so secured has been assumed by such Person;
and (f) Indebtedness of others Guarantied by such Person. The Indebtedness of
any Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such Person
is liable therefor as a result of such Person's ownership interest in or other
relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.
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<PAGE> 18
"INDEMNIFIED TAXES" means all Taxes other than (a) Excluded Taxes and Other
Taxes and (b) amounts constituting penalties or interest imposed with respect to
Excluded Taxes or Other Taxes.
"INTELLECTUAL PROPERTY SECURITY AGREEMENTS" means the Intellectual Property
Security Agreement executed and delivered by each of Credit Parties on the
Effective Date and thereafter in accordance with Section 6.11, each
substantially in the form of EXHIBIT C annexed hereto, as such agreements may be
amended, supplemented or otherwise modified from time to time.
"INTEREST ELECTION REQUEST" means a request by CML to convert or continue a
Borrowing in accordance with Section 2.6.
"INTEREST PAYMENT DATE" means (a) with respect to any Base Rate Loan, each
Quarterly Date and (b) with respect to any LIBOR Loan, the last Business Day of
the Interest Period applicable to the Borrowing of which such Loan is a part
and, in the case of a LIBOR Borrowing with an Interest Period of more than three
months' duration, each Business Day prior to the last day of such Interest
Period that would have been the last day of the Interest Period for such LIBOR
Loan had successive three month Interest Periods been applicable to such LIBOR
Loan.
"INTEREST PERIOD" means with respect to any LIBOR Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as CML may elect; provided, that (i) if any Interest Period would
end on a day other than a Business Day, such Interest Period shall be extended
to the next succeeding Business Day unless such next succeeding Business Day
would fall in the next calendar month, in which case such Interest Period shall
end on the next preceding Business Day, (ii) any Interest Period that commences
on the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the last calendar month of such Interest
Period) shall end on the last Business Day of the last calendar month of such
Interest Period and (iii) such Interest Period is available for the applicable
Permitted Currency on the inter-bank currency deposits market in which the
Administrative Agent customarily funds LIBOR Borrowings. For purposes hereof,
the date of a Borrowing initially shall be the date on which such Borrowing is
made and thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing. Notwithstanding the foregoing,
(x) if any Interest Period for any Revolving Credit Borrowing would
otherwise end after the Revolving Credit Maturity Date, such Interest
Period shall end on the Revolving Credit Maturity Date, and
(y) notwithstanding the foregoing clause (x), no Interest Period shall
have a duration of less than one month and, if the Interest Period for any
LIBOR Loan would otherwise be a shorter period, such Loan shall not be
available hereunder as a LIBOR Loan for such period.
"INVESTMENT" means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of capital stock, bonds, notes,
debentures, partnership or other
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ownership interests or other securities of any other Person or any agreement to
make any such acquisition (including any "short sale" or any sale of any
securities at a time when such securities are not owned by the Person entering
into such short sale); (b) the making of any deposit with, or advance, loan or
other extension of credit to, any other Person (including the purchase of
Property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such Property to such Person, but excluding
any such advance, loan or extension of credit having a term not exceeding 180
days representing the purchase price of inventory or supplies sold by such
Person in the ordinary course of business); or (c) the entering into of any
Guaranty of, or other contingent obligation with respect to, Indebtedness or
other liability of any other Person and (without duplication) any amount
committed to be advanced, lent or extended to such Person. Notwithstanding the
foregoing, Capital Expenditures and Acquisitions shall not be deemed
"INVESTMENTS" for purposes hereof.
"IP COLLATERAL" means, collectively, the Collateral under the Intellectual
Property Security Agreements.
"ISSUING LENDER" means BankBoston, in its capacity as the issuer of Letters
of Credit hereunder and any of its foreign branches as issuers of Bank
Guaranties.
"LANDLORD CONSENT AND ESTOPPEL" means, with respect to any Leasehold
Property, a letter, certificate or other instrument in writing from the lessor
under the related lease, in such form as may be approved by the Administrative
Agent in its sole discretion.
"LEASEHOLD PROPERTY" means any leasehold interest of any Credit Party as
lessee under any lease of real property, other than any such leasehold interest
designated from time to time by Administrative Agent in its sole discretion as
not being required to be included in the Collateral.
"LC DISBURSEMENT" means a payment made by the Issuing Lender pursuant to a
Letter of Credit.
"LC EXPOSURE" means, at any time, the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time PLUS (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on behalf
of the Borrowers at such time. The LC Exposure of any Revolving Credit Lender at
any time shall be its Applicable Percentage of the total LC Exposure at such
time.
"LENDERS" means the Persons listed on SCHEDULE 2.1 annexed hereto
(including without limitation the Issuing Lender and the Swing Loan Lender) and
any other Person that shall have become a party hereto pursuant to an Assignment
and Acceptance, other than any such Person that ceases to be a party hereto
pursuant to an Assignment and Acceptance.
"LETTER OF CREDIT" means any letter of credit issued pursuant to this
Agreement.
"LEVERAGE RATIO" means, as at any date, the ratio of (a) the Funded Debt of
the Credit Parties (determined on a consolidated basis without duplication in
accordance with GAAP) to (b)
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EBITDA for the period of four consecutive fiscal quarters ending on or most
recently ended prior to such date.
"LIBOR" when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing (whether in Dollars or an
Alternative Currency), are bearing interest at a rate determined by reference to
the Adjusted LIBO Rate.
"LIBO RATE" means, with respect to any LIBOR Borrowing for any Interest
Period, the rate appearing on Page 3750 of the Telerate Service or other
appropriate Telerate Service Page (or on any successor or substitute page of
such Service, or any successor to or substitute for such Service, providing rate
quotations comparable to those currently provided on such page of such Service,
as determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to deposits of the applicable
Permitted Currency in the London interbank market) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, as the rate of interest for deposits of the applicable Permitted
Currency with a maturity comparable to such Interest Period. In the event that
such rate is not available at such time for any reason, then the "LIBO RATE"
with respect to such LIBOR Borrowing for such Interest Period shall be the rate
at which deposits of the applicable Permitted Currency of $5,000,000 (or the
Alternative Currency Amount thereof with respect to a Borrowing to be made in an
Alternative Currency), and for a maturity comparable to such Interest Period,
are offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
"LIEN" means, with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, hypothecation, encumbrance, charge or security interest in, on or
of such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (other than an
operating lease) (or any financing lease having substantially the same economic
effect as any of the foregoing) relating to such asset and (c) in the case of
securities, any purchase option, call or similar right of a third party with
respect to such securities.
"LOAN DOCUMENTS" means this Agreement, any promissory notes evidencing
Loans hereunder, the Collateral Documents and any other instruments or documents
delivered or to be delivered from time to time pursuant to this Agreement.
"LOANS" means the Revolving Credit Loans and the Swing Loans.
"MANAGER" means Fleet National Bank in its capacity as manager for the
Lenders hereunder.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, assets, operations, prospects or condition, financial or otherwise, of
the Credit Parties taken as a whole, (b) the ability of any Credit Party to
perform any of their respective obligations under this Agreement or the other
Loan Documents or (c) the rights of or benefits available to the Lenders under
this Agreement and the other Loan Documents.
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"MATERIAL INDEBTEDNESS" means Indebtedness (other than the Loans or Letters
of Credit), or obligations in respect of one or more Hedging Agreements, of any
one or more of the Credit Parties in an aggregate principal amount exceeding
$750,000. For purposes of determining Material Indebtedness, the "principal
amount" of the obligations of any Person in respect of any Hedging Agreement at
any time shall be the maximum aggregate amount (giving effect to any netting
agreements) that such Person would be required to pay if such Hedging Agreement
were terminated at such time.
"MATERIAL LEASEHOLD PROPERTY" means a Leasehold Property reasonably
determined by the Administrative Agent to be of material value as Collateral or
of material importance to the operations of the Credit Parties; provided,
however that a Leasehold Property with respect to which the aggregate amount of
all rents payable during any one fiscal year does not exceed $25,000 shall not
be a "Material Leasehold Property."
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"MORTGAGE" means (i) a security instrument (whether designated as a deed of
trust or a mortgage, leasehold mortgage, collateral assignment of leases and
rents or by any similar title) executed and delivered by any Credit Party in
such form as may be approved by the Administrative Agent in its sole discretion,
in each case with such changes thereto as may be recommended by Administrative
Agent's local counsel based on local laws or customary local practices, (ii) or
at Administrative Agent's option, in the case of an Additional Mortgaged
Property, an amendment to an existing Mortgage, in form satisfactory to
Administrative Agent, adding such Additional Mortgaged Property to the Real
Property Assets encumbered by such existing Mortgage, in either case as such
security instrument or amendment may be amended, supplemented or otherwise
modified from time to time. "MORTGAGES" means all such instruments, including
Effective Date Mortgages and any Additional Mortgages, collectively.
"MORTGAGED PROPERTY" means an Effective Date Mortgaged Property or an
Additional Mortgaged Property.
"NET CASH PAYMENTS" means,
(i) with respect to any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received
by any Credit Party in respect of such Casualty Event net of (A) reasonable
expenses incurred by any Credit Party in connection therewith and (B)
contractually required repayments of Indebtedness to the extent secured by
a Lien on such property and any income and transfer taxes payable by any
Credit Party in respect of such Casualty Event;
(ii) with respect to any Disposition, the aggregate amount of all cash
payments received by any Credit Party directly or indirectly in connection
with such Disposition, whether at the time of such Disposition or after
such Disposition under deferred payment arrangements or Investments entered
into or received in connection with such Disposition (including Disposition
Investments); provided that
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(A) Net Cash Payments shall be net of (I) the amount of any
legal, title, transfer and recording tax expenses, commissions and
other fees and expenses payable by any Credit Party in connection with
such Disposition and (II) any Federal, state and local income or other
taxes estimated to be payable by any Credit Party as a result of such
Disposition, but only to the extent that such estimated taxes are in
fact paid to the relevant Federal, state or local governmental
authority within twelve months of the date of such Disposition; and
(B) Net Cash Payments shall be net of any repayments by any
Credit Party of Indebtedness to the extent that (I) such Indebtedness
is secured by a Lien on the property that is the subject of such
Disposition and (II) the transferee of (or holder of a Lien on) such
property requires that such Indebtedness be repaid as a condition to
the purchase of such property; and
(iii) with respect to any offering of equity securities or any
incurrence of Indebtedness permitted pursuant to Section 7.1(f), the
aggregate amount of all cash proceeds received by any Credit Party
therefrom less all legal, underwriting and similar fees and expenses
incurred in connection therewith.
"NET INCOME" means, for any period, net income (or loss), excluding
extraordinary items, of the Credit Parties (determined in accordance with GAAP
on a consolidated basis).
"OBLIGATIONS" means, any and all obligations of the Credit Parties or any
of them to the Lenders of every kind and description, direct or indirect,
absolute or contingent, primary or secondary, due or become due, now existing or
hereafter arising, regardless of how they arise or by what agreement or
instrument they may be evidenced or whether evidenced by any agreement or
instrument, and including obligations to perform acts and to refrain from acting
as well as obligations to pay money.
"OPERATING LEASE OBLIGATIONS" means, with respect to the Credit Parties
means the obligations to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are not Capital Lease Obligations.
"OTHER TAXES" means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement and the other Loan Documents,
provided that there shall be excluded from "Other Taxes" all Excluded Taxes.
"PENSION PLAN" means any Plan that is a defined benefit pension plan
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
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"PERMITTED ACQUISITIONS" means acquisition by any of the Borrowers upon the
following conditions:
(a) The line of business acquired is substantially similar to the
Borrowers' existing business.
(b) Maximum additional Revolving Credit Loans for any single
acquisition or series of related acquisitions may not exceed $25,000,000.
(c) Any obligations due to a seller of any such acquired company or
any other debt incurred to finance such acquisition must be subordinated to
the obligations due the Lenders upon terms acceptable to the Required
Revolving Credit Lenders.
(d) A Borrower must be the surviving entity of any merger or other
corporate reorganization related to any such acquisition.
(e) The Borrowers must demonstrate on a pro forma basis that the
Borrowers and the acquired company would have complied with all financial
covenants on a combined basis based for the four quarters ending prior to
the date of the acquisition.
(f) No default or Events of Default shall exist or occur or be
continuing at the time of or after giving effect to any proposed
acquisition.
"PERMITTED CURRENCY" means Dollars or an Alternative Currency or each such
currency as the context requires.
"PERMITTED INVESTMENTS" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guarantied by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from Standard and Poor's Ratings Service
or from Moody's Investors Service, Inc.;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
issued or guarantied by or placed with, and money market deposit accounts
issued or offered by, any domestic office of any commercial bank organized
under the laws of the United States of America or any State thereof which
has a combined capital and surplus and undivided profits of not less than
$250,000,000;
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(d) fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (a) above and entered into
with a financial institution satisfying the criteria described in clause
(c) above; and
(e) loans to employees of the Credit Parties not to exceed $750,000 in
the aggregate outstanding at any time and an additional $750,000 for loans
to Affiliates in the aggregate outstanding at any time.
"PERSON" means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
"PLAN" means any employee benefit plan within the meaning of Section 3(3)
of ERISA in which CML or any ERISA Affiliate is an "employer" as defined in
Section 3(5) of ERISA.
"PLEDGE AGREEMENTS" means the Pledge Agreements executed and delivered by
certain of the Credit Parties on the Effective Date and thereafter in accordance
with Section 6.11, each substantially in the form of EXHIBIT A annexed hereto,
as such agreements may be amended, supplemented or otherwise modified from time
to time.
"POST-DEFAULT RATE" means, for Base Rate Loans, a rate per annum equal to
the Adjusted Base Rate PLUS the Applicable Margin PLUS 2%, and, for LIBOR Loans,
a rate per annum equal to the Adjusted LIBO Rate PLUS the Applicable Margin PLUS
2%.
"PROJECT LIGHTNING DISCUSSION MATERIALS" means the "Project Lightning
Discussion Materials" delivered by CML to the Administrative Agent at a
presentation in June 1997.
"PROPERTY" means any interest of any kind in property or assets, whether
real, personal or mixed, and whether tangible or intangible.
"PTO" means the United States Patent and Trademark Office or any successor
or substitute office in which filings are necessary or, in the opinion of the
Administrative Agent, desirable in order to create or perfect Liens on any IP
Collateral.
"QUARTERLY DATES" means the last Business Day of February, May, August and
November in each year, the first of which shall be the first such day after the
Effective Date of this Agreement.
"REAL PROPERTY ASSET" means, at any time of determination, any fee
ownership or leasehold interest then owned by any Credit Party in any real
property.
"RECORDED LEASEHOLD INTEREST" means a Leasehold Property with respect to
which a Recorded Document (as hereinafter defined) has been recorded in all
places necessary or desirable, in the Administrative Agent's reasonable
judgment, to give constructive notice of such Leasehold Property to third-party
purchasers and encumbrances of the affected real property. For purposes of this
definition, the term "RECORDED DOCUMENT" means, with respect to any Leasehold
Property, (a) the lease evidencing such Leasehold Property or a memorandum
thereof, executed
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and acknowledged by the owner of the affected real property, as lessor, or (b)
if such Leasehold Property was acquired or subleased from the holder of a
Recorded Leasehold Interest, the applicable assignment or sublease document,
executed and acknowledged by such holder, in each case in form sufficient to
give such constructive notice upon recordation and otherwise in form reasonably
satisfactory to the Administrative Agent.
"REFUNDED SWING LOANS" has the meaning assigned to such term in Section
2.8.
"REFUNDING OR PARTICIPATION AMOUNTS" has the meaning specified in Section
2.8.
"REGISTER" has the meaning assigned to such term in Section 10.4.
"RELATED PARTIES" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"RENTAL OBLIGATIONS" means the maximum fixed rentals paid or payable by a
lessee under any lease during a specified period, excluding amounts paid or
payable on account of maintenance, utilities, ordinary repairs, insurance,
taxes, assessments and other similar charges, whether or not designated as
rental or additional rental.
"REQUIRED REVOLVING CREDIT LENDERS" means, at any time, Lenders having
Revolving Credit Loans, LC Exposure, Bank Guaranties and unused Revolving Credit
Commitments representing at least 51% of the sum of the total Revolving Credit
Exposure, LC Exposure, Bank Guaranties and unused Revolving Credit Commitments
at such time.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of any Credit
Party now or hereafter outstanding, except a dividend payable solely in shares
of that class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock of any Credit
Party now or hereafter outstanding, (iii) any payment made to retire, or to
obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of stock of any Credit Party now or hereafter
outstanding, and (iv) any payment or prepayment of principal of, premium, if
any, or interest on, or redemption purchase, retirement, defeasance (including
in-substance or legal defeasance), sinking fund or similar payment with respect
to any Subordinated Indebtedness.
"RESTRICTED SUBSIDIARY" means each Subsidiary of CML that is not an
Unrestricted Subsidiary.
"REVOLVING CREDIT AVAILABILITY PERIOD" means the period from and including
the Effective Date to but excluding the earlier of (a) the Revolving Credit
Maturity Date and (b) the date of termination of the Revolving Credit
Commitments.
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"REVOLVING CREDIT COMMITMENT" means, with respect to each Lender, the
commitment of such Lender to make Revolving Credit Loans and to acquire
participations in Letters of Credit hereunder, as such commitment may be (a)
reduced from time to time pursuant to Sections 2.7 and 2.10 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 10.4. The initial maximum amount of each Lender's Revolving
Credit Commitment is set forth on SCHEDULE 2.1, or in the Assignment and
Acceptance pursuant to which such Lender shall have assumed its Revolving Credit
Commitment, as applicable. The aggregate original maximum amount of the
Revolving Credit Commitments is $250,000,000.
"REVOLVING CREDIT EXPOSURE" means, with respect to any Revolving Credit
Lender at any time, the sum of the outstanding principal amount of such Lender's
Revolving Credit Loans (including participations in Alternative Currency Loans
under Section 2.5(b)(iii)) and its LC Exposure PLUS its share of outstanding
Bank Guaranties at such time.
"REVOLVING CREDIT LENDER" means (a) initially, a Lender that has a
Revolving Credit Commitment set forth opposite its name on SCHEDULE 2.1 and (b)
thereafter, the Lenders from time to time holding Revolving Credit Loans or
Swing Loans or both and Revolving Credit Commitments, after giving effect to any
assignments thereof permitted by Section 10.4.
"REVOLVING CREDIT LOAN" means a Loan made pursuant to Section 2.1 that
utilizes the Revolving Credit Commitment.
"REVOLVING CREDIT MATURITY DATE" means the last Business Day in August,
2002.
"SECURITY AGREEMENTS" means the Security Agreements executed and delivered
by certain of the Credit Parties on the Effective Date and thereafter in
accordance with Section 6.11, each substantially in the form of EXHIBIT B
annexed hereto, as such agreements may be amended, supplemented or otherwise
modified from time to time or such documentation as required under the law
applicable to the Credit Party or its assets in which security is being granted
to the Administrative Agent.
"SPECIAL COUNSEL" means Palmer & Dodge LLP, in its capacity as special
counsel to BankBoston, N.A,, as Administrative Agent of the credit facilities
contemplated hereby.
"SPECIAL CREDIT PARTY" means any Unrestricted Subsidiary or any Sylvania
Company to which the Lenders have made one or more Loans, directly or indirectly
though another Credit Party, but which Unrestricted Subsidiary or Sylvania
Company can only agree to repay and secure the actual Loans made to it and
cannot guaranty or secure any Loans (including the Sylvania Acquisition Loan)
not made directly to such Unrestricted Subsidiary or Sylvania Company. Special
Credit Parties have and will execute this Agreement solely for purposes of
acknowledging the representations set forth in Article IV to the extent
applicable to any such Special Credit Party and the covenants set forth in
Articles VI and VII.
"STATUTORY RESERVE RATE" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one MINUS (i) with respect to LIBOR Loans denominated in Dollars, the aggregate
of the maximum reserve percentages
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(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board to which the Administrative Agent is
subject with respect to the Adjusted LIBO Rate, for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D of the
Board) or (ii) with respect to LIBOR Loans denominated in an Alternative
Currency, the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the applicable governmental authority with respect to such
Alternative Currency. Such reserve percentages shall include those imposed
pursuant to such Regulation D. LIBOR Loans shall be deemed to constitute
eurocurrency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be available
from time to time to any Lender under such Regulation D or any comparable
regulation. The Statutory Reserve Rate shall be adjusted automatically on and as
of the effective date of any change in any reserve percentage.
"STERLING" means the lawful currency of the United Kingdom of Great Britain
and Northern Ireland.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of any Credit Party
consented to in writing by the Required Revolving Credit Lenders which matures
in its entirety later than the Loans and by its terms (or by the terms of the
instrument under which it is outstanding and to which appropriate reference is
made in the instrument evidencing such Subordinated Indebtedness) is made
subordinate and junior in right of payment to the Loans and to such Credit
Party's other obligations to the Lenders hereunder by provisions reasonably
satisfactory in form and substance to the Required Revolving Credit Lenders and
Special Counsel.
"SUBSIDIARY" means, with respect to any Person (the "PARENT") at any date,
any corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent's consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50%
of the ordinary voting power or, in the case of a partnership, more than 50% of
the general partnership interests are, as of such date, owned, controlled or
held, or (b) that is, as of such date, otherwise Controlled, by the parent or
one or more subsidiaries of the parent or by the parent and one or more
subsidiaries of the parent. References herein to "SUBSIDIARIES" shall, unless
the context requires otherwise, be deemed to be references to Subsidiaries of
CML.
"SWING LOAN" has the meaning specified in Section 2.8.
"SWING LOAN COMMITMENT" means the commitment of the Swing Loan Lender to
make Swing Loans, as such commitment may be (a) reduced from time to time
pursuant to Sections 2.7 and 2.10 and (b) reduced or increased from time to time
pursuant to assignments by the Swing Loan Lender pursuant to Section 10.4, which
Commitment shall be deemed to be part of the Swing Loan Lender's Revolving
Credit Commitment if and to the extent of such Revolving Credit Commitment and
not in addition thereto.
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"SWING LOAN LENDER" means BankBoston, N.A., or such other Lender who shall
agree to act as the Swing Loan Lender.
"SWING LOAN REQUEST" has the meaning assigned to such term in Section 2.8.
"SWING LOAN SUBLIMIT" means a sublimit of the Revolving Credit Commitment
equal to $10,000,000.
"SYLVANIA" means Sylvania Lighting International B.V., a private company
with limited liability incorporated under the laws of the Netherlands.
"SYLVANIA ACQUISITION" means the acquisition by CML or a Subsidiary of CML
(provided such Subsidiary is a Credit Party) of all the outstanding shares of
capital stock of Sylvania and the other transactions contemplated by the
Sylvania Acquisition Agreement.
"SYLVANIA ACQUISITION AGREEMENT" means that certain Stock Purchase
Agreement dated August 18, 1997 by and among CML and the shareholders of
Sylvania in the form delivered to the Administrative Agent and the Lenders prior
to their execution of this Agreement.
"SYLVANIA ACQUISITION LOAN" means the Loan made on the date hereof as
further described in Section 2.1 hereof.
"SYLVANIA COMPANIES" means Sylvania and its Subsidiaries on the date of the
Sylvania Acquisition.
"SYNDICATION AGENT" means BancBoston Securities Inc. as syndication agent
and arranger.
"TAXES" means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.
"TITLE COMPANY" means, collectively, Lawyer's Title Insurance Corporation,
and one or more other title insurance companies reasonably satisfactory to the
Administrative Agent.
"TRANSACTIONS" means (a) with respect to the Borrowers, the execution,
delivery and performance by the Borrowers of the Loan Documents to which it is a
party, the borrowing of Loans and the use of the proceeds thereof, and the
issuance of Letters of Credit hereunder and (b) with respect to any Credit Party
(other than the Borrowers), the execution, delivery and performance by such
Credit Party of the Loan Documents to which it is a party.
"TYPE" when used in reference to any Loan or Borrowing, refers to whether
the rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted LIBO Rate or the Adjusted Base Rate.
"UCC" means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.
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"UNRESTRICTED SUBSIDIARIES" means (a) any Foreign Subsidiary which is not
permitted under applicable U.S. or local law to guaranty the Loans or to grant
Liens to the Administrative Agent for the benefit of the Lenders in order to
secure the Loans, (b) any Foreign Subsidiary designated as such by the Board of
Directors of CML as set forth below if, at the time of such designation: (i)
neither the Borrowers nor any of the Restricted Subsidiaries either (A)
provides, except as permitted by this Agreement, credit support for, or
otherwise Guaranties, any Indebtedness of such Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness, but excluding
any credit support or other Guaranty that would not be prohibited hereby to
exist after giving effect to such designation), (B) is otherwise directly or
indirectly liable for any Indebtedness of such Subsidiary (excluding any
liability that would not be prohibited hereby to exist after giving effect to
such designation) or (C) has assigned a promissory note executed by such Foreign
Subsidiary as described in Section 7.1(e) to the Administrative Agent for the
benefit of the Lenders and (ii) no default with respect to any Indebtedness of
such Subsidiary (including any right which the holders thereof may have to take
enforcement action against such Subsidiary) for which any Credit Party is not
liable would permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of the Credit Parties to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its final scheduled maturity, (c) any Foreign Subsidiary of the Borrowers (other
than a Subsidiary existing on the date hereof or any successor to any such
Subsidiary (including any Person that owns any Property previously owned by any
such Subsidiary)) which at the time of determination shall have been designated
an Unrestricted Subsidiary by the Board of Directors of the Borrowers as
provided below, (d) any Subsidiary of an Unrestricted Subsidiary and (e) each
Foreign Subsidiary of the Borrowers designated as an Unrestricted Subsidiary in
Part (a) of SCHEDULE 4.13 annexed hereto. The Board of Directors of CML may,
subject to clauses (b) and (c) above, designate any Foreign Subsidiary of the
Borrowers to be an Unrestricted Subsidiary unless (i) such Subsidiary owns any
capital stock of, or owns or holds any Lien on any property of, any Credit
Party, (ii) such Subsidiary has assets having an aggregate fair market value of
more than $10,000, or (iii) at the time of such designation (either before or
after giving effect thereto), an Event of Default exists or would result
therefrom and the Administrative Agent acting upon the instructions of the
Required Revolving Credit Lenders shall have objected to such designation on or
before the tenth Business Day following the earlier of the date it receives
notice of such designation as provided in the following sentence or the date it
receives notice of such Event of Default as provided in Section 6.2 (d) hereof.
Any Unrestricted Subsidiary shall cease to be an Unrestricted Subsidiary by
designation of the Board of Directors of CML. CML shall furnish to the
Administrative Agent a certified copy of each resolution of its Board of
Directors evidencing each designation pursuant to this definition and a
certificate of a Financial Officer to the effect that such designation complied
with the conditions thereto set forth herein and (in the case of any Subsidiary
of the Borrowers being designated an Unrestricted Subsidiary) setting forth in
reasonable detail the computations necessary to determine whether the Borrowers
are in compliance with Section 7.9 hereof on the date of such designation (both
before and after giving effect thereto), and no such designation shall be
effective for purposes hereof until the Administrative Agent shall have received
such resolution and certificate. As of the Effective Date, Schedule 4.13
indicates which Subsidiaries are Unrestricted Subsidiaries.
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"WHOLLY OWNED SUBSIDIARY" means, with respect to any Person at any date,
any corporation, limited liability company, partnership, association or other
entity of which securities or other ownership interests representing 100% of the
equity or ordinary voting power (other than directors' qualifying shares) or, in
the case of a partnership, 100% of the general partnership interests are, as of
such date, directly or indirectly owned, controlled or held by such Person or
one or more Wholly Owned Subsidiaries of such Person or by such Person and one
or more Wholly Owned Subsidiaries of such Person.
"WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.
1.2 CLASSIFICATION OF LOANS AND BORROWINGS. For purposes of this Agreement,
Loans may be classified and referred to by Class (e.g., a "Revolving Credit
Loan" or "Swing Loan") or by Type (e.g., a "Base Rate Loan" or a "LIBOR Loan")
or by Class and Type (e.g., a "LIBOR Revolving Credit Loan" or a "Base Rate
Revolving Credit Loan"). In similar fashion, (i) Borrowings may be classified
and referred to by Class, by Type and by Class and Type, and (ii) Commitments
may be classified and referred to by Class.
1.3 TERMS GENERALLY. The definitions of terms herein shall apply equally to
the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation". The word "will" shall be
construed to have the same meaning and effect as the word "shall". Unless the
context requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights. References in Articles
VI and VII in respect of the affirmative and negative covenants to be performed
by the Credit Parties shall be interpreted to mean, with respect to Article VI,
that CML will, and will cause each Restricted Subsidiary and Special Credit
Party to comply with such covenant, and, with respect to Article VII, that CML
will not, and will not permit any Restricted Subsidiary or Special Credit Party
to, violate such covenant.
1.4 ACCOUNTING TERMS; GAAP. Except as otherwise expressly provided herein,
all terms of an accounting or financial nature shall be construed in accordance
with GAAP, as in effect from time to time or similar uniform standards as may be
applicable to any Foreign Subsidiary; provided that, if CML notifies the
Administrative Agent that CML requests an amendment to any provision hereof to
eliminate the effect of any change occurring after the date
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hereof in GAAP or such similar uniform standard as may be applicable to any
Foreign Subsidiary or in the application thereof on the operation of such
provision (or if the Administrative Agent notifies CML that the Required
Revolving Credit Lenders request an amendment to any provision hereof for such
purpose), regardless of whether any such notice is given before or after such
change in GAAP or such similar uniform standard as may be applicable to any
Foreign Subsidiary or in the application thereof, then such provision shall be
interpreted on the basis of GAAP or such similar uniform standard as may be
applicable to any Foreign Subsidiary as in effect and applied immediately before
such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
1.5 MULTIPLE BORROWERS. The term "Borrowers" refers to more than one
corporation. All references to the Borrowers are references to CML and its
Domestic Subsidiaries. All Obligations are joint and several between CML and
each such Domestic Subsidiary and the obligations of the Guarantors pursuant to
the Article III are joint and several with the Obligations. All representations
and covenants shall apply and be applied to each of the Credit Parties
separately as well as jointly and are made by each of the Credit Parties, other
than financial covenants contained in Section 7.9, which shall be applied on a
consolidated basis to the Credit Parties. The Borrowers designate CML to act on
behalf of the Borrowers for all purposes under this Agreement, including the
requesting of Revolving Credit Loans and Swing Loans hereunder, and reduction of
the Revolving Credit Commitment.
ARTICLE II
THE CREDITS
2.1 REVOLVING CREDIT COMMITMENTS. Subject to the terms and conditions set
forth herein, each Revolving Credit Lender agrees to make Revolving Credit Loans
to the Borrowers and Special Credit Parties from time to time during the
Revolving Credit Availability Period in an aggregate principal amount that will
not result in such Lender's Revolving Credit Loans exceeding such Lender's
Revolving Credit Commitment; provided that, based on the Dollar Amount of all
Borrowings, the total Revolving Credit Exposure shall not at any time exceed the
total Revolving Credit Commitments; provided further that, the aggregate amount
of Revolving Credit Loans comprising the Sylvania Acquisition Loan shall not
exceed $125,000,000; provided further that (a) the aggregate amount of Revolving
Credit Loans denominated as Alternative Currency Loans either to the Borrowers
or the Special Credit Parties PLUS the amount of the overdraft outstanding
pursuant to the Sterling Overdraft Facility shall not at any time exceed
$50,000,000 in Dollar Amount and (b) the aggregate principal amount of Revolving
Credit Loans made directly to or for the benefit of any Special Credit Party
shall not exceed the principal amount of such Special Credit Party's Funded Debt
outstanding on the date hereof and to be refinanced hereby without the prior
written consent of the Required Revolving Credit Lenders in their sole
discretion on a case by case basis as to amount and Alternative Currency (the
maximum amount and Alternative Currency of Special Credit Parties shall be
listed on Schedule 2 hereto if different from the existing Funded Debt of each
such Special Credit Party on the Effective Date).
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2.2 LOANS AND BORROWINGS.
(a) Each Loan of a particular Class (other than a Swing Loan made by the
Swing Loan Lender or an Alternative Currency Loan made by the Administrative
Agent) shall be made as part of a Borrowing consisting of Loans of such Class
made by the Lenders ratably in accordance with their respective Commitments of
such Class. The failure of any Lender to make any Loan required to be made by it
shall not relieve any other Lender of its obligations hereunder; provided that
the Revolving Credit Commitments of the Lenders are several and no Lender shall
be responsible for any other Lender's failure to make Loans as required.
(b) Subject to Section 2.13 and except with respect to Swing Loans, each
Borrowing shall be comprised entirely of Base Rate Loans or LIBOR Loans as the
Borrowers may request in accordance herewith. Each Lender at its option may make
any LIBOR Loan by causing any domestic or foreign branch or Affiliate of such
Lender to make such Loan; provided that any exercise of such option shall not
affect the obligation of the Borrowers to repay such Loan in accordance with the
terms of this Agreement.
(c) At the commencement of each Interest Period for a LIBOR Borrowing
denominated in Dollars, such Borrowing shall be in an aggregate amount at least
equal to $2,500,000 or any greater multiple of $1,000,000, and with respect to
each LIBOR Borrowing denominated in an Alternative Currency, the Dollar Amount
of such Borrowing shall be at least equal to $2,500,000 or any greater multiple
of $1,000,000. At the time that each Base Rate Borrowing (other than a Swing
Loan) is made, such Borrowing shall be in an aggregate amount that is at least
equal to $2,500,000 or any greater multiple of $1,000,000; provided that (i) a
Base Rate Borrowing of Revolving Credit Loans may be in an aggregate amount that
is equal to the entire unused balance of the total Revolving Credit Commitments,
and (ii) a Revolving Credit Base Rate Borrowing may be in an amount that is
required to finance the reimbursement of an LC Disbursement as contemplated by
Section 2.4(e). At the time each Swing Loan is made, such Borrowing shall be in
an aggregate amount of $100,000 or any greater multiples of $100,000. Borrowings
of more than one Type and Class may be outstanding at the same time; provided
that there shall not at any time be more than a total of ten LIBOR Borrowings
outstanding of which no more than six LIBOR Borrowings may be in Dollars.
(d) Alternative Currency Loans shall be made as provided in Section 2.5 (b)
and shall in all other respects be subject to the terms which apply to Revolving
Credit Borrowings.
2.3 REQUESTS FOR BORROWINGS.
(a) To request a Revolving Credit Borrowing, CML on behalf of the Borrowers
or CML and any Special Credit Party, if the Loan is specifically made to or for
the benefit of any such Special Credit Party, shall notify the Administrative
Agent of such request by telephone (i) in the case of a LIBOR Borrowing
denominated in Dollars, not later than 11:00 a.m., Boston, Massachusetts time,
three Business Days before the date of the proposed Borrowing, (ii) in the case
of a LIBOR Borrowing denominated in an Alternative Currency, not later than
11:00 a.m., Boston, Massachusetts time, three Business Days before the date of
the proposed Borrowing or (iii) in the case of a Base Rate Borrowing not later
than 11:00 a.m., Boston, Massachusetts time,
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one Business Day before the date of the proposed Borrowing; provided that any
such notice of a Base Rate Borrowing to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.4(e) may be given not later than 10:00
a.m., Boston, Massachusetts time, on the date of the proposed Borrowing. Each
such telephonic Borrowing Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Borrowing Request in a form approved by the Administrative Agent and signed by
CML and (if appropriate) such Special Credit Party.
(b) Each such telephonic and written Borrowing Request shall specify the
following information in compliance with Section 2.2:
(i) the aggregate amount of such Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be a Base Rate Borrowing (for
Dollar denominated Loans only) or a LIBOR Borrowing;
(iv) in the case of a LIBOR Borrowing,
(A) whether such Borrowing is to be denominated in Dollars or in
an Alternative Currency, and
(B) the initial Interest Period to be applicable thereto, which
shall be a period contemplated by the definition of the term "Interest
Period"; and
(v) the location and number of the Borrowers' account to which funds
are to be disbursed, which shall comply with the requirements of Section
2.5.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be a Base Rate Borrowing. If no Interest Period is specified
with respect to any requested LIBOR Borrowing, then the Borrowers shall be
deemed to have selected an Interest Period of one month's duration. Promptly
following receipt of a Borrowing Request in accordance with this Section 2.3,
the Administrative Agent shall advise each Lender of the details thereof and of
the amount of such Lender's Loan to be made as part of the requested Borrowing.
2.4 LETTERS OF CREDIT AND BANK GUARANTIES.
(a) GENERAL. Subject to the terms and conditions set forth herein, in
addition to the Revolving Credit Loans provided for in Section 2.1(a), CML may
request the issuance of Letters of Credit denominated in Dollars or an
Alternative Currency for its own account by the Issuing Lender, in a form
reasonably acceptable to the Issuing Lender, at any time and from time to time
during the Revolving Credit Availability Period. Letters of Credit issued
hereunder shall constitute utilization of the Revolving Credit Commitments. In
the event of any inconsistency between the terms and conditions of this
Agreement and the terms and conditions of any form of letter of credit
application or other agreement submitted by CML to, or entered into by CML
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with, the Issuing Lender relating to any Letter of Credit, the terms and
conditions of this Agreement shall control.
(b) NOTICE OF ISSUANCE, AMENDMENT, RENEWAL, EXTENSION; CERTAIN CONDITIONS.
To request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), CML shall hand deliver or
telecopy (or transmit by electronic communication, if arrangements for doing so
have been approved by the Issuing Lender) to the Issuing Lender and the
Administrative Agent (reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a notice requesting the issuance of a Letter of
Credit, or identifying the Letter of Credit to be amended, renewed or extended,
the date of issuance, amendment, renewal or extension, the date on which such
Letter of Credit is to expire (which shall comply with paragraph (c) of this
Section 2.4), the amount of such Letter of Credit, the name and address of the
beneficiary thereof and such other information as shall be necessary to prepare,
amend, renew or extend such Letter of Credit. If requested by the Issuing
Lender, the Borrowers also shall submit a letter of credit application on the
Issuing Lender's standard form in connection with any request for a Letter of
Credit. A Letter of Credit shall be issued, amended, renewed or extended only if
(and upon issuance, amendment, renewal or extension of each Letter of Credit the
Borrowers shall be deemed to represent and warrant that), after giving effect to
such issuance, amendment, renewal or extension (i) the aggregate combined LC
Exposure and Bank Guaranties of the Issuing Lender (determined for these
purposes without giving effect to the participations therein of the Revolving
Credit Lenders pursuant to paragraph (e) of this Section 2.4) shall not exceed
$15,000,000 and (ii) the total Revolving Credit Exposure shall not exceed the
total Revolving Credit Commitments.
(c) EXPIRATION DATE. Each Letter of Credit shall expire (without giving
effect to any extension thereof by reason of an interruption of business) at or
prior to the close of business on the earlier of (i) the date one year after the
date of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) provided that any
such Letter of Credit may provide for automatic extensions thereof to a date not
later than one year beyond its current expiration date, and (ii) the Revolving
Credit Maturity Date. No Letter of Credit may be extended beyond the Revolving
Credit Maturity Date.
(d) BANK GUARANTIES; NOTICE OF ISSUANCE, AMENDMENT, RENEWAL, EXTENSION;
CERTAIN CONDITIONS. From time to time as permitted by applicable law, CML may
request the issuance for the benefit of itself the Borrowers or the Special
Credit Parties, Bank Guaranties (or the amendment, renewal or extension of an
outstanding Bank Guaranty). Each such request shall be hand delivered or
telecopied (or transmitted by other electronic communication, if arrangements
for such other electronic communication have been approved by the Issuing
Lender) to the Issuing Lender and the Administrative Agent (reasonably in
advance of the requested date of issuance, amendment, renewal or extension) of a
notice requesting the issuance of a Bank Guaranty, or identifying the Bank
Guaranty to be amended, renewed or extended, the date of issuance, amendment,
renewal or extension, and containing the requested date on which such Bank
Guaranty is to expire (which shall not extend beyond the Revolving Credit
Maturity Date), the amount of such Bank Guaranty, the name and address of the
party for which the Bank Guaranty is being issued and such other information as
shall be necessary to prepare, amend, renew or extend such Bank Guaranty. CML,
the applicable Borrower and/or the applicable
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Special Credit Party shall execute a counter indemnity agreement or similar
reimbursement agreement in form satisfactory to the Issuing Lender. A Bank
Guaranty shall be issued, amended, renewed or extended only if (and upon
issuance, amendment, renewal or extension of each Bank Guaranty the Borrowers
shall be deemed to represent and warrant that) after giving effect to such
issuance, amendment, renewal or extension (i) the aggregate combined LC Exposure
and Bank Guaranties of the Issuing Lender (determined for these purposes without
giving effect to the participations therein of the Revolving Credit Lenders
pursuant to paragraph (e) of this Section 2.4) shall not exceed $15,000,000 in
Dollar Amount less outstanding Letter of Credit Exposure and (ii) the total
Revolving Credit Exposure shall not exceed the total Revolving Credit
Commitments.
(e) PARTICIPATIONS. By the issuance of a Letter of Credit or Bank Guaranty
(or an amendment to a Letter of Credit or Bank Guaranty increasing the amount
thereof) by the Issuing Lender, and without any further action on the part of
the Issuing Lender, the Issuing Lender hereby grants to each Revolving Credit
Lender, and each Revolving Credit Lender hereby acquires from the Issuing
Lender, a participation in such Letter of Credit or Bank Guaranty equal to such
Revolving Credit Lender's Applicable Percentage of the aggregate amount
available to be drawn under such Letter of Credit or such Bank Guaranty. In
consideration and in furtherance of the foregoing, each Revolving Credit Lender
hereby absolutely and unconditionally agrees to pay to the Administrative Agent,
for the account of the Issuing Lender, such Revolving Credit Lender's Applicable
Percentage of each LC Disbursement or Bank Guaranty Disbursement made by the
Issuing Lender and not reimbursed by the Borrowers on the date due as provided
in paragraph (f) of this Section 2.4, or of any reimbursement payment required
to be refunded to the Borrowers for any reason. Each Revolving Credit Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this paragraph in respect of Letters of Credit or Bank Guaranty is absolute
and unconditional and shall not be affected by any circumstance whatsoever,
including any amendment, renewal or extension of any Letter of Credit or any
Bank Guaranty or the occurrence and continuance of a Default or reduction or
termination of the Revolving Credit Commitments, and that each such payment
shall be made without any offset, abatement, withholding or reduction
whatsoever.
(f) REIMBURSEMENT. If the Issuing Lender shall make any LC Disbursement in
respect of a Letter of Credit or Bank Guaranty Disbursement, the Borrowers shall
reimburse the Issuing Lender in respect of such LC Disbursement or Bank Guaranty
Disbursement, as the case may be, by paying to the Administrative Agent an
amount in immediately available funds equal to the Dollar Amount of such LC
Disbursement or Bank Guaranty Disbursement not later than 12:00 noon, Boston,
Massachusetts time, on (i) the Business Day that CML receives notice of such LC
Disbursement or Bank Guaranty Disbursement, if such notice is received prior to
10:00 a.m., Boston, Massachusetts time; provided that any such same-day
Borrowing shall be a Swing Loan to the extent of the Swing Loan Availability at
such time, or (ii) the Business Day immediately following the day that CML
receives such notice, if such notice is not received prior to such time,
provided that, if such LC Disbursement or Bank Guaranty Disbursement is not less
than $500,000 in Dollar Amount, the Borrowers may, subject to the conditions to
borrowing set forth herein, request in accordance with Section 2.3 that such
payment be financed with a Revolving Credit Base Rate Borrowing in an equivalent
amount and, to the extent so financed,
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the Borrowers' obligation to make such payment shall be discharged and replaced
by the resulting Revolving Credit Base Rate Borrowing.
If the Borrowers fail to make such payment when due, the Administrative
Agent shall notify each Revolving Credit Lender of the applicable LC
Disbursement or Bank Guaranty Disbursement, the payment then due from the
Borrowers in respect thereof and such Revolving Credit Lender's Applicable
Percentage thereof. Promptly following receipt of such notice, each Revolving
Credit Lender shall pay to the Administrative Agent the Dollar Amount of its
Applicable Percentage of the payment then due from the Borrowers, in the same
manner as provided in Section 2.5 with respect to Revolving Credit Loans made by
such Lender (and Section 2.5 shall apply to the payment obligations of the
Revolving Credit Lenders, treating each such payment as a Loan for this
purpose), and the Administrative Agent shall promptly pay to the Issuing Lender
the amounts so received by it from the Revolving Credit Lenders. Promptly
following receipt by the Administrative Agent of any payment from the Borrowers
pursuant to this paragraph, the Administrative Agent shall distribute such
payment to the Issuing Lender or, to the extent that the Revolving Credit
Lenders have made payments pursuant to this paragraph to reimburse the Issuing
Lender, then to such Lenders and the Issuing Lender as their interests may
appear. Any payment made by a Revolving Credit Lender pursuant to this paragraph
to reimburse the Issuing Lender for any LC Disbursement or Bank Guaranty
Disbursement shall not constitute a Loan and shall not relieve the Borrowers of
their obligation to reimburse such LC Disbursement or Bank Guaranty
Disbursement, as the case may be.
(g) OBLIGATIONS ABSOLUTE.
(i) The Borrowers' obligation to reimburse LC Disbursements and Bank
Guaranty Disbursements as provided in paragraph (f) of this Section 2.4
shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement under any and all
circumstances whatsoever and irrespective of (A) any lack of validity or
enforceability of any Letter of Credit or Bank Guaranty, or any term or
provision therein, (B) any draft or other document presented under a Letter
of Credit or Bank Guaranty proving to be forged, fraudulent or invalid in
any respect or any statement therein being untrue or inaccurate in any
respect, (C) payment by the Issuing Lender under a Letter of Credit or Bank
Guaranty against presentation of a draft or other document that does not
comply strictly with the terms of such Letter of Credit or Bank Guaranty
and (D) any other event or circumstance whatsoever, whether or not similar
to any of the foregoing, that might, but for the provisions of this Section
2.4, constitute a legal or equitable discharge of the Borrowers'
obligations hereunder.
(ii) Neither the Administrative Agent, the Lenders nor the Issuing
Lender, nor any of their Related Parties, shall have any liability or
responsibility by reason of or in connection with the issuance or transfer
of any Letter of Credit or Bank Guaranty by the Issuing Lender or any
payment or failure to make any payment thereunder (irrespective of any of
the circumstances referred to in clause (g)(i) above), or any error,
omission, interruption, loss or delay in transmission or delivery of any
draft, notice or other communication under or relating to any Letter of
Credit or Bank Guaranty (including any document required to make a drawing
thereunder), any error in interpretation of technical
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terms or any consequence arising from causes beyond the control of the
Issuing Lender; provided that the foregoing shall not be construed to
excuse the Issuing Lender from liability to the Borrowers to the extent of
any direct damages (as opposed to consequential damages, claims in respect
of which are hereby waived by the Borrowers to the extent permitted by
applicable law) suffered by the Borrowers that are caused by the Issuing
Lender's gross negligence or wilful misconduct when determining whether
drafts and other documents presented under a Letter of Credit or Bank
Guaranty comply with the terms thereof. Subject in all respects to the
foregoing, the parties hereto expressly agree that:
(A) the Issuing Lender may accept documents that appear on their
face to be in substantial compliance with the terms of a Letter of
Credit or Bank Guaranty without responsibility for further
investigation, regardless of any notice or information to the
contrary, and may make payment upon presentation of documents that
appear on their face to be in substantial compliance with the terms of
such Letter of Credit or Bank Guaranty;
(B) the Issuing Lender shall have the right, in its sole
discretion, to decline to accept such documents and to make such
payment if such documents are not in strict compliance with the terms
of such Letter of Credit or Bank Guaranty; and
(C) this clause (g)(ii) shall establish the standard of care to
be exercised by the Issuing Lender when determining whether drafts and
other documents presented under a Letter of Credit or Bank Guaranty
comply with the terms thereof (and the parties hereto hereby waive, to
the extent permitted by applicable law, any standard of care
inconsistent with the foregoing).
(h) DISBURSEMENT PROCEDURES. The Issuing Lender shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under any Letter of Credit or Bank Guaranty. The Issuing Lender shall
promptly notify the Administrative Agent and CML by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Lender has made or
will make an LC Disbursement or Bank Guaranty Disbursement thereunder; provided
that any failure to give or delay in giving such notice shall not relieve the
Borrowers of their obligation to reimburse the Issuing Lender and the Revolving
Credit Lenders with respect to any such LC Disbursement or Bank Guaranty
Disbursement.
(i) INTERIM INTEREST. If the Issuing Lender shall make any LC Disbursement
or Bank Guaranty Disbursement in respect of any Letter of Credit or any Bank
Guaranty, as the case may be, then, unless the Borrowers shall reimburse such LC
Disbursement in full on the date of such LC Disbursement or such Bank Guaranty
Disbursement in full on the date of such Bank Guaranty Disbursement, the unpaid
amount thereof shall bear interest, for each day from and including the date
such LC Disbursement or Bank Guaranty Disbursement is made to but excluding the
date that the Borrowers reimburse such LC Disbursement or Bank Guaranty
Disbursement, at the rate per annum then applicable to Revolving Credit Base
Rate Loans; provided that, if the Borrowers fail to reimburse such LC
Disbursement or Bank Guaranty
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Disbursement when due pursuant to paragraph (f) of this Section 2.4, then
interest calculated in accordance with Section 2.12(c) shall accrue on the
unpaid amount thereof. Interest accrued pursuant to this paragraph shall be for
the account of the Issuing Lender, except that interest accrued on and after the
date of payment by any Revolving Credit Lender pursuant to paragraph (f) of this
Section 2.4 to reimburse the Issuing Lender shall be for the account of such
Lender to the extent of such payment.
(j) CASH COLLATERALIZATION. If either (i) an Event of Default shall occur
and be continuing and the Borrowers receive notice from the Administrative Agent
or the Required Revolving Credit Lenders demanding the deposit of cash
collateral pursuant to this paragraph, or (ii) the Borrowers shall be required
to provide cover for LC Exposure and any Bank Guaranty pursuant to Section
2.9(a) or 2.10(b), the Borrowers shall immediately deposit with the Issuing
Lender an amount in cash equal to, in the case of an Event of Default, the LC
Exposure and the amount of any Bank Guaranty as of such date plus any accrued
and unpaid interest thereon and, in the case of cover pursuant to Section 2.9(a)
or 2.10(b), the amount required under Section 2.9(a) or 2.10(b), as the case may
be; provided that the obligation to deposit cash collateral in an amount equal
to the LC Exposure and the amount of any Bank Guaranty plus any accrued and
unpaid interest thereon shall become effective immediately, and such deposit
shall become immediately due and payable, without demand or other notice of any
kind, upon the occurrence of any Event of Default with respect to any Credit
Party described in clause (g) or (h) of Section 8.1. Such deposit shall be held
by the Issuing Lender as collateral in the first instance for the LC Exposure or
Bank Guaranty under this Agreement and thereafter for the payment of any other
obligations of the Credit Parties hereunder.
2.5 FUNDING OF BORROWINGS.
(a) Each Lender shall make each Loan denominated in Dollars (other than a
Swing Loan) to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds of its Applicable Percentage of such
Loan by 1:00 p.m., Boston, Massachusetts time or, in the case of same-day
Borrowings, 2:00 p.m., Boston, Massachusetts time, to the account of the
Administrative Agent most recently designated by it for such purpose by notice
to the Lenders. The Administrative Agent will make such Loans available to the
Borrowers by promptly crediting the amounts so received, in like funds, to an
account of the Borrowers maintained with the Administrative Agent in Boston,
Massachusetts and designated by CML in the applicable Borrowing Request;
provided that Revolving Credit Loans made to finance the reimbursement of an LC
Disbursement under any Letter of Credit as provided in Section 2.4(e) shall be
remitted by the Administrative Agent to the Issuing Lender and Revolving Credit
Base Rate Loans made to finance the refunding of Swing Loans as provided in
Section 2.8(d)(i) shall be remitted by the Administrative Agent to the Swing
Loan Lender.
(b) FUNDING AND PARTICIPATION IN ALTERNATIVE CURRENCY LOANS AND LOANS TO
SPECIAL CREDIT PARTIES.
(i) Subject to the provisions of this Section 2.5(b), only the
Administrative Agent shall fund Alternative Currency Loans. For purposes of
determining the amount of each Lender's Commitment, Bank Guaranties shall be
treated as Alternative Currency
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Loans under this Section 2.5(b) and each Lender has agreed to fund the
Obligations under each such Bank Guaranty as if it were a Alternative Currency
Loan hereunder. If the Administrative Agent is unable to fund any Alternative
Currency Loan, because of conditions described in Section 2.14, then the
Administrative Agent may, in its sole discretion, designate one of the Lenders
(with such Lender's prior written consent) to fund such Alternative Currency
Loan. If the Administrative Agent is unable to designate any of the Lenders to
fund such Alternative Currency Loan due to circumstances applying to the Lenders
described under Section 2.14, then the Administrative Agent shall so notify the
Borrowers and the Borrowers may request a Loan in a different Alternative
Currency or in Dollars. If Alternative Currency Loans are to be made by a Lender
other than the Administrative Agent, such Lender shall wire transfer immediately
available funds in such Alternative Currency by 11:00 a.m., Boston,
Massachusetts time, on the date such Alternative Currency Loan is to be funded,
to the account of the Administrative Agent most recently designated by it for
such purpose by notice to such Lender or to a depository account designated by
the Administrative Agent. The Administrative Agent will make such Loans
available to the Borrowers by promptly crediting the amounts so received, in
like funds, to an account of the Borrowers maintained with the Administrative
Agent in Boston, Massachusetts or such depository account as may have been
designated by the Borrowers in the applicable Borrowing Request.
(ii) Subject to the provisions of this Section 2.5 (b), all Loans to or for
the benefit of Special Credit Parties shall be Alternative Currency Loans and
shall be made by the Administrative Agent. If the Administrative Agent is unable
to fund any Alternative Currency Loan to or for the benefit of any Special
Credit Party, because of conditions described in Section 2.14, then the
Administrative Agent may, in its sole discretion, designate one of the Lenders
to fund such Alternative Currency Loan. If the Administrative Agent is unable to
designate any of the Lenders to fund such Alternative Currency Loan due to
circumstances applying to the Lenders described under Section 2.14, then the
Administrative Agent shall so notify the Special Credit Party and subject to the
prior approval of the Administrative Agent, such Special Credit Party may
request a Loan in a different Alternative Currency or in Dollars. If Alternative
Currency Loans are to be made by a Lender other than the Administrative Agent,
such Lender shall wire transfer immediately available funds in such Alternative
Currency by 11:00 a.m., Boston, Massachusetts time, on the date such Alternative
Currency Loan is to be funded, to the account of the Administrative Agent most
recently designated by it for such purpose by notice to such Lender or to a
depository account designated by the Administrative Agent. The Administrative
Agent will make such Loans available to the Special Credit Party by promptly
crediting the amounts so received, in like funds, to an account of the Borrowers
maintained with the Administrative Agent in Boston, Massachusetts or such
depository account as may have been designated by such Special Credit Party in
the applicable Borrowing Request.
(iii) Upon making or continuing an Alternative Currency Loan to the
Borrowers or any Special Credit Party, each of the Administrative Agent or the
Lender who made any such Alternative Currency Loan (without any further action
on the part of the Administrative Agent or such Lender) hereby grants to each
Revolving Credit Lender,
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and each Revolving Credit Lender hereby acquires from the Administrative Agent
or any such Lender, a participation in each such Alternative Currency Loan in an
amount equal to such Revolving Credit Lender's Applicable Percentage of the
principal amount of such Alternative Currency Loan. In consideration and in
furtherance of the foregoing, each Revolving Credit Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, for the account of
the Administrative Agent or the Lender making or continuing such Alternative
Currency Loan, such Revolving Credit Lender's Applicable Percentage of any
amount not repaid by the Borrowers or the Special Credit Parties under each
Alternative Currency Loan at maturity or upon acceleration as provided in
Section 8 hereof, or of any reimbursement payment required to be refunded to the
Borrowers or the Special Credit Parties, as the case may be, for any reason.
Each Revolving Credit Lender acknowledges and agrees that its obligation to
acquire participations pursuant to this paragraph in respect of Alternative
Currency Loans is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any continuation or extension of any
Alternative Currency Loan or the occurrence and continuance of a Default or
reduction or termination of the Revolving Credit Commitments, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever.
(iv) The Administrative Agent or the Lender making any Alternative Currency
Loan shall distribute to the Lenders in accordance with each Revolving Credit
Lender's Applicable Percentage the Applicable Margin for LIBOR Borrowings paid
by the Borrowers or the Special Credit Parties, as applicable, under each
Alternative Currency Loan. Each Alternative Currency Loan shall in all other
respects be a Revolving Credit Borrowing for purposes of this Agreement.
(v) Each of the Revolving Credit Lenders and the Special Credit Parties
acknowledge and agree that any Alternative Currency Loan made, directly or
indirectly through another Credit Party, to any Special Credit Party shall be
limited as follows:
a. The amount of all Revolving Loans to Special Credit Parties shall
be limited as provided in Section 2.1.
b. No Loan to a Special Credit Party may mature after the Revolving
Credit Maturity Date.
c. To the extent permitted by applicable local law, each such Loan
shall be secured by the assets of the applicable Special Credit Party and
the Collateral securing such Loans shall only secure such Loans unless the
Special Credit Party enters into a Guaranty in favor of the Lenders with
respect to all of the Revolving Credit Loans, but in no circumstance shall
any Special Credit Party guaranty the repayment of the Sylvania Acquisition
Loan.
d. No default or event of default under any Guaranty by a Special
Credit Party in favor of the Lenders shall be a Default under the
underlying Loan
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Documents directly with each such Special Credit Party unless specifically
provided in such Loan Documents.
e. In the case of any indirect Alternative Currency Loan to a Special
Credit Party through another Credit Party, such Loans shall be on terms
identical to the terms, in the opinion of the Administrative Agent, of the
Alternative Currency Loans from the Lenders to such Credit Party (including
acceleration for nonperformance) and all documents and Liens relating to
such Loan shall be assigned to the Administrative Agent for the benefit of
the Lenders on terms satisfactory to the Administrative Agent.
(c) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing (other than a Swing Loan
Borrowing) that such Lender will not make available to the Administrative Agent
such Lender's Applicable Percentage of such Borrowing, the Administrative Agent
may assume that such Lender has made such Applicable Percentage of such
Borrowing available on such date in accordance with paragraph (a) of this
Section 2.5 and may, in reliance upon such assumption, make available to the
Borrowers a corresponding amount. In such event, if a Lender has not in fact
made its Applicable Percentage of the applicable Borrowing available to the
Administrative Agent, then the applicable Lender and the Borrowers severally
agree to pay to the Administrative Agent forthwith on demand such corresponding
amount with interest thereon, for each day from and including the date such
amount is made available to the Borrowers to but excluding the date of payment
to the Administrative Agent, at the Federal Funds Effective Rate. If such Lender
pays such amount to the Administrative Agent, then such amount shall constitute
such Lender's Loan included in such Borrowing.
(d) Notwithstanding any other provisions of this Agreement, all payments in
respect of Alternative Currency Loans by or to any Lender (other than the
funding of Alternative Currency Loans by the Administrative Agent or a Lender
designated under Section 2.5(b)(i)) shall be in the amount of immediately
available funds equal to the Dollar Amount of such Alternative Currency Loan
payment.
2.6 INTEREST ELECTIONS.
(a) Each Borrowing (other than a Swing Loan Borrowing) initially shall be
of the Type specified in the applicable Borrowing Request and, in the case of a
LIBOR Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request. Thereafter, the Borrowers may elect to convert such Borrowing
to a different Type or to continue such Borrowing and, in the case of a LIBOR
Borrowing, may elect Interest Periods therefor, all as provided in this Section
2.6; provided however, that notwithstanding any other provision of this Section
2.6, no Swing Loan shall be converted from a Base Rate Borrowing to a LIBOR
Borrowing. The Borrowers may elect different options for continuations and
conversions with respect to different portions of the affected Borrowing, in
which case each such portion shall be allocated ratably among the Lenders
holding the Loans comprising such Borrowing, and the Loans comprising each such
portion shall be considered a separate Borrowing.
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(b) To make an election pursuant to this Section 2.6, CML or as to Loans
made directly to Special Credit Parties, the Special Credit Party shall notify
the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.3 if the Borrowers were
requesting a Borrowing of the Type resulting from such election to be made on
the effective date of such election. Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Interest Election Request in a
form approved by the Administrative Agent and signed by CML.
(c) Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.2:
(i) the Borrowing to which such Interest Election Request applies and,
if different options for continuations or conversions are being elected
with respect to different portions thereof, the portions thereof to be
allocated to each resulting Borrowing (in which case the information to be
specified pursuant to clauses (iii) and (iv) below shall be specified for
each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be a Base Rate Borrowing
or a LIBOR Borrowing; and
(iv) if the resulting Borrowing is a LIBOR Borrowing, the Interest
Period to be applicable thereto after giving effect to such election, which
shall be a period contemplated by the definition of the term "Interest
Period".
If any such Interest Election Request requests a LIBOR Borrowing but does not
specify an Interest Period, then the Borrowers shall be deemed to have selected
an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each affected Lender of the details thereof
and of such Lender's portion of each resulting Borrowing.
(e) If the Borrowers fail to deliver a timely Interest Election Request
prior to the end of the Interest Period applicable thereto, then, unless such
Borrowing is repaid as provided herein, at the end of such Interest Period (i)
with respect to a LIBOR Borrowing denominated in Dollars, such Borrowing shall
be converted to a Base Rate Borrowing or (ii) with respect to a LIBOR Borrowing
denominated in an Alternative Currency, such Borrowing shall be converted to a
Borrowing at the "base rate" for such Alternative Currency announced by the
Administrative Agent or its corresponding bank in its head office located in the
jurisdiction which issues such Alternative Currency. Notwithstanding any
contrary provision hereof, if an Event of Default has occurred and is continuing
and the Administrative Agent, at the request of the Required Revolving Credit
Lenders, so notifies the Borrowers, then, so long as an Event of Default is
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continuing (i) no outstanding Borrowing may be converted to or continued as a
LIBOR Borrowing and (ii) unless repaid, each LIBOR Borrowing denominated in
Dollars shall be converted to a Base Rate Borrowing at the end of the Interest
Period applicable thereto.
2.7 TERMINATION AND REDUCTION OF COMMITMENTS.
(a) Unless previously terminated, the Revolving Credit Commitments shall
terminate at the close of business on the Revolving Credit Maturity Date.
(b) The Borrowers may at any time terminate, or from time to time reduce,
the Revolving Credit Commitments or the Swing Loan Sublimit upon at least five
(5) Business Days prior written notice to the Administrative Agent; provided
that (i) each reduction of the Revolving Credit Commitments shall be in an
amount that is at least equal to $5,000,000 or any greater multiple of
$1,000,000, and (ii) the Borrowers shall not terminate or reduce (x) the
Revolving Credit Commitments if, after giving effect to any concurrent repayment
of the Loans in accordance with Section 2.9 or prepayment of the Loans in
accordance with Section 2.10, the total Revolving Credit Exposures would exceed
the total Revolving Credit Commitments or (y) the Swing Loan Sublimit if, after
giving effect to any concurrent repayment of the Swing Loans in accordance with
Section 2.9 or prepayment of the Loans in accordance with Section 2.10, the
aggregate principal amount of outstanding Swing Loans would exceed the Swing
Loan Sublimit, after giving effect to such termination or reduction.
(c) The Borrowers shall notify the Administrative Agent of any election to
terminate or reduce Revolving Credit Commitments or the Swing Loan Sublimit
under paragraph (b) of this Section 2.7 at least five Business Days prior to the
effective date of such termination or reduction, specifying such election and
the effective date thereof. Promptly following receipt of any notice, the
Administrative Agent shall advise the Lenders of the contents thereof. Each
notice delivered by the Borrowers pursuant to this Section 2.7 shall be
irrevocable; provided that a notice of termination of Revolving Credit
Commitments or the Swing Loan Sublimit or both delivered by the Borrowers may
state that such notice is conditioned upon the effectiveness of other credit
facilities, in which case such notice may be revoked by the Borrowers (by notice
to the Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied. Any termination or reduction of Revolving Credit
Commitments shall be permanent. Each reduction of Revolving Credit Commitments
shall be made ratably among the Revolving Credit Lenders in accordance with
their respective Revolving Credit Commitments.
2.8 SWING LOAN FACILITY.
(a) THE SWING LOAN. Subject to the terms and conditions hereinafter set
forth, upon notice by the Borrowers made to the Swing Loan Lender in accordance
with Section 2.8(b)(i) or as determined by the Swing Loan Lender to avoid
overdrawing Borrowers' account with the Swing Loan Lender in accordance with
Section 2.8(b)(ii) or to reimburse itself with respect to indemnification
obligations pursuant to Section 2.8(b)(iii), the Swing Loan Lender hereby agrees
to make Swing Loans to the Borrowers from time to time on any Business Day
during the period between the Effective Date and the Business Day immediately
prior to the expiration of the Revolving Credit Availability Period in an
aggregate principal amount not to exceed the Swing
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Loan Sublimit, and the Swing Loans shall be payable with interest accrued
thereon on such Business Day immediately prior to the expiration of the
Revolving Credit Availability Period. Amounts borrowed by the Borrowers under
this Section 2.8 may be repaid and reborrowed, subject to the conditions hereof.
Unless otherwise specifically set forth herein, Swing Loans shall constitute the
use of the Swing Loan Lender's Revolving Credit Commitment. Notwithstanding any
other provisions of this Agreement and in addition to the Swing Loan Sublimit
limitation set forth above (a) at no time shall the sum of (i) the aggregate
principal amount of all outstanding Swing Loans (after giving effect to all
amounts requested and the application of the proceeds thereof) PLUS (ii) the
aggregate principal amount of all outstanding Revolving Credit Loans (after
giving effect to all amounts requested and the application of the proceeds
thereof), PLUS (iii) the aggregate of LC Exposure and Bank Guaranties, exceeds
the aggregate amount of the Revolving Credit Commitments of all the Lenders and
(b) at no time shall the aggregate Revolving Credit Exposure of the Swing Loan
Lender (both in its capacity as the Swing Loan Lender and in its capacity as a
Revolving Credit Lender) exceed its Revolving Credit Commitment (in its capacity
as a Revolving Credit Lender); PROVIDED, HOWEVER, that subject to the
limitations set forth in this Section 2.8(a) from time to time the ratio of (x)
the sum of the aggregate Revolving Credit Exposure of the Swing Loan Lender
(both in its capacity as the Swing Loan Lender and in its capacity as a
Revolving Credit Lender) to (y) the sum of the aggregate Revolving Credit
Exposure of all Lenders (including the Swing Loan Lender both in its capacity as
the Swing Loan Lender and in its capacity as a Revolving Credit Lender) may
exceed its Applicable Percentage.
(b) REQUESTS FOR SWING LOANS.
(i) When the Borrowers desire the Swing Loan Lender to make a Swing
Loan, CML shall send to the Administrative Agent and the Swing Loan Lender
a written request (or telephonic notice, if thereafter promptly confirmed
in writing) (a "SWING LOAN REQUEST"), which request shall set forth (x) the
principal amount of the proposed Swing Loan, and (y) the proposed date of
Borrowing of such Swing Loan. Each such Swing Loan Request must be received
by the Swing Loan Lender not later than 1:00 p.m. (Boston, Massachusetts
time) on the proposed date of Borrowing of the Swing Loan being requested.
Each Swing Loan Request shall be irrevocable and binding on the Borrowers
and shall obligate the Borrowers to borrow the Swing Loan from the Swing
Loan Lender on the proposed date of Borrowing. Upon satisfaction of the
applicable conditions set forth in this Agreement, on the proposed date of
Borrowing the Swing Loan Lender shall make the Swing Loan available to the
Borrowers by crediting the amount of the Swing Loan to the Borrowers'
account with the Swing Loan Lender.
(ii) On each Business Day, the Swing Loan Lender shall determine the
balance of the Borrowers' accounts with the Swing Loan Lender at 3:00 p.m.
(Boston, Massachusetts time), and to the extent any such account would
otherwise be overdrawn, the Borrowers hereby authorize the Swing Loan
Lender to make a Swing Loan. Upon satisfaction of the applicable conditions
set forth in this Agreement, at or before the close of business on such
date on such Business Day the Swing Loan Lender shall make the Swing Loan
available to the Borrowers by crediting the amount of the Swing Loan to the
Borrowers' account with the Swing Loan Lender.
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(iii) On any Business Day on which the Swing Loan Lender shall be
required to pay any amount to any Person with respect to any
indemnification required to be given by such Swing Loan Lender as a
condition of release of any of the Existing Credit Agreements, the
Borrowers hereby authorize the Swing Loan Lender to make a Swing Loan and
to reimburse itself from the proceeds thereof.
(iv) Notwithstanding the foregoing, the Swing Loan Lender shall not
advance any Swing Loans after it has received notice from any Lender or any
Credit Party that a Default has occurred and stating that no new Swing
Loans are to be made until such Default has been cured or waived in
accordance with the provisions of this Agreement.
(c) INTEREST ON SWING LOANS. Each Swing Loan shall be a Base Rate Loan and,
except as otherwise provided in Section 2.12, shall bear interest for the
account of the Swing Loan Lender thereof until repaid in full at the rate per
annum equal to the Base Rate PLUS the Applicable Margin for Base Rate Loans. The
Borrowers promise to pay interest on the Swing Loans in arrears on each Interest
Payment Date with respect thereto. All such interest payable with respect to the
Swing Loans shall be payable for the account of the Swing Loan Lender except the
overdraft pursuant to the Sterling Overdraft Facility shall bear interest for
the account of the Swing Loan Lender thereof until repaid in full at the rate
per annum equal to the Base Rate (as set forth in clause (i) of the definition
thereof) PLUS the Applicable Margin for LIBOR Loans PLUS 0.25%.
(d) REFUNDINGS OF SWING LOANS; PARTICIPATIONS IN SWING LOANS.
(i) Except for Swing Loans made pursuant to Section 2.8(e), the Swing
Loan Lender, at any time in its sole and absolute discretion, may, on
behalf of the Borrowers (which hereby irrevocably directs the Swing Loan
Lender to act on its behalf) request each Revolving Credit Lender,
including BankBoston, in its capacity as a Revolving Credit Lender, to make
a Revolving Credit Loan in an amount equal to such Revolving Credit
Lender's Applicable Percentage of the amount of the Swing Loans (the
"REFUNDED SWING LOANS") outstanding on the date such notice is given.
Unless any of the Events of Default described in Section 8.1(g), (h) or (i)
shall have occurred (in which event the procedures of Section 2.8(d)(ii)
shall apply) each Revolving Credit Lender shall make the proceeds of its
Revolving Credit Loan available to the Administrative Agent, for the
account of the Swing Loan Lender, at the Administrative Agent's Head Office
prior to 11:00 a.m. Boston, Massachusetts time in funds immediately
available on the Business Day next succeeding the date such notice is
given. The proceeds of such Revolving Credit Loans shall be immediately
applied to repay the Refunded Swing Loans.
(ii) If, prior to the making of a Revolving Credit Loan pursuant to
Section 2.8(d)(i), an Event of Default described in Section 8.1(g), (h) or
(i) shall have occurred, each Revolving Credit Lender will, on the date
such Revolving Credit Loan was to have been made, purchase an undivided
participation interest in the Refunded Swing Loan in an amount equal to its
Applicable Percentage of such Refunded Swing Loan. Each Revolving Credit
Lender will immediately transfer to the Swing Loan
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Lender, in immediately available funds, the amount of its participation in
such Refunded Swing Loan.
(iii) Whenever, at any time after the Swing Loan Lender has received
from any Revolving Credit Lender such Revolving Credit Lender's
participation interest in a Refunded Swing Loan pursuant to Section
2.8(d)(ii) above, the Swing Loan Lender receives any payment on account
thereof, the Swing Loan Lender will distribute to such Revolving Credit
Lender its participation interest in such amount (appropriately adjusted,
in the case of interest payments, to reflect the period of time during
which such Revolving Credit Lender's participation interest was outstanding
and funded); provided, however, that in the event that such payment
received by the Swing Loan Lender is required to be returned, such
Revolving Credit Lender will return to the Swing Loan Lender any portion
thereof previously distributed by the Swing Loan Lender to it as such
payment is required to be returned by the Swing Loan Lender.
(iv) If any Revolving Credit Lender does not make available to the
Swing Loan Lender any amounts for the purpose of refunding a Swing Loan
pursuant to Section 2.8(d)(i) above or to purchase a participation interest
in a Swing Loan pursuant to Section 2.8(d)(ii) above (any such amounts
payable by any Revolving Credit Lender being referred to herein as
"REFUNDING OR PARTICIPATION AMOUNTS") on the applicable due date with
respect thereto, then the applicable Revolving Credit Lender shall pay to
the Swing Loan Lender forthwith on demand such Refunding or Participation
Amounts with interest thereon for each day from and including the date such
amount is made available to the Swing Loan Lender but excluding the date of
payment to the Swing Loan Lender, at the Federal Funds Effective Rate. If
such Lender pays such amount to the Swing Loan Lender, then such amount
shall constitute such Revolving Credit Lender's Loan included in such
refunding Borrowing or the consideration for the purchase of such
participation interest, as the case may be.
(v) The failure or refusal of any Revolving Credit Lender to make
available to the Swing Loan Lender at the aforesaid time and place the
amount of its Refunding or Participation Amounts (x) shall not relieve any
other Revolving Credit Lender from its several obligations hereunder to
make available to the Swing Loan Lender the amount of such other Revolving
Credit Lender's Refunding or Participation Amounts and (y) shall not impose
upon such other Revolving Credit Lender any liability with respect to such
failure or refusal or otherwise increase the Revolving Credit Commitment of
such other Revolving Credit Lender.
(vi) Each Revolving Credit Lender severally agrees that its obligation
to make available to the Swing Loan Lender its Refunding or Participation
Amount as described above shall (except to the extent expressly set forth
in Section 2.8(d)(iv)) be absolute and unconditional and shall not be
affected by any circumstance, including (v) any set-off, counterclaim,
recoupment, defense or other right which such Revolving Credit Lender may
have against the Swing Loan Lender, the Borrowers or any other Person for
any reason whatsoever, (w) the occurrence or continuance of any Default,
the termination of the Revolving Credit Commitments or any other condition
precedent whatsoever, (x) any
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adverse change in the condition (financial or otherwise) of any Credit
Party or any other Person, (y) any breach of any of the Loan Documents by
any of the Credit Parties or any other Lender, or (z) any other
circumstance, happening or event, whether or not similar to any of the
foregoing.
(e) Subject to the restrictions on Alternative Currency Loans described in
Section 2.1 and the Swing Loan Sublimit, the Swing Loan Lender hereby agrees to
provide overdrafts to Badalex Limited ("BADALEX") denominated in Sterling (the
"STERLING OVERDRAFT FACILITY"); provided that the aggregate amount of any such
overdrafts pursuant to this subsection (e) shall not exceed $1,000,0000 in
Dollar Amount. Badalex hereby unconditionally promises to pay in Sterling (i) to
the Swing Loan Lender the then unpaid principal amount of such Lender's Sterling
Overdraft Facility Swing Loans on the Revolving Credit Maturity Date and (ii)
interest on the Sterling Overdraft Facility Swing Loans monthly in arrears on
the last day of each month with respect thereto. All such interest payable with
respect to the overdrafts shall be payable for the account of the Swing Loan
Lender.
2.9 REPAYMENT OF LOANS; EVIDENCE OF DEBT.
(a) The Borrowers hereby unconditionally promise to pay to the
Administrative Agent for the account of each Revolving Credit Lender the Dollar
Amount of the then unpaid principal amount of such Lender's Revolving Credit
Loans (including any Alternative Currency Loan), on the Revolving Credit
Maturity Date. The Special Credit Parties shall repay Loans as provided in the
Loan Documents with each such Special Credit Party. In addition, if following
any reduction in the Revolving Credit Commitments or at any other time the
aggregate principal amount of the Revolving Credit Exposure shall exceed the
Dollar Amount of the aggregate Revolving Credit Commitments, the Borrowers shall
first, to the extent required by the following sentence, repay the Swing Loans,
but only to such extent, second, to repay the Sylvania Acquisition Loan, third
to repay the Revolving Credit Loans (including any Alternative Currency Loans),
fourth, repay any remaining Swing Loans, and fifth, provide cover for LC
Exposure and the Bank Guaranties as specified in Section 2.4(j) in an aggregate
amount equal to such excess. If at any time either (a) the aggregate principal
amount of Swing Loans outstanding exceeds the lowest of (i) the Swing Loan
Sublimit or (ii) the Swing Loan Lender's Applicable Percentage of the total
Revolving Credit Commitment at such time or (b) the Swing Loan Lender's
Revolving Credit Exposure at such time exceeds the Swing Loan Lender's
Applicable Percentage of the total Revolving Credit Commitment at such time
after application of any reduction in the Revolving Credit Commitment, then the
Borrowers shall forthwith repay the Swing Loans then outstanding in an amount
equal to such excess, together with accrued interest.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrowers to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.
(c) The Administrative Agent (or in the case of Swing Loans, the Swing Loan
Lender) shall maintain accounts in which it shall record (i) the amount of each
Loan made hereunder, the Type thereof and the Interest Period applicable
thereto, (ii) the amount of any
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principal or interest due and payable or to become due and payable from the
Borrowers to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph (c)
or (d) of this Section 2.9 shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrowers to repay
the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans made by it be evidenced by a
promissory note . In such event, the Borrowers shall prepare, execute and
deliver to such Lender a promissory note payable to the order of such Lender
(or, if requested by such Lender, to such Lender and its registered assigns) and
in a form approved by the Administrative Agent. Thereafter, the Loans evidenced
by such promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 10.4) be represented by one or more promissory
notes in such form payable to the order of the payee named therein (or, if such
promissory note is a registered note, to such payee and its registered assigns).
2.10 PREPAYMENT OF LOANS.
(a) OPTIONAL PREPAYMENTS. The Borrowers shall have the right at any time
and from time to time to prepay any Borrowing in whole or in part, subject to
prior notice in accordance with paragraph (d) of this Section 2.10 and, with
respect to LIBOR Loans, subject to Section 2.15(a) hereof; provided that any
such prepayment shall be first applied to the outstanding amount of the Sylvania
Acquisition Loan and when the Sylvania Acquisition Loan is paid in full any such
additional prepayment shall be applied to the other Obligations. Prepayments by
Special Credit Parties shall be governed by the Loan Documents with each such
Special Credit Party; provided that no prepayment by any Sylvania Company shall
be applied to the Sylvania Acquisition Loan.
(b) MANDATORY PREPAYMENTS. The Borrowers and Special Credit Parties, to the
extent any of the following apply to the Special Credit Parties, (provided that
any such payments shall be applied only to Obligations due specifically from
such Special Credit Parties, except to the extent any such Special Credit Party
may Guaranty the Obligations hereunder) shall make prepayments of the Loans in
the order of priority and with the restrictions provided in Section 2.10 (a)
(and reduce the Commitments hereunder) as follows:
(i) CASUALTY EVENTS. Within 90 days following the receipt by any
Credit Party of the proceeds of insurance, condemnation award or other
compensation in respect of any Casualty Event affecting any property of any
Credit Party (or upon such earlier date as such Credit Party, as the case
may be, shall have determined not to repair or replace the property
affected by such Casualty Event), the Borrowers shall prepay the Loans (and
provide cover for LC Exposure and the Bank Guaranties as specified in
Section 2.4(j)), and the Revolving Credit Commitments shall be subject to
automatic reduction, in an aggregate amount, if any, equal to 100% of the
Net Cash Payments from such Casualty
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Event not theretofore applied or committed to be applied to the repair or
replacement of such property (it being understood that if Net Cash Payments
committed to be applied are not in fact applied within twelve months of the
respective Casualty Event, then such proceeds shall be applied to the
prepayment of Loans, cover for LC Exposure and the Bank Guaranties and
reduction of Revolving Credit Commitments as provided in this clause (i) at
the expiration of such twelve-month period) but only if and to the extent
that the aggregate amount of such proceeds received after the Effective
Date on account of all Casualty Events is greater than $500,000 in excess
of the aggregate amount applied or committed to be applied after the
Effective Date to the repair or replacement of such property, such
prepayment and reduction to be effected in each case in the manner and to
the extent specified in clause (iv) of this Section 2.10(b).
(ii) INCURRENCE OF DEBT OR OFFERING OF EQUITY. Without limiting the
obligation of the Borrowers to obtain the consent of the Required Revolving
Credit Lenders to any incurrence of Indebtedness or sale of equity
securities not otherwise permitted hereunder, the Borrowers agree, on or
prior to the closing of any incurrence of debt pursuant to Section 7.1(h)
or sale of equity securities by any Credit Party to deliver to the
Administrative Agent a statement certified by a Financial Officer, in form
and detail reasonably satisfactory to the Administrative Agent, of the
estimated amount of the Net Cash Payments of such incurrence of debt or
sale of equity securities that will (on the date of such incurrence or
sale) be received by any Credit Party in cash and the Borrowers will prepay
the Loans hereunder (and provide cover for LC Exposure and the Bank
Guaranties as specified in Section 2.4(j)), and the Revolving Credit
Commitments hereunder shall be subject to automatic reduction, upon the
date from such incurrence of debt or sale of securities, in an aggregate
amount equal to 100% of such estimated amount of the Net Cash Payments from
such incurrence of debt or 50% of such estimated amount of the Net Cash
Payments from such sale of equity securities received by any Credit Party,
such prepayment and reduction to be effected in each case in the manner and
to the extent specified in clause (iv) of this Section 2.10(b).
(iii) SALE OF ASSETS. Without limiting the obligation of the Borrowers
to obtain the consent of the Required Revolving Credit Lenders to any
Disposition not otherwise permitted hereunder, the Borrowers agree, on or
prior to the occurrence of any Disposition by any Credit Party, to deliver
to the Administrative Agent a statement certified by a Financial Officer,
in form and detail reasonably satisfactory to the Administrative Agent, of
the estimated amount of the Net Cash Payments of such Disposition that will
(on the date of such Disposition) be received by any Credit Party in cash,
the Borrower will prepay the Loans hereunder (and provide cover for LC
Exposure and the Bank Guaranties as specified in Section 2.4(j)), and the
Revolving Credit Commitments hereunder shall be subject to automatic
reduction, as follows:
(x) upon the date of such Disposition, in an aggregate amount
equal to 100% of such estimated amount of the Net Cash Payments of
such Disposition, to the extent received by any Credit Party in cash
on the date of such Disposition (provided that the first $2,000,000 of
such Net Cash Payments in each fiscal year
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<PAGE> 50
shall be applied to reduce the Sylvania Acquisition Loan and then
other Loans hereunder, but shall not reduce the total Revolving Credit
Commitments); and
(y) thereafter, on the date of receipt, to the extent any Credit
Party shall receive Net Cash Payments in cash under deferred payment
arrangements or Disposition Investments entered into or received in
connection with any Disposition, an amount equal to (A) 100% of the
aggregate amount of such Net Cash Payments MINUS (B) any transaction
expenses associated with Dispositions and not previously deducted in
the determination of Net Cash Payments PLUS (or MINUS, as the case may
be) (C) any other adjustment received or paid by any Credit Party
pursuant to the respective agreements giving rise to Dispositions and
not previously taken into account in the determination of the Net Cash
Payments.
Prepayment and reduction under each of the forgoing (x) or (y) to be
effected in each case in the manner and to the extent specified in
clause (iv) of this Section 2.10(b).
(iv) APPLICATION. Upon the occurrence of any of the events described
in the above paragraphs of this Section 2.10(b), the amount of the required
reductions and prepayments shall be applied to the Revolving Credit
Commitments ratably in accordance with the respective then-outstanding
aggregate amounts of such Revolving Credit Commitments and Loans; provided
that the Revolving Credit Commitments and Loans attributable to the
Sylvania Acquisition Loan shall be reduce first and then when repaid in
full other outstanding Loans and, then cover for LC Exposure, Bank
Guaranties and Loans to Special Credit Parties, in an amount equal to such
required reduction of Revolving Credit Commitments; provided that if as a
result of such reduction, either (x) the aggregate amount of the Revolving
Credit Exposure shall exceed the aggregate Revolving Credit Commitments or
a repayment of Swing Loans would be required by the second sentence of
Section 2.9(a), the Borrowers shall, first, to the extent required by the
second sentence of Section 2.9(a) repay Swing Loans, but only to such
extent, second, repay the Sylvania Acquisition Loan, third repay the other
Revolving Credit Loans (other than Swing Loans), fourth repay the remaining
Swing Loans, fifth, provide cover for LC Exposure and Bank Guaranties as
specified in Section 2.4(j) and sixth, provide cover for outstanding Loans
to Special Credit Parties, in an aggregate amount equal to such excess.
(c) NOTIFICATION OF PREPAYMENTS. The Borrowers shall notify the
Administrative Agent by telephone (confirmed by telecopy) of any prepayment
hereunder (i) in the case of prepayment of a LIBOR Borrowing, not later than
11:00 a.m., Boston, Massachusetts time, three Business Days before the date of
prepayment or (ii) in the case of prepayment of a Base Rate Borrowing, not later
than 11:00 a.m., Boston, Massachusetts time, one Business Day before the date of
prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Borrowing or portion thereof to
be prepaid; provided that, if a notice of prepayment is given in connection with
a conditional notice of termination of Revolving Credit Commitments as
contemplated by Section 2.7, then such notice of prepayment may be revoked if
such notice of termination is revoked in accordance with Section 2.7.
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Promptly following receipt of any such notice relating to a Borrowing, the
Administrative Agent shall advise the Revolving Credit Lenders of the contents
thereof. Each partial prepayment of any Borrowing under paragraph (a) of this
Section 2.10 shall be in an amount that would be permitted in the case of an
advance of a Borrowing of the same Type as provided in Section 2.2.
(d) PREPAYMENTS ACCOMPANIED BY INTEREST. Prepayments shall be accompanied
by accrued interest to the extent required by Section 2.12 and any break funding
payment under Section 2.15.
2.11 FEES.
(a) The Borrowers agree to pay to the Administrative Agent for the account
of each Lender a commitment fee, which shall accrue on the daily average unused
amount of the respective Revolving Credit Commitments of such Lender during the
period from and including the Effective Date to but excluding the date on which
such Revolving Credit Commitment terminates at a rate per annum determined by
reference to the Leverage Ratio as at the end of the immediately preceding
fiscal quarter immediately preceding the delivery of the Compliance Certificate
but initially the Leverage Ratio shall be deemed to be greater than or equal to
2.50 but less than 3.25 to 1:
<TABLE>
<CAPTION>
Range of
Leverage Ratio Commitment Fee (% per annum)
-------------- ----------------------------
<S> <C>
Greater than or equal to 3.25 to 1 0.375%
Greater than or equal to
2.50 to 1 but less than 3.25 to 1 0.375%
Greater than or equal to
2.00 to 1 but less than 2.50 to 1 0.300%
Less than 2.00 to 1 0.250%
</TABLE>
Accrued commitment fees shall be payable in arrears on each Quarterly Date
commencing on the first such date to occur after the date hereof and, in respect
of any Revolving Credit Commitments, on the date such Revolving Credit
Commitments terminate, commencing on the first such date to occur after the
Effective Date. All commitment fees shall be computed on the basis of a year of
365 days (or 366 days in a leap year) and shall be payable for the actual number
of days elapsed (including the first day but excluding the last day). For
purposes of determining the unused portion of each Lender's Commitment solely in
order to calculate the commitment fee under this Section 2.11(a), no Swing Loan
shall constitute the usage of any Lender's Revolving Credit Commitment.
(b) The Borrowers agree to pay with respect to Letters of Credit and Bank
Guaranties outstanding hereunder the following fees:
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(i) to the Administrative Agent for the account of each Revolving
Credit Lender a fee per annum equal to the Applicable Margin for LIBOR
Borrowings on the average daily amount of such Lender's LC Exposure
(excluding any portion thereof attributable to unreimbursed LC
Disbursements) and such Lender's Bank Guaranties during the period from and
including the Effective Date to but excluding the later of the date on
which such Lender's Revolving Credit Commitment terminates and the date on
which there shall no longer be any Letters of Credit or Bank Guaranties
outstanding hereunder, and
(ii) to the Issuing Lender (x) an annual fronting fee equal to the
product of 0.125% per annum TIMES the face amount of each Letter of Credit,
payable in arrears on each Quarterly Date, and (y) the Issuing Lender's
standard fees with respect to the issuance, amendment, renewal or extension
of any Letter of Credit or Bank Guaranty or processing of drawings
thereunder.
Accrued fees shall be payable in arrears on each Quarterly Date and on the date
the Revolving Credit Commitments terminate, commencing on the first such date to
occur after the date hereof, provided that any such fees accruing after the date
on which the Revolving Credit Commitments terminate shall be payable on demand.
All participation fees and fronting fees shall be computed on the basis of a
year of 365 days (or 366 days in a leap year) and shall be payable for the
actual number of days elapsed (including the first day but excluding the last
day).
(c) The Borrowers agree to pay in Dollars with respect to Alternative
Currency Loans funded hereunder to the Administrative Agent or the Lender
providing the Alternative Currency Loan in accordance with Section 2.5(b) a
fronting fee equal to the Dollar Amount of the product of 0.125% TIMES the
original principal amount of such Alternative Currency Loan.
Accrued fees shall be payable in arrears on each Quarterly Date and on the date
the Revolving Credit Commitments terminate, commencing on the first such date to
occur after the date hereof, provided that any such fees accruing after the date
on which the Revolving Credit Commitments terminate shall be payable on demand.
All participation fees and fronting fees shall be computed on the basis of a
year of 365 days (or 366 days in a leap year) and shall be payable for the
actual number of days elapsed (including the first day but excluding the last
day).
(d) The Borrowers agree to pay to the Administrative Agent, for its own
account, fees payable in the amounts and at the times separately agreed in
writing among the Borrowers and the Administrative Agent.
(e) All fees payable hereunder shall be paid on the dates due, in
immediately available funds. Fees paid shall not be refundable under any
circumstances, absent manifest error in the determination thereof.
2.12 INTEREST.
(a) The Loans denominated in Dollars comprising each Base Rate Borrowing
shall bear interest at a rate per annum equal to the Adjusted Base Rate PLUS the
Applicable Margin.
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The overdrafts incurred in Sterling comprising each Sterling Overdraft Facility
Borrowing shall bear interest as provided in Section 2.8(e).
(b) The Loans comprising each LIBOR Borrowing shall bear interest at a rate
per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for
such Borrowing PLUS the Applicable Margin.
(c) Notwithstanding the foregoing, (i) all amounts which are not paid when
due shall bear interest until paid in full at the Post-Default Rate and (ii)
during the period when any Event of Default shall have occurred and be
continuing for a period of 30 or more days (and the Administrative Agent, acting
on the instructions of the Required Revolving Credit Lenders, shall have
notified the Borrowers that the Post-Default Rate shall apply), the principal of
all Loans hereunder shall bear interest, after as well as before judgment, at
the Post-Default Rate.
(d) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan; provided that (i) interest accrued at the
Post-Default Rate shall be payable on demand, (ii) in the event of any repayment
or prepayment of any LIBOR Loan, accrued interest on the principal amount repaid
or prepaid shall be payable on the date of such repayment or prepayment, (iii)
in the event of any conversion of any LIBOR Loan prior to the end of the current
Interest Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion, (iv) all accrued interest on Revolving Credit
Loans and Swing Loans shall be payable upon expiration of the Revolving Credit
Commitments.
(e) All interest hereunder shall be computed on the basis of the Adjusted
LIBO Rate for a year of 365 days (or 366 days in a leap year), except that
interest computed by reference to Adjusted LIBO Rate or the Adjusted Base Rate
at times when the Adjusted Base Rate is based on the Federal Funds Rate shall be
computed on the basis of a year of 360 days, and in each case shall be payable
for the actual number of days elapsed (including the first day but excluding the
last day). The applicable Adjusted Base Rate, Adjusted LIBO Rate or LIBO Rate
shall be determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error.
2.13 ALTERNATE RATE OF INTEREST. If prior to the commencement of any
Interest Period for a LIBOR Borrowing:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable,
for such Interest Period; or
(b) if such Borrowing is of a particular Class of Loans, the Administrative
Agent is advised by the Required Revolving Credit Lenders that the Adjusted LIBO
Rate or the LIBO Rate, as applicable, for such Interest Period will not
adequately and fairly reflect the cost to such Lenders of making or maintaining
their Loans of such Class included in such Borrowing for such Interest Period;
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then the Administrative Agent shall give notice thereof to the Borrowers and the
affected Lenders by telephone or telecopy as promptly as practicable thereafter
and, until the Administrative Agent notifies the Borrowers and such Lenders that
the circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any such Borrowing to, or
continuation of any such Borrowing as, a LIBOR Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a LIBOR Borrowing, such Borrowing
shall be made as a Dollar Base Rate Borrowing.
2.14 INCREASED COSTS.
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit,
currency regulations or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Lender (except any
such reserve requirement reflected in the Adjusted LIBO Rate) or the
Issuing Lender or limit their ability to provide the Borrower with Loans in
any Alternative Currency; or
(ii) impose on any Lender or the Issuing Lender or the London
interbank market any other condition affecting this Agreement or LIBOR
Loans made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any LIBOR Loan (or of maintaining its obligation
to make any such Loan) or to increase the cost to such Lender or the Issuing
Lender of participating in, issuing or maintaining any Letter of Credit or to
reduce the amount of any sum received or receivable by such Lender or the
Issuing Lender hereunder (whether of principal, interest or otherwise), then the
Borrowers will pay to such Lender or the Issuing Lender, as the case may be,
such additional amount or amounts as will compensate such Lender or the Issuing
Lender, as the case may be, for such additional costs incurred or reduction
suffered.
(b) If any Lender or the Issuing Lender reasonably determines that any
Change in Law regarding capital requirements has or would have the effect of
reducing the rate of return on such Lender's or the Issuing Lender's capital or
on the capital of such Lender's or the Issuing Lender's holding company, if any,
as a consequence of this Agreement or the Loans made by, or participations in
Letters of Credit held by, such Lender, or the Letters of Credit issued the
Issuing Lender, to a level below that which such Lender or the Issuing Lender or
such Lender's or the Issuing Lender's holding company could have achieved but
for such Change in Law (taking into consideration such Lender's or the Issuing
Lender's policies and the policies of such Lender's or the Issuing Lender's
holding company with respect to capital adequacy), then from time to time the
Borrowers will pay to such Lender or the Issuing Lender, as the case may be,
such additional amount or amounts as will compensate such Lender or the Issuing
Lender, or such Lender's or the Issuing Lender's holding company, for any such
reduction suffered.
(c) A certificate of a Lender or the Issuing Lender setting forth the
amount or amounts necessary to compensate such Lender or the Issuing Lender or
its holding company, as
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<PAGE> 55
the case may be, as specified in paragraph (a) or (b) of this Section 2.14 shall
be delivered to the Borrowers and shall be conclusive so long as it reflects a
reasonable basis for the calculation of the amounts set forth therein and does
not contain any manifest error. The Borrowers shall pay such Lender or the
Issuing Lender the amount shown as due on any such certificate within 10 days
after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Lender to
demand compensation pursuant to this Section 2.14 shall not constitute a waiver
of such Lender's or the Issuing Lender's right to demand such compensation;
provided that the Borrowers shall not be required to compensate a Lender or the
Issuing Lender pursuant to this Section 2.14 for any increased costs or
reductions incurred more than six months prior to the date that such Lender or
the Issuing Lender, as the case may be, notifies the Borrowers of the Change in
Law giving rise to such increased costs or reductions and of such Lender's or
the Issuing Lender's intention to claim compensation therefor; provided further
that, if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the six-month period referred to above shall be extended to
include the period of retroactive effect thereof.
2.15 BREAK FUNDING PAYMENTS.
(a) In the event of (i) the payment of any principal of any LIBOR Loan
other than on the last day of an Interest Period applicable thereto (including
as a result of an Event of Default), (ii) the conversion of any LIBOR Loan other
than on the last day of the Interest Period applicable thereto, (iii) the
failure to borrow, convert, continue or prepay any LIBOR Loan on the date
specified in any notice delivered pursuant hereto (regardless of whether such
notice is permitted to be revocable and is revoked in accordance herewith) or
(iv) the assignment of any LIBOR Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Borrowers pursuant to
Section 2.18, then, in any such event, the Borrowers shall compensate each
Lender for the loss, cost and expense attributable to such event.
(b) In the case of a LIBOR Loan, the loss to any Lender attributable to any
such event shall be deemed to include an amount determined by such Lender to be
equal to the excess, if any, of
(i) the amount of interest that such Lender would pay for a deposit
equal to the principal amount of such Loan for the period from the date of
such payment, conversion, failure or assignment to the last day of the then
current Interest Period for such Loan (or, in the case of a failure to
borrow, convert or continue, the duration of the Interest Period that would
have resulted from such borrowing, conversion or continuation) if the
interest rate payable on such deposit were equal to the Adjusted LIBO Rate
for such Interest Period,
OVER
(ii) the amount of interest that such Lender would earn on such
principal amount for such period if such Lender were to invest such
principal amount for such period at the interest rate that would be bid by
such Lender (or an affiliate of such
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<PAGE> 56
Lender) for U.S. dollar deposits from other banks in the eurodollar market
at the commencement of such period.
(c) A certificate of any Lender setting forth any amount or amounts that
such Lender is entitled to receive pursuant to this Section 2.15 shall be
delivered to the Borrowers and shall be conclusive absent manifest error. The
Borrowers shall pay such Lender the amount shown as due on any such certificate
within 10 days after receipt thereof.
2.16 TAXES.
(a) Any and all payments by or on account of any obligation of the
Borrowers hereunder shall be made free and clear of and without deduction for
any Indemnified Taxes or Other Taxes; provided that if the Borrowers shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments, then
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.16) the Administrative Agent, Lender or the Issuing Lender
(as the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrowers shall make such deductions
and (iii) the Borrowers shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.
(b) In addition, the Borrowers shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) The Borrowers shall indemnify the Administrative Agent, each Lender and
the Issuing Lender, within 10 days after written demand therefor, for the full
amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or
Other Taxes imposed or asserted on or attributable to amounts payable under this
Section 2.16) paid by the Administrative Agent, such Lender or the Issuing
Lender, as the case may be (and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto during the period prior to the
Borrowers making the payment demanded under this paragraph (c)), whether or not
such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to the Borrowers by a Lender or the
Issuing Lender, or by the Administrative Agent on its own behalf or on behalf of
a Lender or the Issuing Lender, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or Other
Taxes by the Borrowers to a Governmental Authority, the Borrowers shall deliver
to the Administrative Agent the original or a certified copy of a receipt issued
by such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or reduction
of withholding tax under the law of the jurisdiction in which the Borrowers are
located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Borrowers (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law or
reasonably requested by the Borrowers, such properly completed
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and executed documentation prescribed by applicable law as will permit such
payments to be made without withholding or at a reduced rate.
2.17 PAYMENTS GENERALLY: PRO RATA TREATMENT; SHARING OF SET-OFFS.
(a) The Borrowers shall make each payment required to be made by each of
them hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or under Section 2.8, 2.14, 2.15 or 2.16, or otherwise) prior to
12:00 noon, Boston, Massachusetts time, on the date when due, in immediately
available funds, without set-off or counterclaim. Any amounts received after
such time on any date may, in the discretion of the Administrative Agent, be
deemed to have been received on the next succeeding Business Day for purposes of
calculating interest thereon. All such payments shall be made to the
Administrative Agent at such of its offices in Boston, Massachusetts as shall be
notified to the relevant parties from time to time, except payments to be made
directly to the Issuing Lender as expressly provided herein and except that
payments pursuant to Sections 2.8, 2.14, 2.15, 2.16 and 10.3 shall be made
directly to the Persons entitled thereto. The Administrative Agent shall
distribute any such payments received by it for the account of any other Person
to the appropriate recipient promptly following receipt thereof, and the
Borrowers shall have no liability in the event timely or correct distribution of
such payments is not so made. If any payment hereunder shall be due on a day
that is not a Business Day, the date for payment shall be extended to the next
succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All payments
hereunder shall be made in Dollars.
(b) If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, unreimbursed LC
Disbursements, interest and fees then due hereunder under any circumstances,
including, without limitation during, or as a result of the exercise by the
Administrative Agent or the Lenders of remedies under the Collateral Documents
and applicable law, such funds shall be applied (i) first, to pay interest and
fees then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest and fees then due to such parties, and
(ii) second, to pay principal and unreimbursed LC Disbursements then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of principal and unreimbursed LC Disbursements then due to such parties.
(c) Except to the extent otherwise provided herein: (i) each borrowing of
Loans of a particular Class from the Lenders under Section 2.1 shall be made
from the relevant Lenders, each payment of commitment fee under Section 2.11 in
respect of Commitments of a particular Class shall be made for the account of
the relevant Lenders, and each termination or reduction of the amount of the
Commitments of a particular Class under Section 2.3 shall be applied to the
respective Commitments of such Class of the relevant Lenders, pro rata according
to the amounts of their respective Commitments of such Class; (ii) LIBOR Loans
of any Class having the same Interest Period shall be allocated pro rata among
the relevant Lenders according to the amounts of their Commitments of such Class
(in the case of the making of Loans) or their respective Loans of such Class (in
the case of conversions and continuations of Loans); (iii) each payment or
prepayment by the Borrowers of principal of Loans of a particular Class shall be
made for the account of the relevant Lenders pro rata in accordance with the
respective unpaid principal
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amounts of the Loans of such Class held by such Lenders; (iv) each payment by
the Borrowers of interest on Loans of a particular Class shall be made for
account of the relevant Lenders pro rata in accordance with the amounts of
interest on such Loans then due and payable to the respective Lenders; and (v)
each payment by the Borrowers of participation fees in respect of Letters of
Credit shall be made for the account of the Revolving Credit Lenders pro rata in
accordance with the amount of participation fees then due and payable to the
Revolving Credit Lenders.
(d) If any Lender shall, by exercising any right of set-off or counterclaim
or otherwise, obtain payment in respect of any principal of or interest on any
of its Loans (or participations in LC Disbursements) resulting in such Lender
receiving payment of a greater proportion of the aggregate principal amount of
its Loans (and participations in LC Disbursements) and accrued interest thereon
than the proportion of such amounts received by any other Lender, then the
Lender receiving such greater proportion shall purchase (for cash at face value)
participations in the Loans (and LC Disbursements) of the other Lenders to the
extent necessary so that the benefit of such payments shall be shared by all the
Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Loans (and participations in LC
Disbursements); provided that (i) if any such participations are purchased and
all or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this paragraph
shall not be construed to apply to any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its
Loans (or participations in LC Disbursements) to any assignee or participant,
other than to any Credit Party or any subsidiary or Affiliate thereof (as to
which the provisions of this paragraph shall apply). The Borrowers consent to
the foregoing and agrees, to the extent it may effectively do so under
applicable law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against the Borrowers rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrowers in the amount of such participation.
(e) Unless the Administrative Agent shall have received notice from the
Borrowers prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuing Lender entitled thereto (the
"APPLICABLE RECIPIENT") hereunder that the Borrowers will not make such payment,
the Administrative Agent may assume that the Borrowers have made such payment on
such date in accordance herewith and may, in reliance upon such assumption,
distribute to the Applicable Recipient the amount due. In such event, if the
Borrowers have not in fact made such payment, then each Applicable Recipient
severally agrees to repay to the Administrative Agent forthwith on demand the
amount so distributed to such Applicable Recipient with interest thereon, for
each day from and including the date such amount is distributed to it to but
excluding the date of payment to the Administrative Agent, at the Federal Funds
Effective Rate.
(f) If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.4(d), 2.4(e), 2.5(b), 2.8(d)(i) or (ii) or 2.17(e), then
the Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender's obligations under
such Section or Sections until all such unsatisfied obligations are fully paid.
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2.18 MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS.
(a) If any Lender requests compensation under Section 2.14, or if the
Borrowers are required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.16,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder, or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to Section 2.14 or 2.16, as the case may be,
in the future and (ii) would not subject such Lender to any material
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender. The Borrowers hereby agree to pay all reasonable costs and expenses
incurred by any Lender in connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.14, or if the
Borrowers are required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.16,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrowers may, at their sole expense and effort, upon notice to such Lender and
the Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 10.4), all its interests, rights and obligations under this Agreement to
an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) the Borrowers
shall have received the prior written consent of the Administrative Agent (and,
if a Revolving Credit Commitment is being assigned, the Issuing Lender), which
consents shall not unreasonably be withheld or delayed, (ii) such Lender shall
have received payment of an amount equal to the outstanding principal of its
Loans (and participations in LC Disbursements), accrued interest thereon,
accrued fees and all other amounts payable to it hereunder, from the assignee
(to the extent of such outstanding principal and accrued interest and fees) or
the Borrowers (in the case of all other amounts) and (iii) in the case of any
such assignment resulting from a claim for compensation under Section 2.14 or
payments required to be made pursuant to Section 2.16, such assignment will
result in a reduction in such compensation or payments. A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrowers to require such assignment and delegation cease to apply.
ARTICLE III
GUARANTY BY GUARANTORS
3.1 THE GUARANTY. Each Guarantor hereby jointly and severally guaranties to
each Lender, the Issuing Lender and the Administrative Agent and their
respective successors and assigns the prompt payment in full when due (whether
at stated maturity, by acceleration or otherwise) of the principal of and
interest on the Loans made by the Lenders to the Borrowers, all LC
Disbursements, all Bank Guaranty Disbursements and all other amounts from time
to time owing to the Lenders, the Issuing Lender or the Administrative Agent by
the Borrowers hereunder or under any other Loan Document, and all obligations of
the Borrowers to any Lender
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under any Hedging Agreement, in each case strictly in accordance with the terms
thereof (such obligations being herein collectively called the "GUARANTIED
OBLIGATIONS"). Notwithstanding anything in this Agreement to the contrary, if at
any time any of Sylvania Companies is a Guarantor hereunder Guarantied
Obligations, with respect to the Sylvania Companies only, shall specifically
exclude the Sylvania Acquisition Loan. In any event Guarantied Obligations shall
be limited by the laws of the jurisdiction governing each Guarantor; provided
that each Guarantor shall take all steps to put in place a guaranty in
accordance with the laws of the jurisdiction governing the Guarantor which
guaranties the Obligations to the fullest extent permitted by law. Each
Guarantor hereby further agrees that if the Borrowers shall fail to pay in full
when due (whether at stated maturity, by acceleration or otherwise) any of the
Guarantied Obligations, each Guarantor will promptly pay the same, without any
demand or notice whatsoever, and that in the case of any extension of time of
payment or renewal of any of the Guarantied Obligations, the same will be
promptly paid in full when due (whether at extended maturity, by acceleration or
otherwise) in accordance with the terms of such extension or renewal.
3.2 OBLIGATIONS UNCONDITIONAL. Except to the extent the laws of any
jurisdiction would specifically limit the obligations of any Guarantor, the
obligations of each Guarantor under Section 3.1 are absolute and unconditional
irrespective of the value, genuineness, validity, regularity or enforceability
of this Agreement, the other Loan Documents or any other agreement or instrument
referred to herein or therein, or any substitution, release or exchange of any
other guaranty of or security for any of the Guarantied Obligations, and, to the
fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever that might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor, it being the intent of this
Section 3.2 that the obligations of the Guarantors hereunder shall be absolute
and unconditional under any and all circumstances. Without limiting the
generality of the foregoing, it is agreed that the occurrence of any one or more
of the following shall not alter or impair the liability of the Guarantors
hereunder which shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to such
Guarantors, the time for any performance of or compliance with any of the
Guarantied Obligations shall be extended, or such performance or compliance
shall be waived;
(ii) any of the acts mentioned in any of the provisions hereof or of
the other Loan Documents or any other agreement or instrument referred to
herein or therein shall be done or omitted;
(iii) the maturity of any of the Guarantied Obligations shall be
accelerated, or any of the Guarantied Obligations shall be modified,
supplemented or amended in any respect, or any right hereunder or under the
other Loan Documents or any other agreement or instrument referred to
herein or therein shall be waived or any other guaranty of any of the
Guarantied Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with; or
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(iv) any lien or security interest granted to, or in favor of, the
Administrative Agent, the Issuing Lender or any Lender or Lenders as
security for any of the Guarantied Obligations shall fail to be perfected.
To the extent permitted under the law governing each such Guarantor, the
Guarantors hereby expressly waive diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that the Administrative
Agent, the Issuing Lender or any Lender exhaust any right, power or remedy or
proceed against the Borrowers hereunder or under the other Loan Documents or any
other agreement or instrument referred to herein or therein, or against any
other Person under other guaranty of, or security for, any of the Guarantied
Obligations.
3.3 REINSTATEMENT. The obligations of each Guarantor under this Article III
shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of the Borrowers in respect of the Guarantied
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guarantied Obligations, whether as a result of any proceedings in bankruptcy
or reorganization or otherwise, and each of the Guarantors agrees that it will
indemnify the Administrative Agent, the Issuing Lender and each Lender on demand
for all reasonable costs and expenses (including fees and expenses of counsel)
incurred by the Administrative Agent, any Lender or the Issuing Lender in
connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
3.4 SUBROGATION. Each Guarantor hereby waives all rights of subrogation or
contribution, whether arising by contract or operation of law (including any
such right arising under the Federal Bankruptcy Code of 1978, as amended) or
otherwise by reason of any payment by it pursuant to the provisions of this
Article III and further agrees with the Borrowers for the benefit of each of its
creditors (including the Issuing Lender, each Lender and the Administrative
Agent) that any such payment by it shall constitute a contribution of capital by
such Guarantor to the Borrowers.
3.5 REMEDIES. Each Guarantor agrees that, as between such Guarantor and the
Lenders, the obligations of the Borrowers hereunder may be declared to be
forthwith due and payable as provided in Section 8.1 or Section 2.4(j), as
applicable (and shall be deemed to have become automatically due and payable in
the circumstances provided in Section 8.1 or Section 2.4(j), as applicable) for
purposes of Section 3.1 notwithstanding any stay, injunction or other
prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against the Borrowers and that, in the event
of such declaration (or such obligations being deemed to have become
automatically due and payable), such obligations (whether or not due and payable
by the Borrowers) shall forthwith become due and payable by such Guarantor for
purposes of Section 3.1.
3.6 INSTRUMENT FOR THE PAYMENT OF MONEY. Each Guarantor hereby acknowledges
that the guaranty in this Article III constitutes an instrument for the payment
of money, and consents and agrees that the Issuing Lender, any Lender or the
Administrative Agent, at its sole option, in the event of a dispute by the
Guarantors in the payment of any moneys due hereunder,
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shall have the right to summary judgment or such other expedited procedure as
may be available for a suit on a note or other instrument for the payment of
money.
3.7 CONTINUING GUARANTY. The guaranty in this Article III is a continuing
guaranty, and shall apply to all Guarantied Obligations whenever arising.
3.8 RIGHTS OF CONTRIBUTION. The Guarantors hereby agree, as between
themselves, that if any Guarantor shall become an Excess Funding Guarantor (as
defined below) by reason of the payment by such Guarantor of any Guarantied
Obligations, each other Guarantor shall, on demand of such Excess Funding
Guarantor (but subject to the next sentence), pay to such Excess Funding
Guarantor an amount equal to such Guarantor's Pro Rata Share (as defined below
and determined, for this purpose, without reference to the properties, debts and
liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined
below) in respect of such Guarantied Obligations. The payment obligation of a
Guarantor to any Excess Funding Guarantor under this Section 3.8 shall be
subordinate and subject in right of payment to the prior payment in full of the
obligations of such Guarantor under the other provisions of this Article III and
such Excess Funding Guarantor shall not exercise any right or remedy with
respect to such excess until payment and satisfaction in full of all of such
obligations.
For purposes of this Section 3.8, (i) "EXCESS FUNDING GUARANTOR" means, in
respect of any Guarantied Obligations, a Guarantor that has paid an amount in
excess of its Pro Rata Share of such Guarantied Obligations, (ii) "EXCESS
PAYMENT" means, in respect of any Guarantied Obligations, the amount paid by an
Excess Funding Guarantor in excess of its Pro Rata Share of such Guarantied
Obligations and (iii) "PRO RATA SHARE" means, for any Guarantor, the ratio
(expressed as a percentage) of (x) the amount by which the aggregate present
fair saleable value of all properties of such Guarantor (excluding any shares of
stock of, or ownership interest in, any other Guarantor) exceeds the amount of
all the debts and liabilities of such Guarantor (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of such Guarantor hereunder and any obligations of any other
Guarantor that have been Guarantied by such Guarantor) to (y) the amount by
which the aggregate fair saleable value of all properties of all of the Credit
Parties exceeds the amount of all the debts and liabilities (including
contingent, subordinated, unmatured and unliquidated liabilities, but excluding
the obligations of the Borrowers and the Guarantors hereunder and under the
other Loan Documents) of all of the Credit Parties, determined (A) with respect
to any Guarantor that is a party hereto on the Effective Date, as of the
Effective Date, and (B) with respect to any other Guarantor, as of the date such
Guarantor becomes a Guarantor hereunder.
3.9 GENERAL LIMITATION ON GUARANTY OBLIGATIONS. In any action or proceeding
involving any state or non-U.S. corporate law, or any state or Federal or
non-U.S. bankruptcy, insolvency, reorganization or other law affecting the
rights of creditors generally, if the obligations of any Guarantor under Section
3.1 would otherwise, taking into account the provisions of Section 3.8, be held
or determined to be void, invalid or unenforceable, or subordinated to the
claims of any other creditors, on account of the amount of its liability under
Section 3.1, then, notwithstanding any other provision hereof to the contrary,
the amount of such liability shall, without any further action by such
Guarantor, any Lender, the Administrative Agent or any other Person, be
automatically limited and reduced to the highest amount that is
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valid and enforceable and not subordinated to the claims of other creditors as
determined in such action or proceeding.
3.10 RELEASE OF COLLATERAL AND GUARANTIES. The Administrative Agent and the
Lenders agree that if all of the capital stock of any Guarantor that is owned by
the Credit Parties is sold to any Person as permitted by the terms of this
Agreement and the Collateral Documents, or if any Guarantor is merged or
consolidated with or into any other Person as permitted by the terms of this
Agreement and such Guarantor is not the continuing or surviving corporation, the
Administrative Agent shall, upon request of the Borrower (and upon the receipt
by the Administrative Agent of such evidence as the Administrative Agent or any
Lender may reasonably request to establish that such sale, designation, merger
or consolidation is permitted by the terms of this Agreement), terminate the
Guaranty of such Guarantor under this Article III and authorize the
Administrative Agent to release the Lien created by the Collateral Documents on
any capital stock of such Guarantor.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each of the Credit Parties represents and warrants to the Lenders and the
Administrative Agent, as to itself and each other Credit Party, that:
4.1 ORGANIZATION; POWERS. Each Credit Party is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. Each Credit Party has all requisite power and authority under its
organizational documents to carry on its business as now conducted and, except
where the failure to be so qualified or in good standing, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.
4.2 AUTHORIZATION; ENFORCEABILITY. The Transactions are within the
corporate power of each Credit Party and have been duly authorized by all
necessary corporate and, if required, stockholder action on the part of such
Credit Party. This Agreement has been duly executed and delivered by each Credit
Party and constitutes a legal, valid and binding obligation of such Credit
Party, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.
4.3 GOVERNMENTAL APPROVALS; NO CONFLICTS. The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority, (b) will not violate any applicable law,
policy or regulation or the charter, by-laws or other organizational documents
of any Credit Party or any order of any Governmental Authority, (c) will not
violate or result in a default under any indenture, agreement or other
instrument binding upon any Credit Party, or any of its assets, or give rise to
a right thereunder to require any payment to be made by any Credit Party and (d)
except for the Liens created by the
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Collateral Documents, will not result in the creation or imposition of any Lien
on any asset of the Credit Parties.
4.4 FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE.
(a) The Borrowers have heretofore delivered to the Lenders the following
financial statements:
(i) the audited consolidated balance sheet and statements of earnings
(loss), stockholders' deficit and cash flows of CML and its Consolidated
Subsidiaries as of and for the fiscal years ended December 3, 1995 and
December 1, 1996, respectively, accompanied by an opinion of Ernst & Young
LLP, independent public accountants;
(ii) the unaudited consolidated balance sheet and statements of income
and cash flows of CML and its Consolidated Subsidiaries as of and for the
six-month period ended June 1, 1997, certified by a Financial Officer that
such financial statements fairly present (subject, in the case of such
balance sheet as at June 1, 1997 and such statements of income and cash
flows for the six months then ended, to normal year-end audit adjustments)
the consolidated financial condition of CML and its Consolidated
Subsidiaries as at such dates and the consolidated results of the
operations of CML and its Consolidated Subsidiaries for the periods ended
on such dates and that all such financial statements, including the related
schedules and notes thereto have been prepared in accordance with GAAP
applied consistently throughout the periods involved;
(iii) the audited consolidated balance sheet and statements of
earnings (loss), stockholders' deficit and cash flows of Sylvania and its
Consolidated Subsidiaries as of and for the fiscal year ended December 31,
1996;
(iv) the unaudited consolidated balance sheet and statements of and
cash flows of the Sylvania Companies as of and for the six-month period
ended June 30, 1997 (subject, in the case of such balance sheet as at June
30, 1997 and such statements of income and cash flows for the six months
then ended, to normal year-end audit adjustments);
(v) all related management letters from CML and its Consolidated
Subsidiaries from their independent public accountants;
(vi) the projected consolidated balance sheets and statements of
profit and loss and statements of cash flow for the fiscal years 1997
through 2001 (the "Projections"); and
(vii) the pro forma unaudited consolidated balance sheet and
statements of operations for the fiscal year 1997, and prepared by the
Borrowers under the assumption that the Sylvania Acquisition had occurred
at the beginning of the respective periods covered by such statements and
reflecting estimated purchase price accounting adjustments are accurate and
complete to the best of the Borrowers' knowledge.
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Such financial statements (except for the Projections) and management letters
present fairly, in all material respects, the respective actual or proforma
consolidated financial position and results of operations and cash flows of the
respective entities as of such respective dates and for such periods in
accordance with GAAP as to all U.S. Credit Parties or statements consolidated
and expressed in U.S. Dollars or other appropriate accounting standards as to
other financial statements, subject to year-end audit adjustments and the
absence of footnotes in the case of such unaudited or pro forma statements. The
Projections were prepared by the Borrowers in good faith and were based on
assumptions which were reasonable when made and which continue to be reasonable
on the date hereof.
(b) There has been no material adverse change in the business, assets,
operations, prospects or financial condition, of (i) the Credit Parties taken as
a whole since December 1, 1996, and (ii) Sylvania and its Subsidiaries since the
date of their most recent audited financial statements, except as disclosed by
Ernst and Young in reports submitted to the Administrative Agent prior to the
date hereof.
(c) None of the Credit Parties has on the date hereof any contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments in each case
that are material, except as referred to or reflected or provided for in the
balance sheets as at December 1, 1996 referred to above or as otherwise
expressly provided in this Agreement or the financial statements described in
this Section 4.4.
4.5 PROPERTIES.
(a) Each of the Credit Parties has good and marketable title to, or valid,
subsisting and enforceable leasehold interests in, all its real and personal
property material to its business.
(b) Each of the Credit Parties owns, or to its knowledge has acquired an
implied license to use, all trademarks, service marks, tradenames, copyrights,
patents and other intellectual property ("PROPRIETARY RIGHTS") which are
necessary for the conduct of its business in the manner that such businesses
have heretofore been conducted, including the computer software programs listed
on SCHEDULE 4.5 annexed hereto, and, to the knowledge of the Credit Parties, the
use thereof does not infringe upon the rights of any other Person, except for
such infringements that, individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect. No other Proprietary Rights
are necessary for the unimpaired continued operation of the Credit Parties'
businesses in the manner that such businesses heretofore have been conducted.
All such trademark applications and registrations, trademarks, registered
copyrights, patents and patent applications which are owned by or licensed to
any Credit Party are listed on SCHEDULE 4.5.
(c) As of the date hereof, SCHEDULE 4.5 contains a true, accurate and
complete list of (i) all owned Real Property Assets and (ii) all leases,
subleases or assignments of leases (together with all amendments, modifications,
supplements, renewals or extensions of any thereof) affecting each Real Property
Asset of any Credit Party, regardless of whether such Credit Party is the
landlord or tenant (whether directly or as an assignee or successor in interest)
under such
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lease, sublease or assignment. Expect as specified in SCHEDULE 4.5, each
agreement listed in clause (ii) of the immediately preceding sentence is in full
force and effect and the Borrowers have no knowledge of any default that has
occurred and is continuing thereunder, and each such agreement constitutes the
legal, valid and binding obligation of each applicable Credit Party, enforceable
against such Credit Party in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or limiting creditors' rights generally or by equitable
principles.
4.6 LITIGATION AND ENVIRONMENTAL MATTERS.
(a) There are no actions, suits or proceedings by or before any arbitrator
or Governmental Authority pending against or, to the knowledge of any of the
Credit Parties, threatened against or affecting the Credit Parties (i) as to
which there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve any of the Basic Documents or the Transactions.
(b) Except for the Disclosed Matters and except with respect to any other
matters that, individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect, none of the Credit Parties (i) has
failed to comply with any Environmental Law or to obtain, maintain or comply
with any permit, license or other approval required under any Environmental Law,
(ii) has become subject to any Environmental Liability, (iii) has received
notice of any claim with respect to any Environmental Liability or any inquiry,
allegation, notice or other communication from any Governmental Authority
concerning its compliance with any Environmental Law or (iv) knows of any basis
for any Environmental Liability.
4.7 COMPLIANCE WITH LAWS AND AGREEMENTS. Each of the Credit Parties is in
compliance with all laws, regulations, policies and orders of any Governmental
Authority applicable to it or its property and all indentures, agreements and
other instruments binding upon it or its property, except where the failure to
do so, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.
4.8 INVESTMENT AND HOLDING COMPANY STATUS. No Credit Party nor any of their
respective Subsidiaries is (a) an "investment company" as defined in, or subject
to regulation under, the Investment Company Act of 1940, as amended, (b) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935, as amended or (c) a "bank holding company"
as defined in, or subject to regulation under, the Bank Holding Company Act of
1956, as amended.
4.9 TAXES. Each of the Credit Parties and their respective Subsidiaries has
timely filed or caused to be filed all Tax returns and reports required to have
been filed and has paid or caused to be paid all Taxes required to have been
paid by it, except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which such Credit Party has set aside on its
books adequate reserves with respect thereto in accordance with GAAP or (b) to
the extent that the failure to do so could not reasonably be expected to result
in a Material Adverse Effect.
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4.10 ERISA. No ERISA Event has occurred or is reasonably expected to occur
that, when taken together with all other such ERISA Events for which liability
is reasonably expected to occur, could reasonably be expected to result in a
Material Adverse Effect. The present value of all accumulated benefit
obligations under each Plan (based on the assumptions used for purposes of
Statement of Financial Accounting Standards No. 87) did not, as of the date of
the most recent financial statements reflecting such amounts, exceed by more
than $100,000 the fair market value of the assets of such Plan, and the present
value of all accumulated benefit obligations of all underfunded Plans (based on
the assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $100,000 the fair market value of
the assets of all such underfunded Plans.
4.11 DISCLOSURE. The Project Lightning Discussion Materials, a copy of
which previously has been delivered to each Lender and the Administrative Agent,
completely and accurately describes in all material respects the business,
principal properties and assets of the Credit Parties, including CML and
Sylvania. The Credit Parties have disclosed to the Lenders all agreements,
instruments and corporate or other restrictions to which any Credit Party is
subject, and all other matters known to any Credit Party, that, individually or
in the aggregate, could reasonably be expected to result in a Material Adverse
Effect. Notwithstanding the forgoing, all information in respect of Sylvania and
its Subsidiaries is limited to the materials presented to the Lenders and the
best knowledge of the Credit Parties (except to the extent Sylvania and its
Subsidiaries become Credit Parties). The management structure of CML after
giving effect to the Sylvania Acquisition is as set forth on SCHEDULE 4.11
annexed hereto. The information, reports, financial statements, exhibits and
schedules furnished in writing by or on behalf of the Credit Parties to the
Administrative Agent or any Lender in connection with the negotiation,
preparation or delivery of this Agreement and the other Basic Documents or
included herein or therein or delivered pursuant hereto or thereto, when taken
as a whole do not contain any untrue statement of material fact or omit to state
any material fact necessary to make the statements herein or therein, in light
of the circumstances under which they were made, not misleading. All written
information furnished after the date hereof by the Credit Parties to the
Administrative Agent and the Lenders in connection with this Agreement and the
other Basic Documents and the transactions contemplated hereby and thereby will
be true, complete and accurate in every material respect, or (in the case of
projections) based on reasonable estimates, on the date as of which such
information is stated or certified. There is no fact known to the Borrowers that
could reasonably be expected to have a Material Adverse Effect that has not been
disclosed herein, in the other Basic Documents or in a report, financial
statement, exhibit, schedule, disclosure letter or other writing furnished to
the Administrative Agent for use in connection with the transactions
contemplated hereby or thereby.
4.12 CAPITALIZATION. As of the date hereof, the capital structure and
principal ownership (those parties holding more than 5% of the outstanding
shares of CML) of CML, both before and after giving effect to the Sylvania
Acquisition, are correctly described in SCHEDULE 4.12 annexed hereto. The
authorized, issued and outstanding capital stock of CML consists, on the date
hereof, of the common stock described on SCHEDULE 4.12, all of which is duly and
validly issued and outstanding, fully paid and nonassessable. Except as set
forth in SCHEDULE 4.12, as of the date hereof, (x) there are no outstanding
Equity Rights with respect to
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CML and (y) there are no outstanding obligations of any Credit Party to
repurchase, redeem, or otherwise acquire any shares of capital stock of any
Credit Party nor are there any outstanding obligations of any Credit Party to
make payments to any Person, such as "phantom stock" payments, where the amount
thereof is calculated with reference to the fair market value or equity value of
any Credit Party.
4.13 SUBSIDIARIES.
(a) Set forth in SCHEDULE 4.13 annexed hereto is a complete and correct
list of all of the Subsidiaries of the Credit Parties as of the date hereof
together with, for each such Subsidiary, (i) the jurisdiction of organization of
such Subsidiary, (ii) each Person holding ownership interests in such Subsidiary
and (iii) the nature of the ownership interests held by each such Person and the
percentage of ownership of such Subsidiary represented by such ownership
interests. Upon the refinancing of the Existing Credit Agreements and the
release of the Liens related thereto, (x) each Credit Party and its respective
Subsidiaries owns, free and clear of Liens (other than Liens created pursuant to
the Collateral Documents), and has the unencumbered right to vote, all
outstanding ownership interests in each Person shown to be held by it in
SCHEDULE 4.13, (y) all of the issued and outstanding capital stock of each such
Person organized as a corporation is validly issued, fully paid and
nonassessable and (z) there are no outstanding Equity Rights with respect to
such Person.
(b) Except as set forth in SCHEDULE 4.13, as of the date of this Agreement,
none of the Subsidiaries of CML is subject to any indenture, agreement,
instrument or other arrangement containing any provision of the type described
in Section 7.8, other than any such provision the effect of which has been
unconditionally, irrevocably and permanently waived.
4.14 MATERIAL INDEBTEDNESS, LIENS AND AGREEMENTS.
(a) SCHEDULE 4.14 annexed hereto is a complete and correct list, as of the
date of this Agreement, of all Material Indebtedness or any extension of credit
(or commitment for any extension of credit) to, or guaranty by, any Credit Party
the aggregate principal or face amount of which equals or exceeds (or may equal
or exceed) $750,000 (or the Alternative Currency Amount thereof), and the
aggregate principal or face amount outstanding or that may become outstanding
with respect thereto is correctly described in SCHEDULE 4.14.
(b) SCHEDULE 4.14 is a complete and correct list, as of the date of this
Agreement, of each Lien securing Indebtedness of any Person the aggregate
principal or face amount of which equals or exceeds (or may equal or exceed)
$100,000 and covering any property of the Credit Parties, and the aggregate
Indebtedness secured (or which may be secured) by each such Lien and the
Property covered by each such Lien is correctly described in SCHEDULE 4.14.
(c) SCHEDULE 4.14 is a complete and correct list, as of the date of this
Agreement, of each contract and arrangement to which any Credit Party is a party
for which breach, nonperformance, cancellation or failure to renew would have a
Material Adverse Effect.
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True and complete copies of each agreement listed on SCHEDULE 4.14 have been
delivered to the Administrative Agent, together with all amendments, waivers and
other modifications thereto. All such agreements are valid, subsisting, in full
force and effect, are currently binding and after the Sylvania Acquisition will
continue to be binding upon each Credit Party that is a party thereto and, to
the best knowledge of the Credit Parties, binding upon the other parties thereto
in accordance with their terms. The Credit Parties are not in default under any
such agreements. The Credit Parties have good commercial working relationships
with respect to the other parties listed in SCHEDULE 4.14, and, except at the
request of a Credit Party, no such other party has canceled or otherwise
terminated its relationship with such Credit Party, or during the last twelve
months decreased materially its services or supplies to such Credit Party or its
usage or purchase of services or products of such Credit Party, as the case may
be. No Credit Party knows of any plan or intention of any such other party, and
nor has it received any written threat from any such other party, to terminate,
to cancel or otherwise materially and adversely modify its relationship with a
Credit Party or to decrease materially or limit its services or supplies to a
Credit Party or its usage or purchase of services or products of a Credit Party.
The licenses and other agreements listed in Part (b) of SCHEDULE 4.5
collectively entitle the Credit Parties to use all Proprietary Rights material
to the conduct of the business of CML as presently conducted and as proposed to
be conducted after the Sylvania Acquisition.
4.15 FEDERAL RESERVE REGULATIONS. No Credit Party nor any of its
Subsidiaries is engaged principally or as one of its important activities in the
business of extending credit for the purpose of purchasing or carrying margin
stock (as defined in Regulation U of the Board). The value of all margin stock
owned by the Borrowers does not constitute more than 25% of the value of the
assets of the Borrowers.
4.16 BURDENSOME RESTRICTIONS. No Credit Party is a party to or otherwise
bound by any indenture, loan or credit agreement or any lease or other agreement
or instrument or subject to any charter, corporate or partnership restriction
which would, or in the exercise of reasonable judgement could, foreseeably have
a Material Adverse Effect.
4.17 FORCE MAJEURE. Since the date of the most recent financial statements
referred to in Section 4.4(a)(i) to the Effective Date, the business, properties
and other assets of the Credit Parties have not been materially and adversely
affected in any way as the result of any fire or other casualty, strike, lockout
or other labor trouble, embargo, sabotage, confiscation, contamination, riot,
civil disturbance, activity of armed forces or act of God.
4.18 LABOR RELATIONS. No Credit Party is engaged in any unfair labor
practice that could have a Material Adverse Effect on the any of the Credit
Parties. There is (i) no significant unfair labor practice complaint pending
against any of the Credit Parties or, to the best of their joint and several
knowledge, threatened against any of them, before the National Labor Relations
Board or similar regulatory body, and no significant grievance or significant
arbitration proceeding arising out of or under any collective bargaining
agreement or similar labor agreement is so pending against any of the Credit
Parties or, to the best of their joint and several knowledge, threatened against
any of them, (ii) no significant strike, labor dispute, slowdown or stoppage is
pending against any of the Credit Parties or, to the best of their joint and
several knowledge, threatened against any of the Credit Parties and (iii) to the
best of the knowledge of
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any of the Credit Parties, no union or labor organization question existing with
respect to the employees of any of the Credit Parties and, to best of their
joint and several knowledge, except to the extent a union or labor organization
is already representing such employees, no union or labor organization
organizing activities are taking place.
ARTICLE V
CONDITIONS
5.1 EFFECTIVE DATE. The obligations of the Lenders to make Loans, and of
the Issuing Lender to issue Letters of Credit, hereunder shall not become
effective until the date on which each of the following conditions is satisfied
(or waived in accordance with Section 10.2):
(a) COUNTERPARTS OF AGREEMENT. The Administrative Agent shall have received
from each party hereto either (i) a counterpart of this Agreement signed on
behalf of such party or (ii) written evidence satisfactory to the Administrative
Agent (which may include telecopy transmission of a signed signature page of
this Agreement) that such party has signed a counterpart of this Agreement.
(b) NOTES. The Administrative Agent shall have received for each Lender
that shall have requested a promissory note, a duly completed and executed
promissory note for such Lender.
(c) CORPORATE STRUCTURE. The corporate organizational structure, capital
structure and ownership of the Credit Parties, both before and after giving
effect to the Sylvania Acquisition, shall be as set forth on SCHEDULES 4.12 AND
4.13.
(d) CORPORATE MATTERS. The Administrative Agent shall have received such
documents and certificates as the Administrative Agent or Special Counsel may
reasonably request relating to the organization, existence and good standing of
each Credit Party, the authorization of the Transactions and any other legal
matters relating to the Credit Parties, this Agreement, the other Loan Documents
or the Transactions, all in form and substance reasonably satisfactory to the
Administrative Agent and its counsel.
(e) SECURITY INTERESTS IN PERSONAL AND MIXED PROPERTY. To the extent not
otherwise satisfied pursuant to Section 5.1(f), the Administrative Agent shall
have received evidence satisfactory to it that the Credit Parties shall have
taken or caused to be taken all such actions, executed and delivered or caused
to be executed and delivered all such agreements, documents and instruments, and
made or caused to be made all such filings and recordings (other than the filing
or recording of items described in clauses (iii), (iv) and (v) below) that may
be necessary or, in the opinion of the Administrative Agent, desirable in order
to create in favor of the Administrative Agent, for the benefit of the Lenders,
a valid and (upon such filing and recording) perfected First Priority security
interest in the entire personal and mixed property Collateral in the United
States, Canada, Germany, the United Kingdom and Costa Rica. Such actions shall
include the following (or their applicable local equivalent):
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(i) COLLATERAL DOCUMENTS. Delivery to the Administrative Agent of all
the Collateral Documents, duly executed by the applicable party thereto,
together with accurate and complete schedules to all such Collateral
Documents;
(ii) STOCK CERTIFICATES AND INSTRUMENTS. Delivery to the
Administrative Agent of (A) certificates (which certificates shall be
accompanied by irrevocable undated stock powers, duly endorsed in blank and
otherwise satisfactory in form and substance to the Administrative Agent)
representing all capital stock pledged pursuant to the Pledge Agreements
and (B) all promissory notes or other instruments (duly endorsed, where
appropriate, in a manner satisfactory to the Administrative Agent)
evidencing any Collateral;
(iii) LIEN SEARCHES AND UCC TERMINATION STATEMENTS. Delivery to the
Administrative Agent of (A) the results of a recent search, by a Person
satisfactory to the Administrative Agent, of all effective UCC financing
statements and fixture filings and all judgment and tax lien filings which
may have been made with respect to any personal or mixed property of any
Credit Party, together with copies of all such filings disclosed by such
search, and (B) UCC termination statements duly executed by all applicable
Persons for filing in all applicable jurisdictions as may be necessary to
terminate any effective UCC financing statements or fixture filings
disclosed in such search (other than any such financing statements or
fixture filings in respect of Liens permitted to remain outstanding
pursuant to the terms of this Agreement);
(iv) UCC FINANCING STATEMENTS AND FIXTURE FILINGS. Delivery to the
Administrative Agent of UCC financing statements and, where appropriate,
fixture filings, duly executed by each applicable Credit Party with respect
to all personal and mixed property Collateral of such Credit Party, for
filing in all jurisdictions as may be necessary or, in the opinion of the
Administrative Agent, desirable to perfect the security interests created
in such Collateral pursuant to the Collateral Documents;
(v) PTO COVER SHEETS, ETC. Delivery to the Administrative Agent of all
cover sheets or other documents or instruments required to be filed with
the PTO in order to create or perfect Liens in respect of any IP
Collateral;
(vi) PERFECTION CERTIFICATE. Delivery to the Administrative Agent of a
perfection certificate dated the Effective Date substantially in the form
of SCHEDULE I annexed to the form of Security Agreement annexed hereto duly
executed by a Financial Officer;
(vii) OPINIONS OF LOCAL COUNSEL. Delivery to the Administrative Agent
of an opinion of counsel (which counsel shall be reasonably satisfactory to
the Administrative Agent) under the laws of Massachusetts, Illinois,
Oklahoma, New Jersey, the Netherlands, the United Kingdom, the Province of
Ontario, Canada and Costa Rica dealing with the creation and perfection of
the security interests in favor of the Administrative Agent in such
Collateral and such other matters governed by the laws of such jurisdiction
regarding such security interests as the Administrative Agent may
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reasonably request, in each case in form and substance reasonably
satisfactory to the Administrative Agent.
(f) EFFECTIVE DATE MORTGAGES; EFFECTIVE DATE MORTGAGE POLICIES; ETC..
The Administrative Agent shall have received the following (or their
applicable local equivalent) from each Credit Party on or prior to the
Effective Date with respect to each Real Property Asset located in the
United States, Canada, Germany and the United Kingdom:
(i) EFFECTIVE DATE MORTGAGES. Fully executed and notarized
Mortgages, Deeds of Trust or equivalent real estate lien document
under applicable local law (each a "EFFECTIVE DATE MORTGAGE" and,
collectively, the "EFFECTIVE DATE MORTGAGES"), in proper form for
recording in all appropriate places in all applicable jurisdictions,
encumbering each Real Property Asset listed and marked with an
asterisk ("*") in SCHEDULE 4.5 (each a "EFFECTIVE DATE MORTGAGED
PROPERTY" and, collectively, the "EFFECTIVE DATE MORTGAGED
PROPERTIES");
(ii) SURVEYS. As to each Effective Date Mortgaged Property,
copies of all existing surveys, surveyors certificates and such
additional surveys or surveyor certificates as the Administrative
Agent may reasonably require;
(iii) RECORDED LEASEHOLD INTERESTS. In the case of each Real
Property Asset listed in clause (ii) of SCHEDULE 4.5, copies of all
leases between any Credit Party and any landlord or tenant;
(iv) LANDLORD CONSENTS AND ESTOPPELS. In the case of each Real
Property Asset listed in clause (ii) of SCHEDULE 4.5 in which the
Administrative Agent is taking an Effective Date Mortgage, a Landlord
Consent and Estoppel with respect thereto and where required by the
terms of any lease, the consent of the mortgagee, ground lessor or
other party;
(v) MATTERS RELATING TO FLOOD HAZARD PROPERTIES. (A) As to all
U.S. Real Property Assets evidence reasonably acceptable to the
Administrative Agent as to whether any Effective Date Mortgaged
Property is a Flood Hazard Property and (B) if there are any such
Flood Hazard Properties, evidence that the applicable Credit Party has
obtained flood insurance with respect to each Flood Hazard Property in
amounts approved by the Administrative Agent, or evidence acceptable
to the Administrative Agent that such insurance is not available;
(vi) ENVIRONMENTAL INDEMNITY. An environmental indemnity
agreement, substantially in the form of EXHIBIT D annexed hereto, with
respect to the indemnification of the Administrative Agent and the
Lenders for any liabilities that may be imposed on or incurred by any
of them as a result of any Hazardous Materials;
(vii) TITLE INSURANCE. (A) ALTA mortgagee title insurance
policies or unconditional commitments (or their applicable local
equivalent) therefor (the "EFFECTIVE DATE MORTGAGE POLICIES") issued
by the Title Company with respect to the Effective Date
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Mortgaged Properties listed (AND MARKED WITH AN ASTERISK) in SCHEDULE
4.5, in amounts not less than the respective amounts designated
therein with respect to any particular Effective Date Mortgaged
Properties, insuring fee simple title to, or a valid leasehold
interest in, each such Effective Date Mortgaged Property vested in
such Credit Party and assuring the Administrative Agent that the
applicable Effective Date Mortgages create valid and enforceable First
Priority mortgage Liens on the respective Effective Date Mortgaged
Properties encumbered thereby, subject only to a standard exceptions
as may be reasonably acceptable by the Administrative Agent, which
Effective Date Mortgage Policies (I) shall include all endorsements
for matters reasonably requested by the Administrative Agent and (II)
shall provide for affirmative insurance and such reinsurance as the
Administrative Agent may reasonably request, all of the foregoing in
form and substance reasonably satisfactory to the Administrative
Agent; and (B) evidence satisfactory to the Administrative Agent that
such Credit Party has (I) delivered to the Title Company all
certificates and affidavits required by the Title Company in
connection with the issuance of the Effective Date Mortgage Policies
and (II) paid to the Title Company or to the appropriate Governmental
Authorities all expenses and premiums of the Title Company in
connection with the issuance of the Effective Date Mortgage Policies
and all recording and stamp taxes (including mortgage recording and
intangible taxes) payable in connection with recording the Effective
Date Mortgages in the appropriate real estate records and as to each
Effective Date Mortgage on property outside of the United States, such
title certificate is customarily taken by a lending institution in
such jurisdiction;
(viii) TITLE REPORTS. With respect to each Effective Date
Mortgaged Property listed (AND MARKED WITH AN ASTERISK) in SCHEDULE
4.5, a title report issued by the Title Company or in non-U.S.
jurisdictions the equivalent customary title report with respect
thereto, dated not more than 30 days prior to the Effective Date and
satisfactory in form and substance to the Administrative Agent;
(ix) COPIES OF DOCUMENTS RELATING TO TITLE EXCEPTIONS. Copies of
all recorded documents listed as exceptions to title or otherwise
referred to in the Effective Date Mortgage Policies or in the title
reports delivered pursuant to Section 5.1(f)(vii); and
(x) OPINIONS OF LOCAL COUNSEL. An opinion of counsel (which
counsel shall be reasonably satisfactory to the Administrative Agent)
in each state or country in which a Effective Date Mortgaged Property
is located with respect to the enforceability of the form(s) of
Effective Date Mortgages to be recorded in such state and such other
matters as the Administrative Agent may reasonably request, in each
case in form and substance reasonably satisfactory to the
Administrative Agent.
(g) REAL ESTATE APPRAISALS. The Administrative Agent shall have received
appraisals from one or more independent real estate appraisers satisfactory to
the Administrative Agent, in form, scope and substance satisfactory to the
Administrative Agent and satisfying the requirements of any applicable laws and
regulations, concerning any Effective Date Mortgaged Properties listed in clause
(i) of SCHEDULE 4.5 to the extent available prior to the Effective Date and the
Borrowers shall use their best efforts to provide the remaining appraisals, in
each case to
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the extent required under such laws and regulations as determined by the
Administrative Agent in its sole discretion.
(h) ENVIRONMENTAL REPORTS. The Administrative Agent shall have received
reports and other information, in form, scope and substance satisfactory to the
Administrative Agent, regarding environmental matters relating to the Facilities
, which reports shall include a Phase I environmental assessment for each of the
Facilities listed in clause (i) of SCHEDULE 4.5 (and so identified thereon)
which conforms to the ASTM Standard Practice for Environmental Site Assessments:
Phase I Environmental Site Assessment Process E 1527-94 (or its applicable local
equivalent) and a transaction screen (or its applicable local equivalent) for
each of the Facilities listed in clause (ii) of SCHEDULE 4.5 (and so identified
thereon) which conforms to the ASTM Standard Practice for Environmental Site
Assessments: Transaction Screen Process E 1528-96. Such reports shall be
conducted by one or more environmental consulting firms reasonably satisfactory
to the Administrative Agent.
(i) EVIDENCE OF INSURANCE. The Administrative Agent shall have received a
certificate from the Credit Parties' insurance broker or other evidence
satisfactory to it that all insurance required to be maintained pursuant to
Section 6.5 is in full force and effect and that the Administrative Agent on
behalf of the Lenders has been named as additional insured and loss payee
thereunder to the extent required under Section 6.5.
(j) MANAGEMENT; EMPLOYMENT CONTRACTS. The management structure of CML and
its Subsidiaries, after giving effect to the Sylvania Acquisition, shall be as
set forth on SCHEDULE 4.11, and the Administrative Agent shall have received
copies of, and shall be satisfied with the form and substance of (i) any and all
employment contracts with senior management of CML and its Subsidiaries, (ii)
any and all shareholders' agreements among any of the shareholders of CML and
its Subsidiaries, (iii) any and all consulting agreements with and Persons and
(iv) any stock option plans, phantom stock incentive programs and similar
arrangements provided by CML and its Subsidiaries to any Person; provided, that
any the foregoing which relate to Sylvania and its Subsidiaries which is not
provided by Sylvania prior to the consummation of the Sylvania Acquisition will
be provided by the Borrowers no later than 90 days after the Effective Date.
(k) NECESSARY GOVERNMENTAL AUTHORIZATIONS AND CONSENTS; EXPIRATION OF
WAITING PERIODS, ETC.. Except as set forth on SCHEDULE 5.1 annexed hereto, the
Borrowers shall have obtained all permits, licenses, authorizations or consents
from all Governmental Authorities and all consents of other Persons with respect
to Material Indebtedness, Liens and agreements listed on SCHEDULE 4.14 (and so
identified thereon), in each case that are necessary or advisable in order to
consummate the Sylvania Acquisition, the other transactions contemplated by the
Basic Documents, and are required for the continued operation of the business
conducted by CML and Sylvania, in substantially the same manner as conducted
prior to the consummation of the Sylvania Acquisition and each of the foregoing
shall be in full force and effect, in each case other than those the failure to
obtain or maintain which, either individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Without limiting the
scope of the foregoing, the Credit Parties shall have obtained all third party
consents necessary to cause the assignment to the Lenders for security purposes
of all agreements required to be listed in
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SCHEDULE 4.14. All applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority which would
restrain, prevent or otherwise impose adverse conditions on the Sylvania
Acquisition or the financing thereof. No action, request for stay, petition for
review or rehearing, reconsideration or appeal with respect to any of the
foregoing shall be pending, and the time for any applicable Governmental
Authority to take action to set aside its consent on its own motion shall have
expired.
(l) CONSUMMATION OF THE SYLVANIA ACQUISITION.
(i) All conditions to the Sylvania Acquisition, including those set
forth in the Sylvania Acquisition Agreement, respectively, shall have been
satisfied or the fulfillment of any such conditions shall have been waived
with the consent of the Administrative Agent;
(ii) the Sylvania Acquisition shall have become effective in
accordance with the terms of the Sylvania Acquisition Agreement;
(iii) the aggregate consideration paid by CML in connection with the
Sylvania Acquisition shall not exceed $165,000,000 as adjusted pursuant to
the Sylvania Acquisition Agreement (plus $55,000,000 in assumed liabilities
and the payment of $144,000 in dividends for each of September and October
1997);
(iv) the Administrative Agent shall have received copies of all
instruments and agreements relating to the Sylvania Acquisition; and
(v) the Administrative Agent shall have received an certificate of an
officer of the Borrower to the effect set forth in clauses (i)-(iv) above
and stating that the Borrower will proceed to consummate the Sylvania
Acquisition immediately upon the making of the Sylvania Acquisition Loan.
(m) EXISTING CREDIT AGREEMENTS. The Administrative Agent shall have
received evidence that the principal of and interest on, and all other amounts
owing in respect of, the Existing Credit Agreements except for the Existing
Credit Agreements set forth in SCHEDULE 5.1 shall have been, or shall
simultaneously be, repaid in full, that the "Commitments" thereunder shall have
been terminated and that all Guaranties in respect of, and all Liens securing,
any such obligations shall have been released (or arrangements for such release
satisfactory to the Administrative Agent shall have been made); provided that
all outstanding Alternative Currency Loans under the Existing Credit Agreements
shall be funded at closing by the Lenders and all outstanding letter of credits
with either be replaced or backing Letters of Credit will be issued by the
Issuing Lender.
(n) FINANCIAL STATEMENTS; PROJECTIONS; PRO FORMA BALANCE SHEET. The
Administrative Agent shall have received from the Credit Parties the certified
financial statements, the Projections and pro forma balance sheet referred to in
Section 4.4 hereof and shall have received from Ernst & Young a due diligence
report, acceptable to the Administrative Agent in its sole discretion, in
respect of the Sylvania and its Subsidiaries and respective businesses.
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(o) FINANCIAL COVENANTS. The Administrative Agent shall have received a
certificate of a Financial Officer, in form and detail satisfactory to the
Administrative Agent, setting forth calculations necessary to demonstrate
compliance with the financial covenants contained in Section 7.9 on a pro forma
basis after giving effect to the Loans to be made on the Effective Date and the
completion of the Sylvania Acquisition.
(p) LEVERAGE RATIO. The Administrative Agent shall have received a
certificate of a Financial Officer, in form and detail satisfactory to the
Administrative Agent, setting forth the Leverage Ratio as at the Effective Date.
(q) SOLVENCY ASSURANCES. The Administrative Agent shall have received a
certificate from a Financial Officer to the effect that, as of the Effective
Date and after giving effect to the initial Loans hereunder and to the other
Transactions:
(i) the aggregate value of all properties of the Credit Parties at
their present fair saleable value (i.e., the amount that may be realized
within a reasonable time, considered to be six months to one year, either
through collection or sale at the regular market value, conceiving the
latter as the amount that could be obtained for the property in question
within such period by a capable and diligent businessman from an interested
buyer who is willing to purchase under ordinary selling conditions), exceed
the amount of all the debts and liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities) of the Credit
Parties,
(ii) the Credit Parties will not, on a consolidated basis, have an
unreasonably small capital with which to conduct their business operations
as heretofore conducted and
(iii) the Credit Parties will have, on a consolidated basis,
sufficient cash flow to enable them to pay their debts as they mature.
Such certificate shall include a statement to the effect that the financial
projections and assumptions underlying such analysis are fair and reasonable and
accurately computed.
(r) FINANCIAL OFFICER CERTIFICATE. The Administrative Agent shall have
received a certificate, dated the Effective Date and signed by the President, a
Vice President or a Financial Officer, confirming compliance with the conditions
set forth in paragraphs (a) and (b) of Section 5.2.
(s) NO MATERIAL ADVERSE EFFECT. There shall have occurred no Material
Adverse Effect (in the reasonable opinion of the Administrative Agent) since
December 1, 1996 in the case of the Borrowers.
(t) OPINIONS OF COUNSEL. The Administrative Agent shall have received
favorable written opinions (addressed to the Administrative Agent and the
Lenders and dated the Effective Date) of (i) Bingham, Dana & Gould LLP, counsel
to the Credit Parties, substantially in the form of EXHIBIT G annexed hereto and
covering such matters relating to the Credit Parties, this Agreement, the other
Loan Documents or the Transactions as the Required Revolving Credit
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Lenders shall request (and each Credit Party hereby requests such counsel to
deliver such opinion) and (ii) local counsel in Oklahoma, Illinois, New Jersey,
the Province of Ontario, Canada, Costa Rica, the United Kingdom and Germany.
(u) FEES AND EXPENSES. The Administrative Agent shall have received all
fees and other amounts due and payable on or prior to the Effective Date,
including, without limitation to the extent invoiced, reimbursement or payment
of all legal, examination and related fees and expenses required to be
reimbursed or paid by the Borrowers hereunder.
(v) OTHER DOCUMENTS. The Administrative Agent shall have received such
other documents as the Administrative Agent or any Lender or Special Counsel
shall have reasonably requested.
The Administrative Agent shall notify the Borrowers and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans, and of the Issuing
Lender to issue Letters of Credit, hereunder shall not become effective unless
each of the foregoing conditions is satisfied (or waived pursuant to Section
10.2) at or prior to 12:00 p.m., Boston, Massachusetts time, on November 15,
1997 (and, in the event such conditions are not so satisfied or waived, the
Revolving Credit Commitments shall terminate at such time).
5.2 EACH EXTENSION OF CREDIT. The obligation of each Lender to make a Loan
on the occasion of any Borrowing, and of the Issuing Lender to issue, amend,
renew or extend any Letter of Credit or any Bank Guaranty, is subject to the
satisfaction of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
each Credit Party set forth in this Agreement and the other Loan Documents shall
be true and correct on and as of the date of such Borrowing, or (as applicable)
the date of issuance, amendment, renewal or extension of such Letter of Credit,
both before and after giving effect thereto and to the use of the proceeds
thereof (or, if any such representation or warranty is expressly stated to have
been made as of a specific date, such representation or warranty shall be or
have been true and correct as of such specific date).
(b) NO DEFAULTS. At the time of and immediately after giving effect to such
Borrowing, or (as applicable) the date of issuance, amendment, renewal or
extension of such Letter of Credit or Bank Guaranty, no Default shall have
occurred and be continuing and the Credit Parties shall be in compliance with
each covenant, condition and agreement contained in this Agreement.
The making of each Loan shall be deemed to be a representation and warranty
by the Borrowers on the date of the Borrowing or the date of issuance,
amendment, renewal or extension of a Letter of Credit or a Bank Guaranty as to
the accuracy of the facts referred to in subsections (a) and (b) of this Section
5.2.
ARTICLE VI
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AFFIRMATIVE COVENANTS
Until the Revolving Credit Commitments have expired or been terminated and
the principal of and interest on each Loan and all fees payable hereunder shall
have been paid in full and all Letters of Credit and Bank Guaranties shall have
expired or terminated and all LC Disbursements and Bank Guaranty Disbursements
shall have been reimbursed, each of the Credit Parties covenants and agrees with
the Lenders that:
6.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Credit Parties will
furnish to the Administrative Agent and each Lender:
(a) as soon as available and in any event within 90 days after the end of
each fiscal year of the Credit Parties:
(i) consolidated and consolidating statements of income, retained
earnings and cash flows of the Credit Parties for such fiscal year and the
related consolidated and consolidating balance sheets of the Credit Parties
as at the end of such fiscal year, setting forth in each case in
comparative form the corresponding consolidated and consolidating figures
for the preceding fiscal year;
(ii) an opinion (without a "going concern" or like qualification or
exception and without any qualification or exception as to the scope of
such audit) of independent certified public accountants of recognized
national standing stating that said consolidated financial statements
referred to in the preceding clause (i) fairly present the consolidated
financial condition and results of operations of the Credit Parties as at
the end of, and for, such fiscal year in accordance with GAAP, and a
statement of such accountants to the effect that, in making the examination
necessary for their opinion, nothing came to their attention that caused
them to believe that the Credit Parties were not in compliance with Section
7.9, insofar as such Section relates to accounting matters; and
(iii) a certificate of a Financial Officer in the form of EXHIBIT E
annexed hereto stating that the consolidating financial statements referred
to in the clause (i) fairly present the respective individual
unconsolidated financial condition and results of operations of each of the
Credit Parties, in each case in accordance with GAAP consistently applied,
as at the end of, and for, such fiscal year;
(b) as soon as available and in any event within 45 days after the end of
each quarterly fiscal period of each fiscal year of the Credit Parties:
(i) consolidated and consolidating statements of income, retained
earnings and cash flows of the Credit Parties for such period and for the
period from the beginning of the respective fiscal year to the end of such
period, and the related consolidated and consolidating balance sheets of
the Credit Parties as at the end of such period, setting forth in each case
in comparative form the corresponding consolidated and consolidating
figures for the corresponding period in the preceding fiscal year (except
that, in the case of balance sheets, such comparison shall be to the last
day of the prior fiscal year) and
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including (i) separate statements of income for CML and its Consolidated
Subsidiaries (except Sylvania and its Consolidated Subsidiaries) (ii)
separate statements of income for Sylvania and its Consolidated
Subsidiaries and (iii) separate statements of income, retained earnings,
cash flow and balance sheet, for each Special Credit Party obligated,
directly or indirectly, for an Alternative Currency Loan; and
(ii) a certificate of a Financial Officer, which certificate shall
state that said consolidated financial statements referred to in the
preceding clause (i) fairly present the consolidated financial condition
and results of operations of the Credit Parties and that said consolidating
financial statements referred to in the preceding clause (i) fairly present
the respective individual unconsolidated financial condition and results of
operations of each of the Credit Parties, in each case in accordance with
generally accepted accounting principles, consistently applied, as at the
end of, and for, such period (subject to normal year-end audit adjustments
and the omission of footnotes);
(c) promptly upon receipt by the Credit Parties, all management letters
from their independent certified public accountants;
(d) concurrently with any delivery of financial statements under clause (a)
and (b) above, a Compliance Certificate duly executed by a Financial Officer;
(e) as soon as available and in any event within 30 days after the
beginning of the fiscal year of CML, statements of forecasted consolidated
income for the Credit Parties for each fiscal month in such fiscal year and a
forecasted consolidated balance sheet of the Credit Parties, together with
supporting assumptions which were reasonable when made, as at the end of each
fiscal month, all prepared in good faith in reasonable detail and consistent
with CML's and CML's past practices in preparing projections and otherwise
reasonably satisfactory in scope to the Administrative Agent;
(f) promptly after the same become publicly available, copies of all
registration statements, regular periodic or other reports and press releases
filed by the Credit Parties with the Securities and Exchange Commission, or any
Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange;
(g) promptly upon the mailing thereof to the shareholders of CML generally,
copies of all financial statements, reports and proxy statements so mailed; and
(h) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of any Credit
Party, or compliance with the terms of this Agreement, as the Administrative
Agent or any Lender may reasonably request.
6.2 NOTICES OF MATERIAL EVENTS. The Credit Parties will furnish to the
Administrative Agent prompt written notice of the following:
(a) the occurrence of any Default (delivered no later than five Business
Days after such occurrence);
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(b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting any Credit
Party or any Affiliate thereof that, if adversely determined, could reasonably
be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
liability of the Credit Parties in an aggregate amount exceeding $100,000; and
(d) any other development that results in, or could reasonably be expected
to result in, a Material Adverse Effect.
Each notice delivered under this Section 6.2 shall be accompanied by a statement
of a Financial Officer or other executive officer of CML setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
6.3 EXISTENCE; CONDUCT OF BUSINESS. Each of the Credit Parties will cause
to be done all things necessary to preserve, renew and keep in full force and
effect its legal existence and the rights, licenses, permits, privileges and
franchises material to the conduct of its business; provided that the foregoing
shall not prohibit any merger, consolidation, liquidation, dissolution or any
discontinuance or sale of such business permitted under Section 7.4.
6.4 PAYMENT OF OBLIGATIONS.
(a) Each of the Credit Parties will pay its obligations, including Tax
liabilities, that, if not paid, could result in a Material Adverse Effect before
the same shall become delinquent or in default, except where (a) the validity or
amount thereof is being contested in good faith by appropriate proceedings, (b)
such Credit Party has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (c) the failure to make payment pending such
contest could not reasonably be expected to result in a Material Adverse Effect.
(b) No Credit Party will file any consolidated tax return with any
Unrestricted Subsidiary prior to having entered into a tax sharing agreement,
approved by the Required Revolving Credit Lenders, that (i) obligates such
Unrestricted Subsidiary to reimburse the Credit Parties for the portion of any
tax liability equal to the proportionate contribution of such Unrestricted
Subsidiary to the taxable income of the Credit Parties and (ii) obligates the
Credit Parties to reimburse such Unrestricted Subsidiary for the portion of any
tax savings or benefits resulting exclusively from the operations of such
Unrestricted Subsidiary, on account of the filing of such consolidated tax
return.
6.5 MAINTENANCE OF PROPERTIES; INSURANCE. Each of the Credit Parties will
(a) keep and maintain all property material to the conduct of its business in
good working order and condition, ordinary wear and tear excepted, and (b)
maintain, with financially sound and reputable insurance companies, as may be
required by law and such other insurance in such amounts and against such risks
as are customarily maintained by companies engaged in the same or similar
businesses operating in the same or similar locations, including business
interruption
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insurance. Without limiting the generality of the foregoing, each Credit Party
will (i) maintain or cause to be maintained flood insurance with respect to each
Flood Hazard Property in amounts approved by the Administrative Agent, or
provide evidence acceptable to the Administrative Agent that such insurance is
not available and (ii) maintain or cause to be maintained replacement value
casualty insurance on its Property under such policies of insurance, in each
case with such insurance companies, in such amounts, with such deductibles, and
covering such terms and risks as are at all times satisfactory to the
Administrative Agent in its commercially reasonable judgment. Each such policy
of insurance shall (x) in the case of each liability insurance policy, name the
Administrative Agent for the benefit of the Lenders as an additional insured
thereunder as its interests may appear and (y) in the case of each business
interruption and casualty insurance policy, contain a loss payable clause or
endorsement, satisfactory in form and substance to the Administrative Agent that
names the Administrative Agent for the benefit of the Lenders as the loss payee
thereunder for any covered loss and provides for at least 30 days prior written
notice to the Administrative Agent of any modifications or cancellation of such
policy.
6.6 BOOKS AND RECORDS; INSPECTION RIGHTS. Each of the Credit Parties will
keep proper books of record and account in which full, true and correct entries
are made of all dealings and transactions in relation to its business and
activities. Each of the Credit Parties will permit any representatives
designated by the Administrative Agent or any Lender, upon reasonable prior
notice, to visit and inspect its properties, to examine and make extracts from
its books and records, and to discuss its affairs, finances and condition with
its officers and independent accountants, all at such reasonable times and as
often as reasonably requested, provided that, so long as no Default has occurred
and is continuing, all such visits shall be at reasonable times during regular
business hours of such Credit Party and neither the Administrative Agent nor any
Lender shall visit any Credit Party more frequently than once each fiscal
quarter, and provided further that after the occurrence and during the
continuance of any Default the Administrative Agent and the Lenders may visit at
any reasonable times and as often as the Administrative Agent or such Lender
reasonably deems necessary. The Borrowers, in consultation with the
Administrative Agent, will arrange for a meeting to be held at least once every
year with the Lenders hereunder at which the business and operations of the
Credit Parties are discussed.
6.7 FISCAL YEAR. To enable the ready and consistent determination of
compliance with the covenants set forth in Section 7 hereof, the Credit Parties
will not change the last day of their fiscal year from Sunday closest to
December 1 of each year, or the last day of the first three fiscal quarters in
each of its fiscal years from February, May and August, respectively.
6.8 COMPLIANCE WITH LAWS. Each of the Credit Parties will comply with all
laws, rules, regulations and orders including Environmental Laws, of any
Governmental Authority applicable to it or its property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
6.9 COMPLIANCE WITH AGREEMENTS. Each of the Credit Parties will comply in
all material respects with each term, condition and provision of all leases,
agreements and other instruments entered into in the conduct of its business
including any agreement listed on
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SCHEDULE 4.14; provided that the Credit Parties may contest any such lease,
agreement and other instrument in good faith so long as adequate reserves are
maintained in accordance with GAAP.
6.10 USE OF PROCEEDS.
(a) The proceeds of the Sylvania Acquisition Loan will be used only for the
Sylvania Acquisition;
(b) Loans to Special Credit Parties shall be used only for (i) the
refinancing of Existing Credit Agreements of the Special Credit Party and (ii)
for general working capital purposes of the Special Credit Party;
(c) All other Revolving Credit Loans will be used only for (i) the
refinancing of Existing Credit Agreements (except for the Existing Credit
Agreements described in paragraph (b)(i) above), (ii) expenses incurred in
connection with this Agreement and related transactions and (iii) for general
working capital purposes of the Borrowers;
(d) No part of the proceeds of any Loan will be used, whether directly or
indirectly, for any purpose that entails a violation of any of the Regulations
of the Board, including Regulations G, U and X.
6.11 CERTAIN OBLIGATIONS RESPECTING RESTRICTED SUBSIDIARIES AND SPECIAL
CREDIT PARTIES.
(a) ADDITIONAL RESTRICTED SUBSIDIARIES. In the event that any Credit Party
shall form or acquire any new Restricted Subsidiary after the date hereof, the
applicable Credit Party shall cause such new Restricted Subsidiary within five
Business Days of such formation or acquisition:
(i) to execute and deliver to the Administrative Agent the following
documents: (1) a counterpart to this Agreement (and thereby to become a
party to this Agreement, as a "Borrower" hereunder if such Subsidiary is a
Domestic Subsidiary or as a "Guarantor" hereunder if such Subsidiary is a
Foreign Subsidiary), (2) a Pledge Agreement, (3) a Security Agreement, (4)
an Intellectual Property Security Agreement, (5) Mortgages and (6) such
other instruments documents and agreements as may be required by the
Administrative Agent;
(ii) to take such action (including delivering such shares of stock
and executing and delivering such UCC financing statements or its
applicable local equivalent) as shall be necessary to create and perfect
valid and enforceable First Priority Liens consistent with the provisions
of the applicable Collateral Documents; and
(iii) to deliver such proof of corporate action, incumbency of
officers and other documents as is consistent with those delivered by each
Restricted Subsidiary pursuant to Section 5.1 upon the Effective Date or as
the Administrative Agent shall have reasonably requested.
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(b) ADDITIONAL SPECIAL CREDIT PARTIES. At any time that the Lenders make
Loans to any Unrestricted Subsidiary or Sylvania Company such Unrestricted
Subsidiary or Sylvania Company shall become a Special Credit Party and shall, if
not already a party, execute this Agreement. The execution of this Agreement or
the grant of any security for Loans made to any Special Credit Party shall not
bind any such Special Credit Party to terms of this Agreement other than the
representation in Article IV and the covenants set forth in Articles VI and VII
and such other provisions which specifically relate to the Special Credit
Parties. No security interest or lien granted to the Agent or any of the Lenders
by any Special Credit Party which is a Sylvania Company shall secure the
Sylvania Acquisition Loan. Each new Special Credit Party shall become a
Guarantor of all Loans other than the Sylvania Acquisition Loan, to the extent
permitted under the law governing such Special Credit Party or its assets.
(c) OWNERSHIP OF RESTRICTED SUBSIDIARIES. Except as expressly permitted by
this Agreement, no Credit Party shall sell, transfer or otherwise dispose of any
shares of stock in any Restricted Subsidiary owned by it, nor permit any
Restricted Subsidiary to issue any shares of stock of any class whatsoever to
any Person other than to a Credit Party. Each of the Credit Parties will take
such action from time to time as shall be necessary to ensure that the
percentage of the equity capital of any class or character owned by it in any
Restricted Subsidiary on the date hereof (or, in the case of any newly formed or
newly acquired Restricted Subsidiary, on the date of formation or acquisition)
is not at any time decreased, other than by reason of transfers to another
Credit Party. In the event that any additional shares of stock shall be issued
by any Credit Party, the respective holder of such shares of stock shall
forthwith deliver to the Administrative Agent pursuant to a Pledge Agreement the
certificates evidencing such shares of stock, accompanied by undated stock
powers executed in blank and to take such other action as the Administrative
Agent shall request to perfect the security interest created therein pursuant to
such Pledge Agreement.
6.12 ERISA. The Credit Parties will maintain each Plan in compliance with
all material applicable requirements of ERISA and of the Code and with all
applicable rulings and regulations issued under the provisions of ERISA and of
the Code and will not and not permit any of the ERISA Affiliates to (a) engage
in any transaction in connection with which CML or any of the ERISA Affiliates
would be subject to either a civil penalty assessed pursuant to Section 502(i)
of ERISA or a tax imposed by Section 4975 of the Code, (b) fail to make full
payment when due of all amounts which, under the provisions of any Plan, CML or
any ERISA Affiliate is required to pay as contributions thereto, or permit to
exist any accumulated funding deficiency (as such term is defined in Section 302
of ERISA and Section 412 of the Code), whether or not waived, with respect to
any Plan or (c) fail to make any payments to any Multiemployer Plan that CML or
any of the ERISA Affiliates may be required to make under any agreement relating
to such Multiemployer Plan or any law pertaining thereto.
6.13 ENVIRONMENTAL MATTERS; REPORTING. Each of the Credit Parties will
observe and comply with, all laws, rules, regulations and orders of any
government or government agency relating to health, safety, pollution, hazardous
materials or other environmental matters to the extent non-compliance could
result in a material liability or otherwise have a material adverse effect on
the Credit Parties taken as a whole. The Credit Parties will give the
Administrative Agent prompt written notice of any violation as to any
environmental matter by any Credit Party
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and of the commencement of any judicial or administrative proceeding relating to
health, safety or environmental matters (a) in which an adverse result would
have a Material Adverse Effect on any operating permits, air emission permits,
water discharge permits, hazardous waste permits or other permits held by any
Credit Party which are material to the operations of such Credit Party, or (b)
which will or threatens to impose a material liability on such Credit Party to
any Person or which will require a material expenditure by such Credit Party to
cure any alleged problem or violation.
6.14 CONFORMING LEASEHOLD INTERESTS; MATTERS RELATING TO ADDITIONAL REAL
PROPERTY COLLATERAL.
(a) If any Credit Party acquires any Material Leasehold Property, each of
the Credit Parties shall, or shall cause such Restricted Subsidiary to, use its
best efforts (without requiring such Credit Party to relinquish any material
rights or incur any material obligations or to expend more than a nominal amount
of money over and above the reimbursement, if required, of the landlord's
out-of-pocket costs, including attorneys' fees) to cause such Leasehold Property
to be a Conforming Leasehold Interest.
(b) From and after the Effective Date, in the event that (i) any Credit
Party acquires any fee interest in real property or any Material Leasehold
Property, or the Administrative Agent determines in its sole discretion to place
a Mortgage on any Real Property Asset owned on the Effective Date by any Credit
Party if a Mortgage was not placed on any such Real Property Asset as of the
Effective Date, (ii) at the time any Person becomes a Restricted Subsidiary and
such Person owns or holds any fee interest in real property or any Material
Leasehold Property, or (iii) any Loan is extended to any Special Credit Party
and such Special Credit Party may extend a lien on its freehold or fee Real
Property Assets, excluding as to each of the foregoing cases any such Real
Property Asset the encumbering of which requires the consent of any applicable
lessor or (in the case of clause (ii) above) any then-existing senior
lienholder, where the Credit Parties are unable to obtain such lessor's or
senior lienholder's consent or granting such a lien would violate applicable law
(any such non-excluded Real Property Asset described in the foregoing clause
(i), (ii) or (iii) being an "ADDITIONAL MORTGAGED PROPERTY"), such Credit Party,
Restricted Subsidiary or Special Credit Party, as the case may be, with
Additional Mortgaged Property shall deliver to the Administrative Agent all of
the items required to be delivered for each Effective Date Mortgaged Property,
as soon as practicable after such Person acquires such Additional Mortgaged
Property. Notwithstanding the foregoing, the Additional Mortgaged Property of
Sylvania or any of its Subsidiaries shall not secure the Sylvania Acquisition
Loan and to the extent restricted by local law and the Additional Mortgaged
Property of any Special Credit Party will only secure the Obligations of such
Special Credit Party.
6.15 ADDITIONAL SECURITY INTERESTS.
(a) The Credit Parties shall use their best efforts to satisfy, not later
than 90 days after the Effective Date, the requirements of Sections 5.1(e) and
(f) with respect to any personal or mixed property of any Restricted Subsidiary
or Subsidiary of CML not delivered at closing or Real Property Asset any
Restricted Subsidiary or Subsidiary of CML, including, without limitation,
delivery of a Pledge of 65% of the shares of Sylvania.
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(b) Any agreement by which any of the Sylvania Companies guaranty the
Obligations here under or become Special Credit Parties or grant liens of any
nature to the Administrative Agent shall specifically provide that such
Obligations undertaken or secured exclude the Obligations arising from the
Sylvania Acquisition Loan.
(c) As soon as possible, the Restricted Subsidiaries and Unrestricted
Subsidiaries, where permitted under local law, shall amend their charters to
provide that they will not undertake any additional debt for borrowed money
without the consent of the Administrative Agent unless their board of directors
or other equivalent governing body determines that such additional debt is in
the best interest of such Restricted Subsidiary or Unrestricted Subsidiary and
the Administrative Agent declines or cannot under the terms of this Agreement
make a Loan to such Restricted Subsidiary or Unrestricted Subsidiary.
(d) Any Special Credit Party shall not be required under any Loan to agree
to repay anything more than the actual Loan or Loans made to such Special Credit
Party or secure more than such specific Loan if in the reasonable judgment of
the Administrative Agent, such Special Credit Party's undertaking or securing
additional Obligations would (i) cause such Special Credit Party to violate
Section 6.15(b), (ii) violate the law of the jurisdiction governing such Special
Credit Party or (iii) could reasonably render any Obligation undertaken or
security granted void or voidable or might subordinate the Obligations of such
Special Credit Party to the Lenders to the obligations due any other Person.
Notwithstanding the foregoing no Sylvania Company shall guaranty, provide
Collateral to secure or in any way be obligated for, the Sylvania Acquisition
Loan.
6.16 REFINANCING OF EXISTING CREDIT AGREEMENTS. On or before September 30,
1997, each Existing Credit Agreement listed on SCHEDULE 5.1 shall have been
repaid in full and the "Commitments" thereunder shall have been terminated
and/or assigned to the Administrative Agent and all Guaranties in respect of,
and all Liens securing, any such obligations shall have been released or notice
of such termination, release or assignment shall have been irrevocably given in
accordance with the terms thereof.
6.17 ADEQUATE CAPITAL. To the extent that the Administrative Agent in its
reasonable discretion determines that any Credit Party (except CML) has failed
to maintain adequate capital as required by local law applicable to such Credit
Party, the Credit Parties shall contribute such funds in cash to the affected
Credit Party to the extent necessary for it to comply with local law.
ARTICLE VII
NEGATIVE COVENANTS
Until the Revolving Credit Commitments have expired or terminated and the
principal of and interest on each Loan and all fees payable hereunder have been
paid in full and all Letters of Credit and Bank Guaranties shall have expired or
terminated and all LC Disbursements and Bank Guaranty Disbursement shall have
been reimbursed, each of the Credit Parties covenants and agrees with the
Lenders that:
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7.1 INDEBTEDNESS. No Credit Party will create, incur, assume or permit to
exist any Indebtedness, except:
(a) Indebtedness created hereunder or permitted to any Lender under the
terms hereof, including certain Hedging Agreements with the Administrative
Agent;
(b) Indebtedness existing on the date hereof not required to be repaid and
set forth in SCHEDULE 4.14;
(c) Indebtedness of any Credit Party to any other Credit Party;
(d) Indebtedness of Foreign Subsidiaries to lending institutions located in
such Foreign Subsidiary's jurisdiction of organization not in excess of the
amounts and set forth in SCHEDULE 7.1;
(e) Indebtedness of any Foreign Subsidiary which is not a Guarantor to CML;
provided that such Indebtedness shall not exceed the principal amount of the
promissory note executed by each such Foreign Subsidiary for such Indebtedness
which has been assigned to the Administrative Agent for the benefit of the
Lenders;
(f) Guaranties by any Credit Party of Indebtedness of any other Credit
Party;
(g) Indebtedness of any Credit Party (determined on a consolidated basis
without duplication in accordance with GAAP) for Funded Debt secured by Liens
permitted under Section 7.2(i) in an aggregate principal amount not in excess of
$15,000,000 at any one time outstanding; and
(h) Additional Indebtedness of any Credit Party (determined on a
consolidated basis without duplication in accordance with GAAP) for Funded Debt
in an aggregate principal amount, which when added to Indebtedness incurred
pursuant to Section 7.1(e) and 7.1 (g) does not exceed $20,000,000 at any one
time outstanding.
7.2 LIENS. No Credit Party will create, incur, assume or permit to exist
any Lien on any Property or asset now owned or hereafter acquired by it, or
assign or sell any income or revenues (including accounts receivable) or rights
in respect of any thereof, except:
(a) Liens created under the Collateral Documents;
(b) any Lien on any property or asset of any Credit Party existing on the
date hereof and set forth in SCHEDULE 4.14 or any Lien securing Indebtedness
which does not have to be scheduled under the terms of this Agreement, provided
that (i) such Lien shall not apply to any other property or asset of any Credit
Party and (ii) such Lien shall secure only those obligations which it secures on
the date hereof and extensions, renewals and replacements thereof that do not
increase the outstanding principal amount thereof;
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(c) Liens imposed by any Governmental Authority for taxes, assessments or
charges not yet due or (in the case of property taxes and assessments not
exceeding $100,000 in the aggregate more than 90 days overdue) which are being
contested in good faith and by appropriate proceedings if adequate reserves with
respect thereto are maintained on the books of any Credit Party in accordance
with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's, repairmen's or
other like Liens, and vendors' Liens imposed by statute or common law not
securing the repayment of Indebtedness, arising in the ordinary course of
business which are not overdue for a period of more than 60 days or which are
being contested in good faith and by appropriate proceedings and Liens securing
judgments (including pre-judgment attachments) but only to the extent for an
amount and for a period not resulting in an Event of Default under Section
8.1(j) hereof;
(e) pledges or deposits under worker's compensation, unemployment insurance
and other social security legislation;
(f) deposits to secure the performance of bids, tenders, trade contracts
(other than for borrowed money), leases (other than capital leases), statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions on the use of Property or
minor imperfections in title thereto which, in the aggregate, are not material
in amount, and which do not, in the aggregate, materially detract from the value
of the Property of any Credit Party or interfere with the ordinary conduct of
the business of any Credit Party;
(h) Liens consisting of bankers' liens and rights of setoff, in each case,
arising by operation of law, and Liens on documents presented in letters of
credit drawings; and
(i) Liens on fixed or capital assets, including real or personal property,
acquired, constructed or improved by any Credit Party, provided that (A) such
Liens secure Indebtedness (including Capital Lease Obligations) permitted by
Section 7.1(h), (B) such Liens and the Indebtedness secured thereby are incurred
prior to or within 90 days after such acquisition or the completion of such
construction or improvement, (C) the Indebtedness secured thereby does not
exceed the cost of acquiring, constructing or improving such fixed or capital
assets and (D) such security interests shall not apply to any other property or
assets of any Credit Party.
7.3 CONTINGENT LIABILITIES. No Credit Party will Guaranty the Indebtedness
or other obligations of any Person, or Guaranty the payment of dividends or
other distributions upon the stock of, or the earnings of, any Person, except:
(a) endorsements of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business,
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(b) Guaranties of obligations of any Credit Party by any other Credit
Party;
(c) Guaranties in effect on the date hereof which are disclosed in SCHEDULE
4.14 an any replacement thereof which do not exceed the limits set forth on
SCHEDULE 4.14; and
(d) obligations in respect of Letters of Credit and Bank Guaranties.
7.4 FUNDAMENTAL CHANGES. No Credit Party will enter into any transaction of
merger or consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution). No Credit Party will acquire
any business or property from, or capital stock of, or be a party to any
Acquisition of, any Person except Permitted Acquisitions, purchases of inventory
and other property to be sold or used in the ordinary course of business,
Investments permitted under Section 7.5 and Capital Expenditures permitted under
Section 7.9(e). No Credit Party will convey, sell, lease, transfer or otherwise
dispose of, in one transaction or a series of transactions, any part of its
business or property, whether now owned or hereafter acquired, including,
receivables and leasehold interests, but excluding (x) obsolete or worn-out
property, tools or equipment no longer used or useful in its business, (y)
Dispositions permitted under the terms of this Agreement and (z) any inventory
or other property sold or disposed of in the ordinary course of business and on
ordinary business terms).
Notwithstanding the foregoing provisions of this Section 7.4:
(a) any Restricted Subsidiary may be merged or consolidated with or into
any other Restricted Subsidiary; provided that if any such transaction shall be
between a Subsidiary and a Wholly Owned Subsidiary, the Wholly Owned Subsidiary
shall be the continuing or surviving corporation;
(b) any Restricted Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its property (upon voluntary liquidation or otherwise)
to any Subsidiary that is a Wholly Owned Subsidiary of CML; provided that
Chicago Miniature Lamp-Sylvania I B.V. may sell, lease, transfer or otherwise
dispose of any or all of its property only to Chicago Miniature Lamp-Sylvania II
B.V., its Wholly Owned Subsidiary; provided further that if any such sale is by
a Restricted Subsidiary to a Subsidiary of CML not a Restricted Subsidiary, then
such Subsidiary shall have assumed all of the obligations of such Restricted
Subsidiary hereunder and under the applicable Collateral Documents and (if not
theretofore so pledged) all of the issued and outstanding capital stock of such
Subsidiary shall be pledged under the Pledge Agreement executed by the
applicable Credit Party and (if not theretofore so encumbered) all the assets of
such Subsidiary shall become subject to a Lien in favor of the Administrative
Agent pursuant to a Security Agreement and an Intellectual Property Security
Agreement; and
(c) the capital stock of any Restricted Subsidiary may be sold, transferred
or otherwise disposed of to CML or any Subsidiary that is a Wholly Owned
Subsidiary of CML; provided that if any such sale, transfer or disposition is to
a Subsidiary of CML not a Restricted Subsidiary, then such Subsidiary shall have
become a Restricted Subsidiary hereunder and all of the issued and outstanding
capital stock of such Subsidiary shall be pledged under the Pledge Agreement
executed by the applicable Credit Party and all the assets of such Subsidiary
shall
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become subject to a Lien in favor of the Administrative Agent pursuant to a
Security Agreement and an Intellectual Property Security Agreement.
7.5 INVESTMENTS; HEDGING AGREEMENTS.
(a) No Credit Party will make or permit to remain outstanding any
Investment, except:
(i) Investments by CML in capital stock of a Credit Party to the
extent outstanding on the date of the financial statements of CML or any
Consolidated Subsidiary referred to in Section 4.4 hereof, advances by any
Credit Party to any other Credit Party in the ordinary course of business
and capital contributions by any Credit Party to any other Credit Party;
(ii) Permitted Investments;
(iii) Operating deposit accounts with banks; and
(iv) Investments in Unrestricted Subsidiaries not exceeding
$10,000,000 in the aggregate at any one time outstanding.
(b) No Credit Party will enter into any Hedging Agreement, other than
Hedging Agreements entered into in the ordinary course of business to hedge or
mitigate risks to which such Credit Party is exposed in the conduct of its
business or the management of its liabilities.
7.6 RESTRICTED JUNIOR PAYMENTS. No Credit Party will declare or make any
Restricted Junior Payment at any time; provided, however, that nothing herein
shall be deemed to prohibit the making of any dividend or distribution by any
Restricted Subsidiary to CML or any other Restricted Subsidiary which is its
parent. Nothing in this Agreement shall limit the ability of CML to acquire its
public shares (other than the shares held by Persons who are Affiliates of CML
on the date hereof) in a stock redemption authorized by its Board of Directors
and which stock redemption (i) will not violate actually or on a proforma basis
after such stock redemption any covenants in Section 7.9, and (ii) in the
aggregate with all other stock redemptions, will not require or permit payments
to acquire stock in excess of $15,000,000.
7.7 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by this
Agreement, no Credit Party will, directly or indirectly, (a) make any Investment
in an Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any
property to an Affiliate; (c) merge into or consolidate with an Affiliate, or
purchase or acquire property from an Affiliate; or (d) enter into any other
transaction directly or indirectly with or for the benefit of an Affiliate
(including guaranties and assumptions of obligations of an Affiliate); provided
that:
(i) any Affiliate who is an individual may serve as a director,
officer, employee or consultant of any Credit Party and receive reasonable
compensation for his or her services in such capacity; and
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(ii) the Credit Parties may engage in and continue the transactions
with or for the benefit of Affiliates which are described in SCHEDULE 7.7
annexed hereto.
7.8 RESTRICTIVE AGREEMENTS. No Credit Party will , directly or indirectly,
enter into, incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon (a) the ability of any Credit
Party to create, incur or permit to exist any Lien upon any of its property or
assets, or (b) the ability of any Credit Party to pay dividends or other
distributions with respect to any shares of its capital stock or to make or
repay loans or advances to any other Credit Party or to Guaranty Indebtedness of
any other Credit Party; provided that (i) the foregoing shall not apply to
restrictions and conditions imposed by law or by this Agreement, (ii) the
foregoing shall not apply to restrictions and conditions existing on the date
hereof identified on SCHEDULE 7.8 annexed hereto (but shall apply to any
extension or renewal of, or any amendment or modification expanding the scope
of, any such restriction or condition) (iii) the foregoing shall not apply to
customary restrictions and conditions contained in agreements relating to the
sale of a Restricted Subsidiary pending such sale; provided such restrictions
and conditions apply only to the Restricted Subsidiary that is to be sold and
such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not
apply to restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness and (v) clause
(a) of the foregoing shall not apply to customary provisions in leases and other
contracts restricting the assignment thereof.
7.9 CERTAIN FINANCIAL COVENANTS.
(a) MAXIMUM LEVERAGE RATIO. The Credit Parties will not permit the Leverage
Ratio at any time during the periods below to exceed the ratio set opposite such
period below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the Effective Date through the day prior to the end of 3.75 to 1
fiscal year 1998
From the last day of fiscal year 1998 through the end of 3.50 to 1
fiscal year 1999
From the last day of fiscal year 1999 through the day 3.00 to 1
prior to the end of fiscal year 2000
From the last day of fiscal year 2000 and thereafter 2.75 to 1
</TABLE>
(b) CONSOLIDATED INTEREST COVERAGE RATIO. The Credit Parties will not
permit the Consolidated Interest Coverage Ratio to be less than 3.50 to 1 at any
time.
(c) CONSOLIDATED CASH FLOW COVERAGE RATIO. The Credit Parties will not
permit Consolidated Cash Flow Coverage Ratio at any time during the periods
below to be less than the ratio set opposite such period below:
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<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the Effective Date
through the day prior fiscal
year end 1999 1.30 to 1
From the last day of fiscal year
1999 and at all times thereafter 1.50 to 1
</TABLE>
(d) MINIMUM NET WORTH. The Credit Parties will not permit Consolidated Net
Worth at any time to be less than the sum of (i) $154,000,000 PLUS (ii) 75% of
positive Net Income for each fiscal year ending after the date of such balance
sheet.
(e) CAPITAL EXPENDITURES. The Credit Parties will not permit the aggregate
amount of Capital Expenditures for any fiscal year to exceed $40,000,000 and may
carry forward into the next fiscal year (but not beyond) 25% of such Capital
Expenditure limitation if not used in the current fiscal year; provided that
Capital Expenditures shall not exceed $50,000,000 in any fiscal year.
7.10 LINES OF BUSINESS. No Credit Party shall engage to any substantial
extent in any line or lines of business activity other than (a) the businesses
engaged in by the Credit Parties as of the Effective Date and any related
business and (b) such other lines of business as may be consented to by the
Required Revolving Credit Lenders.
7.11 CALCULATION OF FINANCIAL COVENANTS. For purposes of calculating the
financial covenants set forth in Section 7.9 (a),(b) and (c) (i) for the fiscal
period ending the end of August 1997, the Borrowers shall use the actual results
of the Borrowers and the Guarantors for the four quarters through the fiscal
quarter ending August 1997 and the actual results of the Sylvania Companies for
the six months through June 30, 1997 multiplied by 2 and then combined together
to make each calculation made subject to this Section, (ii) for the fiscal
quarter ending the end of November, 1997, the Borrower shall use the actual
results of the Borrowers and the Guarantors for the four quarters then ended and
the actual results of the Sylvania Companies from September 1, 1997 through the
end of November 1997 multiplied by 4 and then combined together to make each
calculation made subject to this Section , (iii) for the fiscal quarter ending
the end of February, 1998, the Borrower shall use the actual results of the
Borrowers for the four quarters then ended for the Borrowers and the Guarantors
and the actual results of the Sylvania Companies from September 1, 1997 through
the end of February 1998 multiplied by 2 and then combined together to make each
calculation mad subject to this Section , (iv) for the fiscal quarter ending the
end of May, 1998 the Borrowers shall use the actual results of the Borrowers and
the Guarantors for the four fiscal quarters then ended and the actual results of
the Sylvania Companies from September 1, 1997 through the end of May, 1998
multiplied by 1.33 and then combined together to make each calculation made
subject to this Section and (v) for each fiscal quarter ending one and after the
end of August 1998, the Borrower shall use the consolidated results of the
Borrowers, the Guarantors and the Sylvania Companies for the four quarter then
ended to make the calculations under Section 7.9 (a), (b) and (c).
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ARTICLE VIII
EVENTS OF DEFAULT
8.1 EVENTS OF DEFAULT.
If any of the following events ("EVENTS OF DEFAULT") shall occur:
(a) the Credit Parties shall fail to pay any principal of, or interest on,
any Loan or any reimbursement obligation in respect of any LC Disbursement or
Bank Guaranty Disbursement, or other amount payable under this Agreement or any
fee payable under this Agreement or any other agreement to the Administrative
Agent or the Lenders, when and as the same shall become due and payable, whether
at the due date thereof or at a date fixed for prepayment thereof or otherwise;
provided that interest is paid within two Business Days of such due date;
(b) any representation or warranty made or deemed made by or on behalf any
Credit Party in or in connection with this Agreement, any of the other Basic
Documents or any amendment or modification hereof or thereof, or in any report,
certificate, financial statement or other document furnished pursuant to or in
connection with this Agreement, any of the other Basic Documents or any
amendment or modification hereof or thereof, shall prove to have been incorrect
when made or deemed made in any material respect;
(c) the Credit Parties (i) shall fail to observe or perform any covenant,
condition or agreement contained in Sections 6.1(a) through (f), inclusive, 6.2,
6.3, 6.4, 6.5(b), 6.6, 6.8, 6.9, 6.10, 6.11, 6.12, 6.14, 6.16, 6.17 or in
Article VII, or (ii) shall fail to observe or perform any other covenant,
condition or agreement contained in Article VI and such failure shall continue
unremedied for a period of 15 days after the earlier of (x) actual knowledge by
an officer of any Credit Party or (y) notice thereof from the Administrative
Agent (given at the request of any Lender) to the Borrower;
(d) any Credit Party shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those specified
in clauses (a), (b) or (c) of this Article) or any other Loan Document, and such
failure shall continue unremedied for a period of 30 days after notice thereof
from the Administrative Agent (given at the request of the Required Revolving
Credit Lenders) to the Borrowers;
(e) any Credit Party shall fail to make any payment (whether of principal
or interest and regardless of amount) in respect of any Material Indebtedness,
when and as the same shall become due and payable;
(f) any event or condition occurs that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits (with or
without the giving of notice, the lapse of time or both) the holder or holders
of any Material Indebtedness or any trustee or agent on its or their behalf to
cause any Material Indebtedness to become due, or to require the prepayment,
repurchase, redemption or defeasance thereof, prior to its scheduled maturity;
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(g) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of any Credit Party or its debts, or of a substantial part of its
assets, under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect or (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for any Credit
Party or for a substantial part of its assets, and, in any such case, such
proceeding or petition shall continue undismissed for 60 days or an order or
decree approving or ordering any of the foregoing shall be entered;
(h) any Credit Party shall (i) voluntarily commence any proceeding or file
any petition seeking liquidation, reorganization or other relief under any
Federal, state or foreign bankruptcy, insolvency, receivership or similar law
now or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition described
in clause (g) of this Article, (iii) apply for or consent to the appointment of
a receiver, trustee, custodian, sequestrator, conservator or similar official
for any Credit Party or for a substantial part of its assets, (iv) file an
answer admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of creditors or
(vi) take any action for the purpose of effecting any of the foregoing;
(i) any Credit Party shall become unable, admit in writing or fail
generally to pay its debts as they become due;
(j) a final judgment or judgments for the payment of money in excess of
$5,000,000 in the aggregate (exclusive of judgment amounts fully covered by
insurance where the insurer has admitted liability in respect of such judgment)
or in excess of $12,500,000 in the aggregate (regardless of insurance coverage)
shall be rendered by one or more courts, administrative tribunals or other
bodies having jurisdiction against any Credit Party and the same shall not be
discharged (or provision shall not be made for such discharge), or a stay of
execution thereof shall not be procured, within 60 days from the date of entry
thereof and the relevant Credit Party shall not, within said period of 60 days,
or such longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal;
(k) an ERISA Event shall have occurred that, in the opinion of the Required
Revolving Credit Lenders, when taken together with all other ERISA Events
that.have occurred, could reasonably be expected to result in a Material Adverse
Effect;
(l) a reasonable basis shall exist for the assertion against any Credit
Party (or there shall have been asserted against any Credit Party) claims or
liabilities, whether accrued, absolute or contingent, based on or arising from
the generation, storage, transport, handling or disposal of Hazardous Materials
by any Credit Party or any of its Subsidiaries or Affiliates, or any predecessor
in interest of any Credit Party or any of its Subsidiaries or Affiliates, or
relating to any site or facility owned, operated or leased by any Credit Party
or any of its Subsidiaries or Affiliates, which claims or liabilities (insofar
as they are payable by any Credit Party or any of its Subsidiaries but after
deducting any portion thereof which is reasonably expected to be paid by other
credit worthy Persons jointly and severally liable therefor), in the judgment of
the Required
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Revolving Credit Lenders are reasonably likely to be determined adversely to any
Credit Party or any of its Subsidiaries, and the amount thereof is, singly or in
the aggregate, reasonably likely to have a Material Adverse Effect;
(m) any of the following events shall occur and be continuing:
(i) a thirty-five percent (35%) or more of the outstanding voting
stock of CML shall be acquired, directly or indirectly, by a Person (or
group of Persons acting in concert) who owns on the date hereof less than
five percent (5%) of the voting stock of CML; or
(ii) any of Frank M. Ward or Norman Scoular shall cease to be employed
by CML in the position each held on the Effective Date.
(n) any of the following shall occur: (i) the Liens created by the
Collateral Documents shall at any time (other than by reason of the
Administrative Agent relinquishing such Lien) cease to constitute valid and
perfected Liens on the Collateral intended to be covered thereby; (ii) except
for expiration in accordance with its respective terms, any Collateral Document
shall for whatever reason be terminated, or shall cease to be in full force and
effect; or (iii) the enforceability of any Collateral Document shall be
contested by any Credit Party; or
(o) any Guarantor shall assert that its obligations hereunder or under the
Collateral Documents shall be invalid or unenforceable;
then, and in every such event (other than an event with respect to the Credit
Parties described in clause (g) or (h) of Section 8.1 hereof, and at any time
thereafter during the continuance of such event, the Administrative Agent may,
and at the request of the Required Revolving Credit Lenders shall, by notice to
the Credit Parties, take either or both of the following actions, at the same or
different times: (i) terminate the Revolving Credit Commitments, and thereupon
the Revolving Credit Commitments shall terminate immediately and (ii) declare
the Loans then outstanding to be due and payable in whole (or in part, in which
case any principal not so declared to be due and payable may thereafter be
declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Credit Parties accrued hereunder, shall become
due and payable immediately, without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Credit Parties; and in
case of any event with respect to the Credit Parties described in clause (g) or
(h) of this Section 8.1, the Revolving Credit Commitments shall automatically
terminate and the principal of the Loans then outstanding, together with accrued
interest thereon and all fees and other obligations of the Credit Parties
accrued hereunder, shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Credit Parties, and the Administrative Agent shall be
permitted to exercise such rights as secured party and mortgagee under the
Collateral Documents to the extent permitted by applicable law.
8.2 RECEIVERSHIP. Without limiting the generality of the foregoing or
limiting in any way the rights of the Lenders under the Collateral Documents or
otherwise under applicable law,
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at any time after (i) the entire principal balance of any Loan shall have become
due and payable (whether at maturity, by acceleration or otherwise) and (ii) the
Administrative Agent shall have provided to the Credit Parties not less than ten
(10) days' prior written notice of its intention to apply for a receiver, the
Administrative Agent shall be entitled to apply for and have a receiver
appointed under state or federal law by a court of competent jurisdiction in any
action taken by the Administrative Agent to enforce the Lenders' rights and
remedies hereunder and under the Collateral Documents in order to manage,
protect, preserve, sell and otherwise dispose of all or any portion of the
Collateral and continue the operation of the business of the Credit Parties, and
to collect all revenues and profits thereof and apply the same to the payment of
all expenses and other charges of such receivership, including the compensation
of the receiver, and to the payment of the Loans and other fees and expenses due
hereunder and under the Collateral Documents as aforesaid until a sale or other
disposition of such Collateral shall be finally made and consummated. THE CREDIT
PARTIES HEREBY IRREVOCABLY CONSENT TO AND WAIVE ANY RIGHT TO OBJECT TO OR
OTHERWISE CONTEST THE APPOINTMENT OF RECEIVER AS PROVIDED ABOVE. THE CREDIT
PARTIES (I) GRANT SUCH WAIVER AND CONSENT KNOWINGLY AFTER HAVING DISCUSSED THE
IMPLICATIONS THEREOF WITH COUNSEL, (II) ACKNOWLEDGE THAT (A) THE UNCONTESTED
RIGHT TO HAVE A RECEIVER APPOINTED FOR THE FOREGOING PURPOSES IS CONSIDERED
ESSENTIAL BY THE ADMINISTRATIVE AGENT IN CONNECTION WITH THE ENFORCEMENT OF THE
LENDERS' RIGHTS AND REMEDIES HEREUNDER AND UNDER THE COLLATERAL DOCUMENTS, AND
(B) THE AVAILABILITY OF SUCH APPOINTMENT AS A REMEDY UNDER THE FOREGOING
CIRCUMSTANCES WAS A MATERIAL FACTOR IN INDUCING THE LENDERS TO MAKE THE LOANS TO
THE BORROWER; AND (III) AGREE TO ENTER INTO ANY AND ALL STIPULATIONS IN ANY
LEGAL ACTIONS, OR AGREEMENTS OR OTHER INSTRUMENTS IN CONNECTION WITH THE
FOREGOING AND TO COOPERATE FULLY WITH THE ADMINISTRATIVE AGENT AND THE LENDERS
IN CONNECTION WITH THE ASSUMPTION AND EXERCISE OF CONTROL BY THE RECEIVER OVER
ALL OR ANY PORTION OF THE COLLATERAL. THE LENDERS ACKNOWLEDGE AND AGREE THAT
NOTHING IN THIS SECTION 8.2 SHALL BE DEEMED TO CONSTITUTE A WAIVER OF THE CREDIT
PARTIES' RIGHT TO FILE FOR PROTECTION UNDER TITLE 11 OF THE UNITED STATES CODE
AT ANY TIME PRIOR TO THE APPOINTMENT OF A RECEIVER.
ARTICLE IX
THE ADMINISTRATIVE AGENT
9.1 APPOINTMENT AND AUTHORIZATION. Each of the Lenders and the Issuing
Lender hereby irrevocably appoints the Administrative Agent as its agent and
authorizes the Administrative Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Administrative Agent by the terms
of this Agreement and the other Loan Documents, together with such actions and
powers as are reasonably incidental thereto.
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9.2 BANKBOSTON'S RIGHTS AS LENDER. BankBoston shall have the same rights
and powers in its capacity as a Lender hereunder as any other Lender and may
exercise the same as though BankBoston were not the Administrative Agent, and
BankBoston and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with any Credit Party or any Subsidiary
or other Affiliate of any thereof as if it were not the Administrative Agent
hereunder.
9.3 DUTIES AS EXPRESSLY STATED. The Administrative Agent shall not have any
duties or obligations except those expressly set forth in this Agreement and the
other Loan Documents. Without limiting the generality of the foregoing, (a) the
Administrative Agent shall not be subject to any fiduciary or other implied
duties, regardless of whether a Default has occurred and is continuing, (b) the
Administrative Agent shall not have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated by this Agreement and the other Loan Documents that the
Administrative Agent is required to exercise in writing by the Required
Revolving Credit Lenders, and (c) except as expressly set forth herein and in
the other Loan Documents, the Administrative Agent shall not have any duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to any Credit Party or any of their respective Subsidiaries that is
communicated to or obtained by BankBoston or any of its Affiliates in any
capacity. The Administrative Agent shall not be liable for any action taken or
not taken by it with the consent or at the request of the Required Revolving
Credit Lenders or, if provided herein, with the consent or at the request of the
Required Revolving Credit Lenders, or in the absence of its own gross negligence
or wilful misconduct. The Administrative Agent shall not be deemed to have
knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrowers or a Lender, and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into (i)
any statement, warranty or representation made in or in connection with this
Agreement or the other Loan Documents, (ii) the contents of any certificate,
report or other document delivered hereunder or under any of the other Loan
Documents or in connection herewith of therewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein or in any other Loan Document, (iv) the validity, enforceability,
effectiveness or genuineness of this Agreement, the other Loan Documents or any
other agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article V or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent.
The Administrative Agent shall not, except to the extent expressly instructed by
the Required Lenders with respect to collateral security under the Collateral
Documents, be required to initiate or conduct any litigation or collection
proceedings hereunder or under any other Loan Document; provided, however, that
the Administrative Agent shall not be required to take any action which exposes
the Administrative Agent to personal liability or which is contrary to the Loan
Documents or applicable law.
9.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall be
entitled to rely upon, and shall not incur any liability for relying upon, any
notice, request, certificate, consent, statement, instrument, document or other
writing believed by it to be genuine and to have been signed or sent by the
proper Person. The Administrative Agent also may rely upon any statement made to
it orally or by telephone and believed by it to be made by the proper Person,
and shall not incur any liability for relying thereon. The Administrative Agent
may
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consult with legal counsel (who may be counsel for the Borrowers), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts. During any litigation or in preparation
therefor, the Administrative Agent may choose its own legal counsel.
9.5 ACTION THROUGH SUB-ADMINISTRATIVE AGENTS. The Administrative Agent may
perform any and all of its duties, and exercise its rights and powers, by or
through any one or more sub-agents appointed by the Administrative Agent. The
Administrative Agent and any such sub-agent may perform any and all its duties
and exercise its rights and powers through its Related Parties. The exculpatory
provisions of the preceding paragraphs shall apply to any such sub-agent and to
the Related Parties of the Administrative Agent and any such sub-agent, and
shall apply to its activities in connection with the syndication of the credit
facilities provided for herein as well as activities as the Administrative
Agent.
9.6 RESIGNATION OF ADMINISTRATIVE AGENT AND APPOINTMENT OF SUCCESSOR
ADMINISTRATIVE AGENT. Subject to the appointment and acceptance of a successor
Administrative Agent, as provided in this paragraph, the Administrative Agent
may resign at any time by notifying the Lenders, the Issuing Lender and the
Borrowers. Upon any such resignation, the Required Revolving Credit Lenders
shall have the right, in consultation with the Borrowers, to appoint a successor
Administrative Agent. If no successor shall have been so appointed and shall
have accepted such appointment within 30 days after such retiring Administrative
Agent gives notice of its resignation, then such retiring Administrative Agent
may, on behalf of the Lenders and the Issuing Lender, appoint a successor
Administrative Agent, which shall be a bank with an office in Boston,
Massachusetts or New York, New York, or an Affiliate of any such bank. Upon the
acceptance of its appointment as Administrative Agent, by a successor, such
successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder and under the other Loan Documents. The fees payable by the Borrowers
to a successor Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed among the Borrowers and such successor.
After an Administrative Agent's resignation hereunder, the provisions of this
Article and Section 10.3 shall continue in effect for its benefit in respect of
any actions taken or omitted to be taken by it while it was acting as
Administrative Agent.
9.7 LENDERS' INDEPENDENT DECISIONS. Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent, the Issuing
Lender or any other Lender and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon the Administrative Agent, the Issuing Lender or any other Lender
and based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement and the other Loan Documents, any related
agreement or any document furnished hereunder or thereunder. Except as
explicitly provided herein, the Administrative Agent has no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other information with respect to such operations,
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business, property, condition or creditworthiness, whether such information
comes into its possession on or before the first Event of Default or at any time
thereafter.
9.8 OBLIGATIONS OF CO-AGENTS AND MANAGER. The rights, privileges and
benefits of the foregoing provisions of this Section 9 shall extend to ABN AMRO
Bank N.V., CoreStates Bank, N.A., and First Union National Bank in their
capacity as Co-Agents and Fleet National Bank in its capacity as Manager. After
the Closing Date, none of the Co- Agents or Manager shall have any obligations
or duties to any Credit Party, Administrative or Documentary Agent or any
Lender.
ARTICLE X
MISCELLANEOUS
10.1 NOTICES. Except in the case of notices and other communications
expressly permitted to be given by telephone, all notices and other
communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or
sent by telecopy, as follows:
(a) if to any Credit Party, to 500 Chapman Street, Canton, Massachusetts
02021 Attention of Ronald Goldstein (Telecopy No. (617) 828-2012), with a copy
to Bingham, Dana & Gould LLP, 150 Federal Street, Boston, Massachusetts 02110,
Attention of Malcolm Sandilands, Esq. (Telecopy No. 617-951-8736);
(b) if to the Administrative Agent, to BankBoston, 100 Federal Street, Mail
Code 01-07-05, Boston, Massachusetts 02110, Attention of Timothy Clifford, Vice
President (Telecopy No. (617) 434-8102), with a copy to Palmer & Dodge LLP, One
Beacon Street, Boston, Massachusetts 02108, Attention of Richard S. Rosenstein,
Esq. (Telecopy No. 617- 227-4420); and
(c) if to any Lender (including to BankBoston in its capacity as the
Issuing Lender and Swing Loan Lender), to it at its address (or telecopy number)
set forth in SCHEDULE 2.1.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
10.2 WAIVERS; AMENDMENTS.
(a) No failure or delay by the Administrative Agent, the Issuing Lender or
any Lender in exercising any right or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of
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any other right or power. The rights and remedies of the Administrative Agent,
the Issuing Lender and the Lenders hereunder are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agreement or consent to any departure by any Credit Party
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section 10.2, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
Without limiting the generality of the foregoing, the making of a Loan or
issuance of a Letter of Credit shall not be construed as a waiver of any
Default, regardless of whether the Administrative Agent, any Lender or the
Issuing Lender may have had notice or knowledge of such Default at the time.
(b) Neither this Agreement nor any other Loan Document nor any provision
hereof or thereof may be waived, amended or modified except pursuant to an
agreement or agreements in writing entered into by the Credit Parties and the
Required Revolving Credit Lenders or by the Credit Parties and the
Administrative Agent with the written consent of the Required Revolving Credit
Lenders; provided that no such agreement shall:
(i) increase the Revolving Credit Commitment of any Lender without the
written consent of such Lender or increase the aggregate Revolving Credit
Commitments without the written consent of each Lender;
(ii) reduce the principal amount of any Loan, LC Disbursement or Bank
Guaranty Disbursement or reduce the rate of interest thereon, or reduce any
fees payable hereunder, without the written consent of each Lender affected
thereby;
(iii) postpone the scheduled date of payment of the principal amount
of any Loan, LC Disbursement or Bank Guaranty Disbursement, or any interest
thereon, or any fees payable hereunder, or reduce the amount of, waive or
excuse any such payment, or postpone the scheduled date of expiration of
any Revolving Credit Commitment, or postpone the ultimate expiration date
of any Letter of Credit or Bank Guaranty beyond the Revolving Credit
Maturity Date, without the written consent of each Lender affected thereby;
(iv) change Section 2.10 in a manner that would alter the application
of prepayments thereunder, or change Section 2.17(b), (c) or (d) in a
manner that would alter the pro rata sharing of payments required thereby,
without in each case the written consent of each Lender;
(v) alter the rights or obligations of the Borrowers to prepay Loans
without the written consent of each Lender;
(vi) change any of the provisions of this Section 10.2 or the
definition of "Required Revolving Credit Lenders", or any other provision
hereof specifying the number or percentage of Lenders required to waive,
amend or modify any rights hereunder or under any other Loan Document or
make any determination or grant any consent hereunder or thereunder,
without the written consent of each Lender;
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<PAGE> 100
(vii) release any of the Guarantors from their obligations in respect
of its Guaranty under Article III or release any Collateral, except as
expressly permitted in this Agreement, without the written consent of each
Lender;
(viii) waive any of the conditions precedent specified in Section 5.1
without the written consent of each Lender; or
(ix) change any provisions of any Loan Document in a manner which by
its terms adversely affects the rights in respect of payments due to
Lenders holding Loans of any Class differently than those holding Loans of
any other Class without the written consent of Lenders holding a majority
in interest of the outstanding Loans and unused commitments of each
affected Class (in addition to any other consent required under any other
clause of this Section);
provided further that no such agreement shall amend, modify or otherwise affect
the rights or duties of the Administrative Agent, the Issuing Lender or the
Swing Loan Lender hereunder without the prior written consent of the
Administrative Agent, the Issuing Lender or the Swing Loan Lender, as the case
may be.
(c) None of the Collateral Documents nor any provision thereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Credit Parties party thereto, and by the
Administrative Agent with the written consent of the Required Revolving Credit
Lenders.
10.3 EXPENSES; INDEMNITY: DAMAGE WAIVER.
(a) The Credit Parties jointly and severally agree to pay, or reimburse the
Administrative Agent, the Syndication Agent or Lenders for paying, (i) all
reasonable out-of-pocket expenses incurred by the Administrative Agent, the
Syndication Agent and their Affiliates, including the reasonable fees, charges
and disbursements of Special Counsel, in connection with the syndication of the
credit facilities provided for herein, the preparation of this Agreement and the
other Loan Documents or any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all out-of-pocket expenses
incurred by the Issuing Lender in connection with the issuance, amendment,
renewal or extension of any Letter of Credit or any demand for payment
thereunder, (iii) all fees and charges generally charged by the Administrative
Agent, the Syndication Agent or any Lender related to any exam of the books and
record of the Credit Parties provided for in this Agreement, (iv) all
out-of-pocket expenses incurred by the Administrative Agent, the Issuing Lender,
the Syndication Agent or any Lender, including the fees, charges and
disbursements of any counsel for such Administrative Agent, Issuing Lender, the
Syndicated Agent or Lender, in connection with the enforcement or protection of
its rights in connection with this Agreement and the other Loan Documents,
including its rights under this Section 10.3, or in connection with the Loans
made or Letters of Credit issued hereunder, including in connection with any
workout, restructuring or negotiations in respect thereof, and (v) all Other
Taxes levied by any Governmental Authority in respect of this Agreement or any
of the other Loan Documents or any other document referred to herein or
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<PAGE> 101
therein and all costs, expenses, taxes, assessments and other charges incurred
in connection with any filing, registration, recording or perfection of any
security interest contemplated by any Security Document or any other document
referred to therein.
(b) The Credit Parties jointly and severally agree to indemnify the
Administrative Agent, the Issuing Lender, the Syndication Agent and each Lender,
and each Related Party of any of the foregoing Persons (each such Person being
called an "INDEMNITEE") against, and hold each Indemnitee harmless from, any and
all losses, claims, damages, liabilities and related expenses, including the
fees, charges and disbursements of any counsel for any Indemnitee and settlement
costs, incurred by or asserted against any Indemnitee arising out of, in
connection with, or as a result of (i) the execution or delivery of this
Agreement, the other Loan Documents or any agreement or instrument contemplated
hereby, the performance by the parties hereto and thereto of their respective
obligations hereunder or thereunder or the consummation of the Transactions or
any other transactions contemplated hereby or thereby, (ii) any Loan or Letter
of Credit the use of the proceeds therefrom (including any refusal by the
Issuing Lender to honor a demand for payment under a Letter of Credit if the
documents presented in connection with such demand do not strictly comply with
the terms of such Letter of Credit), (iii) any actual or alleged presence or
release of Hazardous Materials on or from any property owned or operated by any
Credit Party or any of their subsidiaries, or any Environmental Liability
related in any way to any Credit Party or any of their subsidiaries, or (iv) any
actual or prospective claim, litigation, investigation or proceeding relating to
any of the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses (are determined by a
court of competent jurisdiction by final and nonappealable judgment to have)
resulted from the gross negligence or wilful misconduct of such Indemnitee.
(c) To the extent that the Credit Parties fail to pay any amount required
to be paid by them to the Administrative Agent or the Syndication Agent under
paragraph (a) or (b) of this Section 10.3, each Lender severally agrees to pay
to the Administrative Agent such Lender's Applicable Percentage (determined as
of the time that the applicable unreimbursed expense or indemnity payment is
sought) of such unpaid amount; provided that the unreimbursed expense or
indemnified loss, claim, damage, liability or related expense, as the case may
be, was incurred by or asserted against the Administrative Agent or the
Syndication Agent in its capacity as such. To the extent that the Credit Parties
fail to pay any amount required to be paid by them to the Issuing Lender under
paragraph (a) or (b) of this Section 10.3, each Revolving Credit Lender
severally agrees to pay to the Issuing Lender such Lender's Applicable
Percentage (determined as of the time that the applicable unreimbursed expense
or indemnity payment is sought) of such unpaid amount; provided that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the
Administrative Agent in its capacity as such.
(d) To the extent permitted by applicable law, none of the Credit Parties
shall assert, and each Credit Party hereby waives, any claim against any
Indemnitee, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement, the other Loan
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<PAGE> 102
Documents or any agreement or instrument contemplated hereby or thereby, the
Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.
(e) All amounts due under this Section 10.3 shall be payable promptly after
written demand therefor.
10.4 SUCCESSORS AND ASSIGNS.
(a) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that no Credit Party may assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
each Lender (and any attempted assignment or transfer by any Credit Party
without such consent shall be null and void). Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby
and, to the extent expressly contemplated hereby, the Related Parties of each of
the Administrative Agent, the Issuing Lender, the Swing Loan Lender and the
Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
(b) Any Lender may assign to one or more assignees all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Revolving Credit Commitment and the Loans at the time owing to it); provided
that
(i) except in the case of an assignment to a Lender or an Affiliate of
a Lender, that is not a Foreign Lender, the Administrative Agent and CML
(and, in the case of an assignment of all or a portion of a Revolving
Credit Commitment or any Lender's obligations in respect of its LC Exposure
and Bank Guaranties, the Issuing Lender) must give their prior written
consent to such assignment which consent shall not be unreasonably withheld
or delayed).
(ii) except in the case of an assignment to a Lender or an Affiliate
of a Lender or an assignment of the entire remaining amount of the
assigning Lender's Revolving Credit Commitment, the amount of the Revolving
Credit Commitment of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Acceptance with respect to
such assignment is delivered to the Administrative Agent) shall not be less
than $5,000,000 unless each of CML and the Administrative Agent otherwise
consent; provided that for such purposes, the amount of outstanding Loans
and unused Commitments shall be determined without regard to any Swing
Loans then outstanding,
(iii) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender's rights and obligations
under this Agreement,
(iv) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Acceptance, together with a
processing and recordation fee of $3,500, and
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<PAGE> 103
(v) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire;
provided further that any consent of CML otherwise required under this paragraph
shall not be required if an Event of Default under clause (g) or (h) of Section
8.1 has occurred and is continuing.
(c) Upon acceptance and recording with the Administrative Agent in the
Register pursuant to paragraph (e) of this Section 10.4, from and after the
effective date specified in each Assignment and Acceptance, the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned
by such Assignment and Acceptance, have the rights and obligations of a Lender
under this Agreement, and the assigning Lender thereunder shall, to the extent
of the interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 2.14, 2.15, 2.16 and 10.3). Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with paragraph (b) of this Section 10.4 and which complies
with paragraph (f) of this Section 10.4 shall be treated for purposes of this
Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with paragraph (f) of this Section and shall otherwise
convey no rights hereunder.
(d) The Administrative Agent, acting for this purpose as an agent of the
Borrowers, shall maintain at one of its offices in Boston, Massachusetts a copy
of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, the identity of the Swing
Loan Lender and the amount of the Swing Loan Sublimit, and the Revolving Credit
Commitment of, and principal amount of the Loans and LC Disbursements owing to,
each Lender pursuant to the terms hereof from time to time (the "REGISTER"). The
entries in the Register shall be conclusive, and the Borrowers, the
Administrative Agent, the Issuing Lender and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrowers, the
Issuing Lender and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance executed
by an assigning Lender and an assignee, the assignee's completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section 10.4
and any written consent to such assignment required by paragraph (b) of this
Section 10.4, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph. Upon recording such
Assignment and Acceptance, the Administrative Agent shall deliver to the
Lenders, the Issuing Lender and the Credit Parties a revised copy of SCHEDULE
2.1 reflecting the current information.
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(f) Any Lender may, without the consent of any Borrower, the Administrative
Agent or the Issuing Lender, sell participations to one or more banks or other
entities (a "PARTICIPANT") in all or a portion of such Lender's rights and
obligations under this Agreement (including all or a portion of its Revolving
Credit Commitment and the Loans owing to it); provided that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrowers, the Administrative Agent, the Issuing
Lender and the other Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver described in the first proviso to
Section 10.2(b), or the first proviso to Section 10.2(c), that affects such
Participant. Subject to paragraph (g) of this Section 10.4, the Borrowers agree
that each Participant shall be entitled to the benefits of Sections 2.14, 2.15
and 2.16 to the same extent as if it were a Lender and had acquired its interest
by assignment pursuant to paragraph (b) of this Section 10.4.
(g) A Participant shall not be entitled to receive any greater payment
under Section 2.14 or 2.16 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrowers'
prior written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 2.16 unless the
Borrowers are notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrowers, to comply with Section
2.16(e) as though it were a Lender.
(h) Any Lender may at any time pledge or assign a security interest in all
or any portion of its rights under this Agreement to secure obligations of such
Lender, including any such pledge or assignment to a Federal Reserve Bank, and
this Section shall not apply to any such pledge or assignment of a security
interest; provided that no such pledge or assignment of a security interest
shall release a Lender from any of its obligations hereunder or substitute any
such assignee for such Lender as a party hereto.
(i) Anything in this Section 10.4 to the contrary notwithstanding, no
Lender may assign or participate any interest in any Loan held by it hereunder
to any Credit Party or any of its Affiliates or Subsidiaries without the prior
consent of each Lender.
(j) The Credit Parties agree that during the Revolving Credit Availability
Period they shall provide to Syndication Agent and the Lenders such information
describing the Credit Parties, the Revolving Credit Commitments and the
Transactions (including pro-forma financial projections for the remainder of the
Revolving Credit Availability Period in form and substance satisfactory to the
Administrative Agent), and such information may be distributed by the
Administrative Agent or any Lender, on a confidential basis, to prospective
assignees of all or a portion of the Administrative Agent's or such Lender's
rights and obligations under this Agreement. In addition, the management,
financial and accounting personnel of the Credit Parties and their advisors
will, at the request of the Syndication Agent, meet and consult with the
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Syndication Agent, the Administrative Agent, the Lenders or potential Lenders at
reasonable times to answer questions and provide information during the
syndicated process.
10.5 SURVIVAL. All covenants, agreements, representations and warranties
made by the Credit Parties herein and in the other Loan Documents, and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement and the other Loan Documents, shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of this Agreement and the other Loan Documents and the making of any
Loans and issuance of any Letters of Credit, regardless of any investigation
made by any such other party or on its behalf and notwithstanding that the
Administrative Agent, the Issuing Lender or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect so
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement or the other Loan Documents is
outstanding and unpaid or any Letter of Credit is outstanding and so long as the
Commitments have not expired or terminated. The provisions of Sections 2.14,
2.15, 2.16 and 10.3 and Article IX shall survive and remain in full force and
effect regardless of the consummation of the transactions contemplated hereby,
the repayment of the Loans, the expiration or termination of the Letters of
Credit and the Revolving Credit Commitments or the termination of this Agreement
or any other Loan Document or any provision hereof or thereof.
10.6 COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and any
separate letter agreements with respect to fees payable to the Administrative
Agent constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral or written, relating to the subject matter hereof. Whenever there is a
reference in any Collateral Document or UCC Financing Statement to the "Credit
Agreement" to which the Administrative Agent, the Lenders and the Credit Parties
are parties, such reference shall be deemed to be made to this Agreement among
the parties hereto. Except as provided in Section 5.1, this Agreement shall
become effective when it shall have been executed by the Administrative Agent
and when the Administrative Agent shall have received counterparts hereof which,
when taken together, bear the signatures of each of the other parties hereto,
and thereafter shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.
10.7 SEVERABILITY. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.
10.8 RIGHT OF SETOFF. If an Event of Default shall have occurred and be
continuing, each Lender is hereby authorized at any time and from time to time,
to the fullest extent
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permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Lender to or for the credit or the account of the
Borrowers against any of and all the obligations of the Borrowers now or
hereafter existing under this Agreement held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be unmatured. The rights of each Lender under this
Section 10.8 are in addition to any other rights and remedies (including other
rights of setoff) which such Lender may have.
10.9 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) This Agreement shall be construed in accordance with and governed by
the law of the Commonwealth of Massachusetts.
(b) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR
ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE
COMMONWEALTH OF MASSACHUSETTS AND OF THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF MASSACHUSETTS, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF
THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS
IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
MASSACHUSETTS COURT (OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT).
EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS
AGREEMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, THE ISSUING
LENDER OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT AGAINST ANY CREDIT PARTY OR ITS PROPERTIES IN THE
COURTS OF ANY JURISDICTION.
(c) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN ANY
COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION 10.9. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT.
(d) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS
IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.1.
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NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
10.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, ADMINISTRATIVE AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 10.10.
10.11 HEADINGS. Article and Section headings and the Table of Contents used
herein are for convenience of reference only, are not part of this Agreement and
shall not affect the construction of, or be taken into consideration in
interpreting, this Agreement.
10.12 SUCCESSOR FACILITY. This Agreement is intended to be a successor to
the Prior Agreement. Upon the execution and delivery of this Agreement, the
Prior Agreement shall be superseded and replaced in its entirety by the terms of
this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
BORROWERS:
---------
CHICAGO MINIATURE LAMP, INC.
CHICAGO MINIATURE LAMP -
SYLVANIA LIGHTING INTERNATIONAL, INC.
CML AIR, INC.
CML BALLAST ,INC.
CML FIBEROPTICS, INC.
ELECTRO FIBEROPTICS CORP.
POWER LIGHTING PRODUCTS, INC. (f/k/a/ Valmont
Electric, Inc.
VBT, INC.
By______________________________
Name: Frank M. Ward
Title: President
WITH RESPECT TO THE STERLING OVERDRAFT FACILITY
BADALEX LIMITED
By______________________________
Name: Frank M. Ward
Title: President
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<PAGE> 109
GUARANTORS
----------
A&S ELECTRIC spol s.r.o. Gmbh
ALBA LIGHT DESIGN GmbH
ALBA SPEZIALLAMPEN GmbH
ALBA SPEZIALLAMPEN HOLDING, GmbH
ALBA TECHNOLOGY (M) Sdr. Bhd.
ARNOLD GmbH
BADALEX LIMITED
BSC ARNOLD GmbH & CO.
CCC DE MEXICO, S.A. DE C.V.
CHICAGO MINIATURE LAMP EUROPE LIMITED
CHICAGO MINIATURE LAMP - SYLVANIA
LIGHTING INTERNATIONAL I, B.V.
IDI INTERNACIONAL S.A.
W. ALBRECHT GmbH und Co. KG
W. ALBRECHT GRUNDSTUCKSGESELLSCHAFT
GmbH und CO.
By______________________________
Name: Frank M. Ward
Title: Director
CHICAGO MINIATURE LAMP (CANADA) INC.
By______________________________
Name: Frank M. Ward
Title: President
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<PAGE> 110
Administrative Agent
--------------------
BANKBOSTON, N.A.
as Administrative Agent
By_____________________________________
Name: Timothy G. Clifford
Title: Vice President
Co-Agents:
---------
ABN AMRO BANK N.V.
as Co-Agent
By___________________________ By_________________________________
Name: Name:
Title: Title:
CORESTATES BANK, N.A.
as Co-Agent
By_____________________________________
Name:
Title:
FIRST UNION NATIONAL BANK
as Co-Agent
By_____________________________________
Name:
Title:
Manager:
-------
FLEET NATIONAL BANK
as Manager
By_____________________________________
Name:
105
<PAGE> 111
Title:
106
<PAGE> 112
LENDERS:
-------
BANKBOSTON, N.A.
By_____________________________________
Name: Timothy G. Clifford
Title: Vice President
ABN AMRO BANK N.V.
By___________________________ By_________________________________
Name: Name:
Title: Title:
CORESTATES BANK, N.A.
By_____________________________________
Name:
Title:
FIRST UNION NATIONAL BANK
By_____________________________________
Name:
Title:
FLEET NATIONAL BANK
By_____________________________________
Name:
Title:
BAYERISCHE VEREINSBANK AG
By_____________________________________
Name:
Title:
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<PAGE> 113
MELLON BANK, N.A.
By_____________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
By_____________________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
By_____________________________________
Name:
Title:
BANK OF SCOTLAND
By_____________________________________
Name:
Title:
NATEXIS BANQUE (BFCE)
By_____________________________________
Name:
Title:
IMPERIAL BANK
By_____________________________________
Name:
Title:
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<PAGE> 114
KREDIETBANK N.V.
By_____________________________________
Name:
Title:
By_____________________________________
Name:
Title:
LLOYDS BANK PLC
By_____________________________________
Name:
Title:
THE SUMITOMO BANK, LIMITED
By_____________________________________
Name:
Title:
USTRUST
By_____________________________________
Name:
Title:
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<PAGE> 115
The following have become parties to this Agreement as of the date set
forth next to their respective signatures:
SPECIAL CREDIT PARTIES
----------------------
---------------------------------------
Dated: __________________ By_____________________________________
Name:
Title:
1
<PAGE> 116
The following have become parties to this Agreement as of the date set
forth next to their respective signatures:
ADDITIONAL BORROWERS/GUARANTORS:
-------------------------------
---------------------------------------
Dated: __________________ By_____________________________________
Name:
Title:
1
<PAGE> 117
SCHEDULE 2.1
<TABLE>
<CAPTION>
COMMITMENTS
REVOLVING CREDIT
LENDER COMMITMENT
- ------ ----------------
<S> <C>
BANKBOSTON, N.A. $36,000,000.00
100 Federal Street
Boston, MA 02110
Attention: Timothy G. Clifford
Telephone: (617) 434-6083
Facsimile: (617) 434-8102
ABN AMRO Bank, N.V. $18,000,000.00
One Post Office Square
39th Floor
Boston, MA 02109
Attention: Mr. John Rogers
CoreStates Bank $18,000,000.00
1345 Chestnut Street
F.C. 1-8-3-16
Philadelphia, PA 19102
Attention: Mr. Robert Brown
First Union $18,000,000.00
One First Union Center
TW-19
Charlotte, NC 28288-0745
Attention: Mr. Ted Noneman
Fleet National Bank $18,000,000.00
1 Federal Street
MA-OF-D04H
Boston, MA 02110
Attention: Ms. Katie Sluder
Mellon Bank, N.A. $18,000,000.00
1 Boston Place
6th Floor
Boston, MA 02110
Attention: Mr. Stephen Wagner
</TABLE>
1
<PAGE> 118
<TABLE>
<S> <C>
State Street Bank $18,000,000.00
225 Franklin Street
2nd Floor
Boston, MA 02110
Attention: Mr. Andrew Beise
Bayerische Vereinsbank $18,000,000.00
335 Madison Avenue
19th Floor
New York, NY 10017
Attention: Mr. Erich Ebner
The Bank of Nova Scotia $11,000,000.00
101 Federal Street
16th Floor
Boston, MA 02110
Attention: Mr. Steven Foley
Bank of Scotland $11,000,000.00
One Post Office Square
Suite 3750
Boston, MA 02109
Attention: Mr. William Boland
NATEXIS Banque (BFCE) $11,000,000.00
645 Fifth Avenue
20th Floor
New York, NY 10022
Attention: Mr. John Rigo
Imperial Bank $11,000,000.00
9920 S. LaCienega Blvd.
14th Floor
Inglewood, CA 90301
Attention: Mr. John Farrace
Kredietbank $11,000,000.00
125 West 55th Street
10th Floor
New York, NY 10019
Attention: Mr. Robert Surdam
Lloyd's Bank $11,000,000.00
575 Fifth Avenue
18th Floor
New York, NY 10017
</TABLE>
2
<PAGE> 119
Attention: Mr. Paul Briamonte
Sumitomo Bank, Ltd. $11,000,000.00
1 Post Office Square
Suite 3820
Boston, MA 02109
Attention: Mr. Al De Gemmis
USTrust $11,000,000.00
30 Court Street
Boston, MA 02108
Attention: Mr. Thomas Macina
TOTAL: $250,000,000.00
===============
3
<PAGE> 120
FIRST AMENDMENT TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT dated as of December 31, 1997
(this "AMENDMENT"), among CHICAGO MINIATURE LAMP, INC. and its DOMESTIC
SUBSIDIARIES (collectively the "BORROWERS"), THE GUARANTORS PARTY TO THE CREDIT
AGREEMENT DEFINED BELOW (the "GUARANTORS"), THE SPECIAL CREDIT PARTIES PARTY TO
THE CREDIT AGREEMENT, THE LENDERS PARTY TO THE CREDIT AGREEMENT (the "LENDERS"),
THE CO-AGENTS PARTY TO THE CREDIT AGREEMENT, comprised of ABN AMRO BANK N.V.,
CORESTATES BANK, N.A., and FIRST UNION NATIONAL BANK, FLEET NATIONAL BANK as
Manager, and BANKBOSTON, N.A., as Administrative and Documentary Agent (the
"ADMINISTRATIVE AGENT").
WHEREAS, pursuant to the Credit Agreement (as defined below), the
Lenders have agreed to make Revolving Credit Loans to the Borrowers in an
aggregate principal amount not in excess of the Revolving Credit Commitment; and
WHEREAS, the Credit Parties, the Lenders and the Administrative Agent
wish to amend the Credit Agreement to revise certain provisions of the Credit
Agreement as provided below and to waive any event of default arising from the
failure to deliver the Fiscal Year 1998 projections by December 31, 1997;
NOW, THEREFORE, in consideration of the foregoing and the agreements
contained herein, the parties hereby agree as follows:
1. REFERENCE TO CREDIT AGREEMENT.
Reference is made to the Amended and Restated Credit Agreement dated as
of October 30, 1997 (as the same may be further amended and restated from time
to time, the "CREDIT AGREEMENT") among the Borrowers, the Guarantors, the
Special Credit Parties party thereto, the Lenders, ABN Amro Bank, N.V.,
Corestates Bank, N.A. and First Union National Bank as Co-Agents, Fleet National
Bank as Manager and the Administrative Agent. Capitalized terms used herein
which are defined in the Credit Agreement have the same meanings herein as
therein, except to the extent that such meanings are amended hereby.
2. AMENDMENTS.
The Credit Parties, the Lenders and the Administrative Agent agree that
the Credit Agreement is hereby amended, effective as of the date hereof, as
follows:
(A) AMENDMENT OF SECTION 1.1 OF THE CREDIT AGREEMENT:
DEFINITIONS. The following definitions are substituted in Section 1.1 of the
Credit Agreement:
i. "DISPOSITION" means any sale, assignment,
transfer or other disposition of any property
(whether now owned or hereafter acquired) by any
Credit Party to any other Person other than another
Credit Party excluding (a) the granting of Liens to
the Administrative Agent on behalf of the Lenders
pursuant to the Collateral Documents, (b) any sale,
assignment, transfer or other disposition of (i) any
property sold or disposed of in the ordinary course
of business and
<PAGE> 121
on ordinary business terms,
(ii) any property no longer used or useful in the
business of the Credit Parties, (iii) any Collateral
under and as defined in the Collateral Documents
pursuant to an exercise of remedies by the
Administrative Agent thereunder and (iv) any property
sold outside the previous exceptions with a book
value or appraised value (which ever is higher) of
equal to or less than $2,500,000, and which in the
aggregate with the book or appraised value (whichever
is higher) of all property sold in other sales of a
similar nature during any calendar year, would not
equal or exceed $5,000,000.
ii. "INTEREST PERIOD" means with respect to
any LIBOR Borrowing, the period commencing on the
date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one,
two, three or six months and if available four or
five months thereafter, as CML may elect; provided,
that (i) if any Interest Period would end on a day
other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day
unless such next succeeding Business Day would fall
in the next calendar month, in which case such
Interest Period shall end on the next preceding
Business Day, (ii) any Interest Period that commences
on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding
day in the last calendar month of such Interest
Period) shall end on the last Business Day of the
last calendar month of such Interest Period and (iii)
such Interest Period is available for the applicable
Permitted Currency on the inter-bank currency
deposits market in which the Administrative Agent
customarily funds LIBOR Borrowings. For purposes
hereof, the date of a Borrowing initially shall be
the date on which such Borrowing is made and
thereafter shall be the effective date of the most
recent conversion or continuation of such Borrowing.
Notwithstanding the foregoing,
(x) if any Interest Period for any Revolving Credit Borrowing
would otherwise end after the Revolving Credit Maturity Date, such
Interest Period shall end on the Revolving Credit Maturity Date, and
(y) notwithstanding the foregoing clause (x), no Interest
Period shall have a duration of less than one month and, if the
Interest Period for any LIBOR Loan would otherwise be a shorter period,
such Loan shall not be available hereunder as a LIBOR Loan for such
period.
iii. "ISSUING LENDER" means BankBoston or
such other Lender who has agreed with the
Administrative Agent and the Credit Parties to be
bound to the terms of this Agreement relative to
being an Issuing Lender, in their respective capacity
as the issuer of Letters of Credit hereunder and any
foreign branch of BankBoston or such other Lender as
issuers of Bank Guaranties.
(B) AMENDMENT TO SECTION 2.3 (a) OF THE CREDIT AGREEMENT.
The following is hereby substituted for Section 2.3 (a) of the Credit
Agreement:
-2-
<PAGE> 122
2.3 (a) To request a Revolving Credit Borrowing, CML on behalf
of the Borrowers or CML and any Special Credit Party, if the
Loan is specifically made to or for the benefit of any such
Special Credit Party, shall notify the Administrative Agent of
such request by telephone (i) in the case of a LIBOR Borrowing
denominated in Dollars, not later than 11:00 a.m., Boston,
Massachusetts time, three Business Days before the date of the
proposed Borrowing, (ii) in the case of a LIBOR Borrowing
denominated in an Alternative Currency, not later than 9:00
a.m., Boston, Massachusetts time, two Business Days before the
date of the proposed Borrowing or (iii) in the case of a Base
Rate Borrowing not later than 11:00 a.m., Boston,
Massachusetts time, one Business Day before the date of the
proposed Borrowing; provided that any such notice of a Base
Rate Borrowing to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.4(e) may be given
not later than 10:00 a.m., Boston, Massachusetts time, on the
date of the proposed Borrowing. Each such telephonic Borrowing
Request shall be irrevocable and shall be confirmed promptly
by hand delivery or telecopy to the Administrative Agent of a
written Borrowing Request in a form approved by the
Administrative Agent and signed by CML and (if appropriate)
such Special Credit Party.
(C) AMENDMENT OF SECTION 2.4 (b) OF THE CREDIT AGREEMENT.
The following is hereby substituted for Section 2.4 (b) of the Credit
Agreement:
(b) NOTICE OF ISSUANCE, AMENDMENT, RENEWAL, EXTENSION; CERTAIN
CONDITIONS. To request the issuance of a Letter of Credit (or
the amendment, renewal or extension of an outstanding Letter
of Credit), CML shall hand deliver or telecopy (or transmit by
electronic communication, if arrangements for doing so have
been approved by each Issuing Lender) to an Issuing Lender
(but only if such Issuing Lender has agreed to be bound as an
Issuing Lender hereunder in a writing delivered to the
Administrative Agent) and the Administrative Agent (reasonably
in advance of the requested date of issuance, amendment,
renewal or extension) a notice requesting the issuance of a
Letter of Credit, or identifying the Letter of Credit to be
amended, renewed or extended, the date of issuance, amendment,
renewal or extension, the date on which such Letter of Credit
is to expire (which shall comply with paragraph (c) of this
Section 2.4), the amount of such Letter of Credit, the name
and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or
extend such Letter of Credit. If requested by the applicable
Issuing Lender, the Borrowers also shall submit a letter of
credit application on such Issuing Lender's standard form in
connection with any request for a Letter of Credit. A Letter
of Credit shall be issued, amended, renewed or extended only
if (and upon issuance, amendment, renewal or extension of each
Letter of Credit the Borrowers shall be deemed to represent
and warrant that), after giving effect to such issuance,
amendment, renewal or extension (i) the aggregate combined LC
Exposure and Bank Guaranties of all of the Issuing Lenders
(determined for these purposes without giving effect to the
participations therein of the Revolving Credit Lenders
pursuant to paragraph (e) of this Section 2.4) shall not
exceed $15,000,000 and (ii) the total Revolving Credit
Exposure shall not exceed the total Revolving Credit
Commitments.
-3-
<PAGE> 123
(D) AMENDMENT OF SECTION 2.4 (f) OF THE CREDIT AGREEMENT.
The following is hereby substituted for Section 2.4(f) of the Credit
Agreement:
2.4 (f) REIMBURSEMENT. If any Issuing Lender shall make any LC
Disbursement or Bank Guaranty Disbursement, the Borrowers
shall reimburse the Issuing Lender in respect of such LC
Disbursement or Bank Guaranty Disbursement, as the case may
be, by paying to the Administrative Agent an amount in
immediately available funds equal to the Dollar Amount of such
LC Disbursement or Bank Guaranty Disbursement not later than
12:00 noon, Boston, Massachusetts time, on (i) the Business
Day that CML receives notice of such LC Disbursement or Bank
Guaranty Disbursement, if such notice is received prior to
10:00 a.m., Boston, Massachusetts time; provided that any such
same-day Borrowing shall be a Swing Loan to the extent of the
Swing Loan Availability at such time, or (ii) the Business Day
immediately following the day that CML receives such notice,
if such notice is not received prior to such time, provided
that, if such LC Disbursement or Bank Guaranty Disbursement is
not less than $500,000 in Dollar Amount, the Borrowers may,
subject to the conditions to borrowing set forth herein,
request in accordance with Section 2.3 that such payment be
financed with a Revolving Credit Base Rate Borrowing in an
equivalent amount and, to the extent so financed, the
Borrowers' obligation to make such payment shall be discharged
and replaced by the resulting Revolving Credit Base Rate
Borrowing. Regardless of the source of such reimbursement, the
Administrative Agent will make payment of the amount of such
reimbursement to the applicable Issuing Lender upon receipt of
payment from the Borrowers.
If the Borrowers fail to make such payment when due,
the Administrative Agent shall notify each Revolving Credit
Lender of the applicable LC Disbursement or Bank Guaranty
Disbursement, the payment then due from the Borrowers in
respect thereof and such Revolving Credit Lender's Applicable
Percentage thereof. Promptly following receipt of such notice,
each Revolving Credit Lender shall pay to the Administrative
Agent the Dollar Amount of its Applicable Percentage of the
payment then due from the Borrowers, in the same manner as
provided in Section 2.5 with respect to Revolving Credit Loans
made by such Lender (and Section 2.5 shall apply to the
payment obligations of the Revolving Credit Lenders, treating
each such payment as a Loan for this purpose), and the
Administrative Agent shall promptly pay to the applicable
Issuing Lender the amounts so received by it from the
Revolving Credit Lenders. Promptly following receipt by the
Administrative Agent of any payment from the Borrowers
pursuant to this paragraph, the Administrative Agent shall
distribute such payment to the applicable Issuing Lender or,
to the extent that the Revolving Credit Lenders have made
payments pursuant to this paragraph to reimburse the
applicable Issuing Lender, then to such Lenders and the
applicable Issuing Lender as their interests may appear. Any
payment made by a Revolving Credit Lender pursuant to this
paragraph to reimburse the applicable Issuing Lender for any
LC Disbursement or Bank Guaranty Disbursement shall not
constitute a Loan and shall not relieve the Borrowers of their
obligation to reimburse such LC Disbursement or Bank Guaranty
Disbursement, as the case may be.
-4-
<PAGE> 124
(E) AMENDMENT OF SECTION 6.1 (e) OF THE CREDIT AGREEMENT.
The following is hereby substituted for Section 6.1 (e):
6.1 (e) as soon as available and in any event within
30 days after the beginning of the fiscal year of CML (except
the fiscal year starting December 1, 1997 for which such
delivery shall be within 60 days after the beginning of such
fiscal year), statements of forecasted consolidated income for
the Credit Parties for each fiscal quarter in such fiscal year
and a forecasted consolidated balance sheet of the Credit
Parties, together with supporting assumptions which were
reasonable when made, as at the end of each fiscal quarter,
all prepared in good faith in reasonable detail and consistent
with CML's and CML's past practices in preparing projections
and otherwise reasonably satisfactory in scope to the
Administrative Agent;
(F) AMENDMENT OF SECTION 8.1(m)(II) OF THE CREDIT
AGREEMENT. The following is hereby substituted for Section 8.1(m)(ii) of
the Credit Agreement:
8.1 (m) (ii) any of Frank M. Ward or Norman Scoular shall
cease to be employed by CML in the position each held on the
Effective Date; provided that if Norman Scoular shall cease to
be employed by CML in his current position at any time one
year or more after the Effective Date, it shall not be an
Event of Default if (i) CML promptly upon receiving notice of
Mr. Scoular's proposed or actual change of status notifies the
Administrative Agent of such actual or proposed change of
status with details as to timing of such change of status and
(ii) upon the earlier of ninety (90) days (a) after CML
receives notice of Mr. Scoular's change of status or (b) Mr.
Scoular's actual change of status, Mr. Scoular is replaced by
such individual or individuals as are reasonably satisfactory
to the Required Revolving Credit Lenders.
3. WAIVER. The Required Revolving Credit Lenders do hereby
waive any Event of Default arising from the failure to deliver the projections
as required under Section 6.1 (e) of the Credit Agreement prior to this
Amendment.
4. NO DEFAULT; REPRESENTATIONS AND WARRANTIES, ETC.
The Credit Parties hereby confirm that: (a) the representations and
warranties of the Credit Parties contained in Article IV of the Credit Agreement
are true on and as of the date hereof as if made on such date (except to the
extent that such representations and warranties expressly relate to an earlier
date); (b) the Credit Parties are in compliance in all material respects with
all of the terms and provisions set forth in the Credit Agreement on their part
to be observed or performed thereunder; and (c) after giving effect to this
Amendment, no Event of Default specified in Article VII of the Credit Agreement,
nor any event which with the giving of notice or expiration of any applicable
grace period or both would constitute such an Event of Default, shall have
occurred and be continuing.
5. CONDITIONS TO THIS AMENDMENT.
-5-
<PAGE> 125
Concurrently herewith (and as conditions to the Lenders' consent to
this Amendment), the Credit Parties will furnish the Administrative Agent with
the following:
(a) Appropriate corporate resolutions, if necessary, and such
other certificates, instruments and documents as the Administrative Agent may
reasonably request for the purpose of implementing or effectuating the
provisions of the Credit Agreement, as hereby amended, or this Amendment.
(b) Such other documents and instruments as the Administrative
Agent may reasonably require in order to put this Amendment into full force and
effect.
6. MISCELLANEOUS.
(a) Except to the extent specifically amended hereby, the
Credit Agreement, the Loan Documents and all related documents shall remain in
full force and effect. Whenever the terms or sections amended hereby shall be
referred to in the Credit Agreement, Loan Documents or such other documents
(whether directly or by incorporation into other defined terms), such defined
terms shall be deemed to refer to those terms or sections as amended by this
Amendment.
(b) This Amendment may be executed in any number of
counterparts, each of which, when executed and delivered, shall be an original,
but all counterparts shall together constitute one instrument.
(c) This Amendment shall be governed by the laws of the
Commonwealth of Massachusetts and shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.
(d) The Credit Parties agree to pay all reasonable expenses,
including legal fees and disbursements incurred by the Lenders in connection
with this Amendment and the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
which shall be deemed to be a sealed instrument as of the date first above
written.
BORROWERS:
CHICAGO MINIATURE LAMP, INC.
CHICAGO MINIATURE LAMP -
SYLVANIA LIGHTING INTERNATIONAL, INC.
CML AIR, INC.
CML BALLAST ,INC.
CML FIBEROPTICS, INC.
-6-
<PAGE> 126
ELECTRO FIBEROPTICS CORP.
POWER LIGHTING PRODUCTS, INC.
(f/k/a/ Valmont Electric, Inc.)
VBT, INC.
By______________________________
Name:Frank M. Ward
Title: President
BADALEX LIMITED
By______________________________
Name:Frank M. Ward
Title: Director
-7-
<PAGE> 127
Each of the undersigned has guaranteed the Obligations of the Borrowers
to the Lenders pursuant to the terms of Article III of the Credit Agreement. By
executing this Consent of Guarantors, each undersigned Guarantor hereby
absolutely and unconditionally reaffirms the provisions of such Article III and
acknowledges and agrees to the terms and conditions of this Amendment and the
terms and conditions of the Credit Agreement as amended hereby.
GUARANTORS:
A&S ELECTRIC spol s.r.o. Gmbh
ALBA LIGHT DESIGN GmbH
ALBA SPEZIALLAMPEN GmbH
ALBA SPEZIALLAMPEN HOLDING, GmbH
ALBA TECHNOLOGY (M) Sdr. Bhd.
ARNOLD GmbH
BADALEX LIMITED
BSC ARNOLD GmbH & CO.
CCC DE MEXICO, S.A. DE C.V.
CHICAGO MINIATURE LAMP EUROPE LIMITED
CHICAGO MINIATURE LAMP - SYLVANIA
LIGHTING INTERNATIONAL I, B.V.
IDI INTERNACIONAL S.A.
W. ALBRECHT GmbH und Co. KG
W. ALBRECHT GRUNDSTUCKSGESELLSCHAFT
GmbH und CO.
By______________________________
Name:Frank M. Ward
Title: Director
CHICAGO MINIATURE LAMP (CANADA) INC.
By________________________________
Name: Frank Ward
Title: President
-8-
<PAGE> 128
ADMINISTRATIVE AGENT
BANKBOSTON, N.A.
as Administrative Agent
By_________________________________
Name: Timothy G. Clifford
Title: Vice President
CO-AGENTS:
ABN AMRO BANK N.V.
as Co-Agent
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
CORESTATES BANK, N.A.
as Co-Agent
By_________________________________
Name:
Title:
FIRST UNION NATIONAL BANK
as Co-Agent
By_________________________________
Name:
Title:
MANAGER:
FLEET NATIONAL BANK
as Manager
-9-
<PAGE> 129
By_________________________________
Name:
Title:
LENDERS:
BANKBOSTON, N.A.
By_________________________________
Name:Timothy G. Clifford
Title: Vice President
ABN AMRO BANK N.V.
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
CORESTATES BANK, N.A.
By_________________________________
Name:
Title:
FIRST UNION NATIONAL BANK
By_________________________________
Name:
Title:
-10-
<PAGE> 130
FLEET NATIONAL BANK
By_________________________________
Name:
Title:
BAYERISCHE VEREINSBANK AG
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
MELLON BANK, N.A.
By_________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
By_________________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
By_________________________________
Name:
Title:
BANK OF SCOTLAND
-11-
<PAGE> 131
By_________________________________
Name:
Title:
NATEXIS BANQUE (BFCE)
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
IMPERIAL BANK
By_________________________________
Name:
Title:
KREDIETBANK N.V.
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
LLOYDS BANK PLC
By_________________________________
Name:
Title:
-12-
<PAGE> 132
By_________________________________
Name:
Title:
THE SUMITOMO BANK, LIMITED
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
USTRUST
By_________________________________
Name:
Title:
-13-
<PAGE> 133
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT dated as of March 4, 1998
(this "AMENDMENT"), among CHICAGO MINIATURE LAMP, INC. and its DOMESTIC
SUBSIDIARIES (collectively the "BORROWERS"), THE GUARANTORS PARTY TO THE CREDIT
AGREEMENT DEFINED BELOW (the "GUARANTORS"), THE SPECIAL CREDIT PARTIES PARTY TO
THE CREDIT AGREEMENT, THE LENDERS PARTY TO THE CREDIT AGREEMENT (the "LENDERS"),
THE CO-AGENTS PARTY TO THE CREDIT AGREEMENT, comprised of ABN AMRO BANK N.V.,
CORESTATES BANK, N.A., and FIRST UNION NATIONAL BANK, FLEET NATIONAL BANK as
Manager, and BANKBOSTON, N.A., as Administrative and Documentary Agent (the
"ADMINISTRATIVE AGENT").
WHEREAS, pursuant to the Credit Agreement (as defined below), the
Lenders have agreed to make Revolving Credit Loans to the Borrowers in an
aggregate principal amount not in excess of the Revolving Credit Commitment; and
WHEREAS, the Credit Parties, the Lenders and the Administrative Agent
wish to amend the Credit Agreement to revise certain provisions of the Credit
Agreement as provided below;
NOW, THEREFORE, in consideration of the foregoing and the agreements
contained herein, the parties hereby agree as follows:
1. REFERENCE TO CREDIT AGREEMENT.
Reference is made to the Amended and Restated Credit Agreement dated as
of October 30, 1997 (as the same may be further amended and restated from time
to time, the "CREDIT AGREEMENT") among the Borrowers, the Guarantors, the
Special Credit Parties party thereto, the Lenders, ABN Amro Bank, N.V.,
Corestates Bank, N.A. and First Union National Bank as Co-Agents, Fleet National
Bank as Manager and the Administrative Agent. Capitalized terms used herein
which are defined in the Credit Agreement have the same meanings herein as
therein, except to the extent that such meanings are amended hereby.
2. AMENDMENTS.
The Credit Parties, the Lenders and the Administrative Agent agree that
the Credit Agreement is hereby amended, effective as of the date hereof, as
follows:
(a) AMENDMENT OF SECTION 1.1 OF THE CREDIT AGREEMENT:
DEFINITIONS. The following definitions are substituted in Section 1.1 of
the Credit Agreement:
"PERMITTED ACQUISITIONS" means acquisition by any of the
Borrowers upon the following conditions:
(a) The line of business acquired is substantially
similar to the Borrowers' existing business.
<PAGE> 134
(b) Maximum additional Revolving Credit Loans for any single
acquisition or series of related acquisitions may not exceed
$25,000,000.
(c) Any obligations due to a seller of any such acquired
company or any other debt incurred to finance such acquisition must be
subordinated to the obligations due the Lenders upon terms acceptable
to the Required Revolving Credit Lenders.
(d) A Borrower must be the surviving entity of any merger or
other corporate reorganization related to any such acquisition.
(e) The Borrowers must demonstrate on a pro forma basis that
the Borrowers and the acquired company would have complied with all
financial covenants on a combined basis based for the four quarters
ending prior to the date of the acquisition.
(f) No default or Events of Default shall exist or occur or be
continuing at the time of or after giving effect to any proposed
acquisition.
Notwithstanding the forgoing the Borrowers shall not be required to
demonstrate compliance under subparagraph (e) of this definition for any
acquisition which meets all of the preceding criteria and for which the
aggregate of the (i) purchase price paid, (ii) notes and other sums payable to
the seller not included in clause (i) and (iii) obligations assumed is equal or
less than $3,500,000.
(b) AMENDMENT OF SECTION 2.11 (C) OF THE CREDIT AGREEMENT.
Section 2.11 (c) is deleted from the Credit Agreement retroactive to prior to
the first advance under the Credit Agreement. The fee under Section 2.11 (c)
shall not apply to any Alternative Currency Loan made under the Credit Agreement
prior to and after the date hereof.
(c) AMENDMENT OF SECTION 6.7 OF THE CREDIT AGREEMENT. Section 6.7 is
deleted from the Credit Agreement and the following is added to read as follows:
6.7 FISCAL YEAR. To enable the ready and consistent determination of
compliance with the covenants set forth in Section 7 hereof, the Credit Parties
will not change the last day of their fiscal year from the Sunday closest to
December 31 of each year, or the last day of the first three fiscal quarters in
each of its fiscal years from March, June and September, respectively.
(d) AMENDMENT OF SECTION 7.1 (H) OF THE CREDIT AGREEMENT.
Section 7.1 (h) is deleted from the Credit Agreement in its entirety and the
following is added to read as follows:
(h) Additional Indebtedness of any Credit Party (determined on a
consolidated basis without duplication in accordance with GAAP) for
Funded Debt in an aggregate principal amount , which when added to
Indebtedness incurred pursuant to Section 7.1 (e) and 7.1 (g) does not
exceed $30,000,000 at any one time outstanding.
3. NO DEFAULT; REPRESENTATIONS AND WARRANTIES, ETC.
-2-
<PAGE> 135
The Credit Parties hereby confirm that: (a) the representations and
warranties of the Credit Parties contained in Section 4 of the Credit Agreement
are true on and as of the date hereof as if made on such date (except to the
extent that such representations and warranties expressly relate to an earlier
date); (b) the Credit Parties are in compliance in all material respects with
all of the terms and provisions set forth in the Credit Agreement on their part
to be observed or performed thereunder; and (c) after giving effect to this
Amendment, no Event of Default specified in Section 8 of the Credit Agreement,
nor any event which with the giving of notice or expiration of any applicable
grace period or both would constitute such an Event of Default, shall have
occurred and be continuing.
4. CONDITIONS TO THIS AMENDMENT.
Concurrently herewith (and as conditions to the Lenders' consent to
this Amendment), the Credit Parties will furnish the Administrative Agent with
the following:
(a) Appropriate corporate resolutions, if necessary, and such
other certificates, instruments and documents as the Administrative Agent may
reasonably request for the purpose of implementing or effectuating the
provisions of the Credit Agreement, as hereby amended, or this Amendment.
(b) Such other documents and instruments as the Administrative
Agent may reasonably require in order to put this Amendment into full force and
effect.
5. MISCELLANEOUS.
(a) Except to the extent specifically amended hereby, the
Credit Agreement, the Loan Documents and all related documents shall remain in
full force and effect. Whenever the terms or sections amended hereby shall be
referred to in the Credit Agreement, Loan Documents or such other documents
(whether directly or by incorporation into other defined terms), such defined
terms shall be deemed to refer to those terms or sections as amended by this
Amendment.
(b) This Amendment may be executed in any number of
counterparts, each of which, when executed and delivered, shall be an original,
but all counterparts shall together constitute one instrument.
BALANCE OF PAGE LEFT INTENTIONALLY BLANK
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<PAGE> 136
PAGE LEFT INTENTIONALLY BLANK
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<PAGE> 137
(c) This Amendment shall be governed by the laws of the
Commonwealth of Massachusetts and shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.
(d) The Credit Parties agree to pay all reasonable expenses,
including legal fees and disbursements incurred by the Lenders in connection
with this Amendment and the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment which shall be deemed to be a sealed instrument as of the date first
above written.
BORROWERS:
CHICAGO MINIATURE LAMP, INC.
CHICAGO MINIATURE LAMP -
SYLVANIA LIGHTING INTERNATIONAL, INC.
CML AIR, INC.
CML BALLAST ,INC.
CML FIBEROPTICS, INC.
ELECTRO FIBEROPTICS CORP.
POWER LIGHTING PRODUCTS, INC.
(f/k/a/ Valmont Electric, Inc.)
VBT, INC.
By______________________________
Name:Frank M. Ward
Title: President
BADALEX LIMITED
By______________________________
Name:Frank M. Ward
Title: Director
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<PAGE> 138
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<PAGE> 139
Each of the undersigned has guaranteed the Obligations of the Borrowers
to the Lenders pursuant to the terms of Article III of the Credit Agreement. By
executing this Consent of Guarantors, each undersigned Guarantor hereby
absolutely and unconditionally reaffirms the provisions of such Article III and
acknowledges and agrees to the terms and conditions of this Amendment and the
terms and conditions of the Credit Agreement as amended hereby.
GUARANTORS:
A&S ELECTRIC spol s.r.o. Gmbh
ALBA LIGHT DESIGN GmbH
ALBA SPEZIALLAMPEN GmbH
ALBA SPEZIALLAMPEN HOLDING, GmbH
ALBA TECHNOLOGY (M) Sdr. Bhd.
ARNOLD GmbH
BADALEX LIMITED
BSC ARNOLD GmbH & CO.
CCC DE MEXICO, S.A. DE C.V.
CHICAGO MINIATURE LAMP EUROPE LIMITED
CHICAGO MINIATURE LAMP - SYLVANIA
LIGHTING INTERNATIONAL I, B.V.
IDI INTERNACIONAL S.A.
W. ALBRECHT GmbH und Co. KG
W. ALBRECHT GRUNDSTUCKSGESELLSCHAFT
GmbH und CO.
By______________________________
Name:Frank M. Ward
Title: Director
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<PAGE> 140
CHICAGO MINIATURE LAMP (CANADA) INC.
By________________________________
Name: Frank Ward
Title: President
ADMINISTRATIVE AGENT
BANKBOSTON, N.A.
as Administrative Agent
By_________________________________
Name: Timothy G. Clifford
Title: Director
CO-AGENTS:
ABN AMRO BANK N.V.
as Co-Agent
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
CORESTATES BANK, N.A.
as Co-Agent
By_________________________________
Name:
Title:
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<PAGE> 141
FIRST UNION NATIONAL BANK
as Co-Agent
By_________________________________
Name:
Title:
MANAGER:
FLEET NATIONAL BANK
as Manager
By_________________________________
Name:
Title:
LENDERS:
BANKBOSTON, N.A.
By_________________________________
Name:Timothy G. Clifford
Title:Director
ABN AMRO BANK N.V.
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
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<PAGE> 142
CORESTATES BANK, N.A.
By_________________________________
Name:
Title:
FIRST UNION NATIONAL BANK
By_________________________________
Name:
Title:
FLEET NATIONAL BANK
By_________________________________
Name:
Title:
BAYERISCHE VEREINSBANK AG
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
MELLON BANK, N.A.
By_________________________________
Name:
Title:
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<PAGE> 143
STATE STREET BANK AND TRUST COMPANY
By_________________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
By_________________________________
Name:
Title:
BANK OF SCOTLAND
By_________________________________
Name:
Title:
NATEXIS BANQUE (BFCE)
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
IMPERIAL BANK
By_________________________________
Name:
Title:
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<PAGE> 144
KREDIETBANK N.V.
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
LLOYDS BANK PLC
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
THE SUMITOMO BANK, LIMITED
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
USTRUST
By_________________________________
Name:
Title:
-12-
<PAGE> 145
THIRD AMENDMENT TO CREDIT AGREEMENT
This THIRD AMENDMENT TO CREDIT AGREEMENT dated as of March 31, 1998
(this "AMENDMENT"), among CHICAGO MINIATURE LAMP, INC. and its DOMESTIC
SUBSIDIARIES (collectively the "BORROWERS"), THE GUARANTORS PARTY TO THE CREDIT
AGREEMENT DEFINED BELOW (the "GUARANTORS"), THE SPECIAL CREDIT PARTIES PARTY TO
THE CREDIT AGREEMENT, THE LENDERS PARTY TO THE CREDIT AGREEMENT (the "LENDERS"),
THE CO-AGENTS PARTY TO THE CREDIT AGREEMENT, comprised of ABN AMRO BANK N.V.,
CORESTATES BANK, N.A., and FIRST UNION NATIONAL BANK, FLEET NATIONAL BANK as
Manager, and BANKBOSTON, N.A., as Administrative and Documentary Agent (the
"ADMINISTRATIVE AGENT").
WHEREAS, pursuant to the Credit Agreement (as defined below), the
Lenders have agreed to make Revolving Credit Loans to the Borrowers in an
aggregate principal amount not in excess of the Revolving Credit Commitment; and
WHEREAS, the Credit Parties, the Lenders and the Administrative Agent
wish to amend the Credit Agreement to reflect all of the forgoing provisions of
the Credit Agreement and the other Loan Documents as provided below;
NOW, THEREFORE, in consideration of the foregoing and the agreements
contained herein, the parties hereby agree as follows:
1. REFERENCE TO CREDIT AGREEMENT.
Reference is made to the Amended and Restated Credit Agreement dated as
of October 30, 1997 (as amended and in effect from time to time, the "CREDIT
AGREEMENT") among the Borrowers, the Guarantors, the Special Credit Parties
party thereto, the Lenders, ABN Amro Bank, N.V., Corestates Bank, N.A. and First
Union National Bank as Co-Agents, Fleet National Bank as Manager and the
Administrative Agent. Capitalized terms used herein which are defined in the
Credit Agreement have the same meanings herein as therein, except to the extent
that such meanings are amended hereby.
2. AMENDMENTS.
The Credit Parties, the Lenders and the Administrative Agent agree that
the Credit Agreement and the Loan Documents are hereby amended, effective as of
the date hereof, as follows:
(a) AMENDMENT OF CREDIT AGREEMENT AND LOAN DOCUMENTS AS TO
CHANGE OF NAME: Effective April 27, 1998, all references to Chicago Miniature
Lamp, Inc. or CML in any of the Loan Documents shall be deemed to be references
to SLI, Inc., the successor by name change to Chicago Miniature Lamp, Inc. All
of the terms and conditions of the Loan Documents which apply to CML shall apply
to SLI, Inc. to the same extent and without further amendment or modification.
<PAGE> 146
(b) AMENDMENT OF SECTION 2.10 (b) (II) OF THE CREDIT
AGREEMENT. Section 2.10 (b) (ii) is deleted from the Credit Agreement in its
entirety and the following is added to read as follows:
(ii) INCURRENCE OF DEBT OR OFFERING OF EQUITY. Without
limiting the obligation of the Borrowers to obtain the consent of the
Required Revolving Credit Lenders to any incurrence of Indebtedness or
sale of equity securities not otherwise permitted hereunder, the
Borrowers agree, on or prior to the closing of any incurrence of debt
pursuant to Section 7.1(h) or sale of equity securities by any Credit
Party to deliver to the Administrative Agent a statement certified by a
Financial Officer, in form and detail reasonably satisfactory to the
Administrative Agent, of the estimated amount of the Net Cash Payments
of such incurrence of debt or sale of equity securities that will (on
the date of such incurrence or sale) be received by any Credit Party in
cash and the Borrowers will prepay the Loans hereunder (and provide
cover for LC Exposure and the Bank Guaranties as specified in Section
2.4(j) upon the date of such incurrence of debt or such sale of
securities, in an aggregate amount equal to 100% of such estimated
amount of the Net Cash Payments from such incurrence of debt or 50% of
such estimated amount of the Net Cash Payments from such sale of equity
securities received by any Credit Party, such prepayment to be effected
in each case in the manner and to the extent specified in clause (iv)
of this Section 2.10(b); provided that such prepayment shall not reduce
any of the Revolving Credit Commitments.
3. NO DEFAULT; REPRESENTATIONS AND WARRANTIES, ETC.
The Credit Parties hereby confirm that: (a) the representations and
warranties of the Credit Parties contained in Section 4 of the Credit Agreement
are true on and as of the date hereof as if made on such date (except to the
extent that such representations and warranties expressly relate to an earlier
date); (b) the Credit Parties are in compliance in all material respects with
all of the terms and provisions set forth in the Credit Agreement on their part
to be observed or performed thereunder; and (c) after giving effect to this
Amendment, no Event of Default specified in Section 8 of the Credit Agreement,
nor any event which with the giving of notice or expiration of any applicable
grace period or both would constitute such an Event of Default, shall have
occurred and be continuing.
4. CONDITIONS TO THIS AMENDMENT.
Concurrently herewith (and as conditions to the Lenders' consent to
this Amendment), the Credit Parties will furnish and covenant to furnish the
Administrative Agent with the following:
(a) Delivery no later than July 31, 1998 of all necessary documents to
be filed in the appropriate offices of each Governmental Authority which the
Administrative Agent deems necessary and appropriate to reflect the change of
name of CML to SLI, Inc. so that the Collateral Documents will remain in full
force and effect and continue to perfect a First Priority Lien in favor of the
Administrative Agent for benefit of the Lenders.
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<PAGE> 147
(b) Delivery at the execution of this amendment of a substitute note to
any Lender which requests such a substitute note evidencing the Obligations due
to such Lender under its Revolving Credit Commitment.
(c) Appropriate corporate resolutions, if necessary, and such other
certificates, instruments and documents as the Administrative Agent may
reasonably request for the purpose of implementing or effectuating the
provisions of the Credit Agreement, as hereby amended, or this Amendment;
including, without limitation, evidence of the change of name to SLI, Inc. and
evidence of the filing of such change of name with the appropriate Governmental
Authority accompanied by an appropriate good standing certificate for SLI, Inc.
by May 8, 1998.
(d) Such other documents and instruments as the Administrative Agent
may reasonably require in order to put this Amendment into full force and
effect.
5. MISCELLANEOUS.
(a) CML has taken no other action which amends or proposes to
amend its charter and by-laws other than the proposed change of its name to SLI,
Inc., and CML does hereby reaffirm its Obligations to the Administrative Agent
and the Lenders under the Loan Documents.
(b) Except to the extent specifically amended hereby, the Credit
Agreement, the Loan Documents and all related documents shall remain in full
force and effect. Whenever the terms or sections amended hereby shall be
referred to in the Credit Agreement, Loan Documents or such other documents
(whether directly or by incorporation into other defined terms), such defined
terms shall be deemed to refer to those terms or sections as amended by this
Amendment.
(c) This Amendment may be executed in any number of
counterparts, each of which, when executed and delivered, shall be an original,
but all counterparts shall together constitute one instrument.
(d) This Amendment shall be governed by the laws of the
Commonwealth of Massachusetts and shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.
(e) The Credit Parties agree to pay all reasonable expenses,
including legal fees and disbursements incurred by the Lenders in connection
with this Amendment and the transactions contemplated hereby.
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<PAGE> 148
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
which shall be deemed to be a sealed instrument as of the date first above
written.
BORROWERS:
CHICAGO MINIATURE LAMP, INC.
CHICAGO MINIATURE LAMP -
SYLVANIA LIGHTING INTERNATIONAL, INC.
CML AIR, INC.
CML BALLAST, INC.
CML FIBEROPTICS, INC.
ELECTRO FIBEROPTICS CORP.
POWER LIGHTING PRODUCTS, INC.
VBT, INC.
By______________________________
Name:Frank M. Ward
Title: President
BADALEX LIMITED
By______________________________
Name:Frank M. Ward
Title: Director
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<PAGE> 149
Each of the undersigned has guaranteed the Obligations of the Borrowers
to the Lenders pursuant to the terms of Article III of the Credit Agreement. By
executing this Consent of Guarantors, each undersigned Guarantor hereby
absolutely and unconditionally reaffirms the provisions of such Article III and
acknowledges and agrees to the terms and conditions of this Amendment and the
terms and conditions of the Credit Agreement as amended hereby.
GUARANTORS:
A&S ELECTRIC spol s.r.o.
ALBA LIGHT DESIGN GmbH
ALBA SPEZIALLAMPEN GmbH
ALBA SPEZIALLAMPEN HOLDING, GmbH
ALBA TECHNOLOGY (M) Sdr. Bhd.
ARNOLD GmbH
BADALEX LIMITED
BSC ARNOLD GmbH & CO.
CCC DE MEXICO, S.A. DE C.V.
CHICAGO MINIATURE LAMP EUROPE LIMITED
CHICAGO MINIATURE LAMP - SYLVANIA
LIGHTING INTERNATIONAL I, B.V.
IDI INTERNACIONAL S.A.
W. ALBRECHT GmbH und Co. KG
W. ALBRECHT GRUNDSTUCKSGESELLSCHAFT
GmbH und CO.
By______________________________
Name:Frank M. Ward
Title: Director
CHICAGO MINIATURE LAMP (CANADA) INC.
By________________________________
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<PAGE> 150
Name: Frank Ward
Title: President
ADMINISTRATIVE AGENT
BANKBOSTON, N.A.
as Administrative Agent
By__________________________________
Name: Timothy G. Clifford
Title: Director
CO-AGENTS:
ABN AMRO BANK N.V.
as Co-Agent
By__________________________________
Name:
Title:
By__________________________________
Name:
Title:
CORESTATES BANK, N.A.
as Co-Agent
By__________________________________
Name:
Title:
FIRST UNION NATIONAL BANK
as Co-Agent
By_________________________________
Name:
Title:
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<PAGE> 151
MANAGER:
FLEET NATIONAL BANK
as Manager
By_________________________________
Name:
Title:
LENDERS:
BANKBOSTON, N.A.
By_________________________________
Name:Timothy G. Clifford
Title:Director
ABN AMRO BANK N.V.
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
CORESTATES BANK, N.A.
By_________________________________
Name:
Title:
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<PAGE> 152
FIRST UNION NATIONAL BANK
By_________________________________
Name:
Title:
FLEET NATIONAL BANK
By_________________________________
Name:
Title:
BAYERISCHE VEREINSBANK AG
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
MELLON BANK, N.A.
By_________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
By_________________________________
Name:
Title:
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<PAGE> 153
THE BANK OF NOVA SCOTIA
By_________________________________
Name:
Title:
BANK OF SCOTLAND
By_________________________________
Name:
Title:
NATEXIS BANQUE (BFCE)
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
IMPERIAL BANK
By_________________________________
Name:
Title:
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<PAGE> 154
KREDIETBANK N.V.
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
LLOYDS BANK PLC
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
USTRUST
By_________________________________
Name:
Title:
-10-
<PAGE> 1
EXHIBIT 10.35
AMENDED AND RESTATED
INTELLECTUAL PROPERTY ALLOCATION AND LICENSE AGREEMENT
This Intellectual Property Allocation and License Agreement (this "Agreement"),
dated as of this 6th day of August, 1992 ("Effective Date"), between EDIL
INTERNATIONAL LIGHTING B.V., a Netherlands corporation (hereinafter referred to
as "IL"), OSRAM ACQUISITION CORPORATION, a Delaware corporation (hereinafter
referred to as "NAL") and OSRAM G.m.b.H., a corporation of the Federal Republic
of Germany (hereinafter referred to as "Osram").
RECITALS
IL has entered into the Amended and Restated IL Stock Purchase Agreement and
related agreements including the Amended and Restated IL Intellectual Property
Agreement dated as of the date hereof (the "IL GTE Agreements") pursuant to
which IL shall acquire all of the stock or assets of those entities listed in
Schedule A to this Agreement, collectively, the "IL Companies", and
NAL has entered into the Amended and Restated NAL Stock Purchase Agreement and
Amended and Restated NAL Asset Purchase Agreement and related agreements
including the Amended and Restated NAL Intellectual Property Agreement dated as
of the date hereof (the "NAL GTE Agreements"), pursuant to which NAL shall
acquire all of the stock of those entities listed in Schedule C to this
Agreement, and the assets of those entities listed in Schedule D to this
Agreement (collectively, the "NAL Companies").
IL and NAL wish to allocate between them Intellectual Property (as defined
below) of the GTE EPG Lighting Business (as defined below) and to enter into
this Agreement for such purpose, and Osram wishes to grant certain license
rights to IL and to enter into this Agreement solely for such purpose.
Now, therefore, in consideration of these premises and other good and valuable
consideration, the parties hereto agree as follows:
ARTICLE I
For all purposes of this Agreement, as amended from time to time, and the
Schedules and Exhibits delivered pursuant to this Agreement, the following
capitalized terms used in this Agreement shall have the following meanings:
<PAGE> 2
2
1.1 "1983 Agreements" shall mean the Agreements of June 1 and July 1,
1983 between Osram and GTE Products Corporation.
1.2 "Accessories" shall have the meaning set forth in the 1983 Agreements.
1.3 "Affiliate" shall mean, with respect to a specific person, another
Person that directly or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the specified Person. The
term "Affiliate" includes both present Affiliates and Persons which become
Affiliates after the date hereof, except that a Person shall be regarded as an
Affiliate only for as long as it remains controlled as specified herein.
1.4 "Best efforts" shall mean all good faith efforts, but not including
any unreasonable act or money payment.
1.5 "Claude S.A." shall mean that company formerly situated in France,
previously a subsidiary of GTE France S.A.
1.6 "CLAUDE Trademarks" shall mean those Trademarks throughout the world
previously owned by Claude S.A. and its Affiliates and to the knowledge of the
parties as set forth on Schedule E.
1.7 "Closing" shall mean the Closing Date under the Amended and Restated
NAL Stock and Asset Purchase Agreements and the Initial Closing Date under the
Amended and Restated IL Stock Purchase Agreement.
1.8 "Copyrights" shall mean all common law or statutory copyright rights,
including any copyright registrations, pending applications for registrations,
rights to apply for registration or protection, and all rights of enforcement
thereof, including all rights to sue or recover for the infringement or
misappropriation thereof.
1.9 "Exclusive NAL World Products" shall mean NAL World Products of the
types under development or manufactured by any IL Company as of the Closing.
1.10 "Fixture Products" shall mean any device for mounting or supporting
lamps including chandeliers, mountings for fluorescent tubes and reflecting or
reflector materials separate from lamps used to diffuse or reflect light.
<PAGE> 3
3
1.11 "Globottle and Starter Patents" shall mean those Patents and
Invention Disclosures of the GTE EPG Lighting Business relating mainly to
globottles and starters and to the knowledge of the parties set forth on
Schedule EE (Patents) and Schedule DD (Invention Disclosures).
1.12 "GTE" shall mean GTE Corporation and its Subsidiaries and
Affiliates, the Stock or assets of which is not to be purchased by IL or NAL
pursuant to the NAL and IL GTE Agreements.
1.13 "GTE EPG" Lighting Business" shall mean the business to be purchased
by NAL and IL pursuant to the NAL and IL GTE Agreements.
1.14 "IL Fixture Trademarks" shall mean those Trademarks worldwide used
with respect to Fixture Products (other than those used exclusively by Sylvania
Canada Ltd. on or prior to the Closing) and to the knowledge of the parties
set forth on Schedule F.
1.15 "Intellectual Property Allocation" shall mean the allocation of the
Intellectual Property forming part of the GTE EPG Lighting Business between IL
and NAL to be carried out by the parties pursuant to this Agreement.
1.16 "Intellectual Property" shall mean and include all Patents,
Trademarks, Copyrights (whether registered or unregistered), Know-How,
Invention Disclosures, and all rights to enforce any and all proprietary rights
therein or statutory protections therefor, including the rights to sue or
recover for the infringement or misappropriation thereof.
1.17 "International NAL World Products Trademarks" shall mean those
Trademarks worldwide exclusively used as of the Closing with respect to NAL
World Products and to the knowledge of the parties as set forth on Schedule G.
1.18 "International Motor Vehicle Lamp and Lighting Products Trademarks"
shall mean those Trademarks worldwide exclusively used as of the Closing with
respect to Motor Vehicle Lamp and Lighting Products and to the knowledge of
the parties as set forth on Schedule H.
1.19 "Invention Disclosures" shall mean all invention disclosures or
patent disclosures existing and identified at the Closing for which patent
applications have not been filed as of the Closing.
<PAGE> 4
4
1.20 "Know-How" shall mean and include know-how, technology, trade
secrets, technical information, formulas, specifications, blue prints, software
and source code and documentation therefor, manuals, notebooks, reports,
drawings, mask work and all rights to enforce any proprietary rights therein,
including all rights to sue or recover for the infringement or misappropriation
thereof. "Know How" does not include "Invention Disclosures."
1.21 "Lamp Competitor" means any corporation, together with its
Subsidiaries (excluding Siemens A.G. and any Subsidiaries of Siemens Group)
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 corporations and their Subsidiaries,
fifty million United States dollars (US$50,000,000);
1.22 "Lamp Parts" shall have the meaning set forth in the 1983
Agreements.
1.23 "Lamp and Lighting Products" shall mean products of the type
manufactured and sold by the GTE EPG Lighting Business.
1.24 "Lamps" shall have the meaning set forth in the 1983
Agreements.
1.25 "Manufacturing Apparatus" shall have the meaning set forth in
the 1983 Agreements.
1.26 "Motor Vehicle Lamp and Lighting Products" shall mean lamp
and lighting products for motor vehicles (including automobiles, motor vehicles
for moving space or aviation equipment, trucks, construction or highway
vehicles, agricultural vehicles and seagoing vehicles which may also propel
themselves on land).
1.27 "NAL Glass Products" shall mean glass products for lamps of
the types under development or manufactured by the NAL Companies as of the
Closing but not products of a
<PAGE> 5
5
type exclusively under development or exclusively manufactured by the IL
Companies. Globottles and starters are not included in NAL Glass Products.
1.28 NAL Chemical and Metallurgical Products" shall mean chemical
and metallurgical products of the types under development or manufactured by
the NAL Companies as of the Closing but not products of a type exclusively
under development or exclusively manufactured by any IL Companies.
1.29 "NAL ECMD Products" shall mean electronic component materials
of the types under development or manufactured by the NAL Companies as of the
Closing but not products of a type exclusively under development or exclusively
manufactured by any IL Companies.
1.30 "NAL World Products" shall mean collectively NAL Chemical and
Metallurgical Products, NAL ECMD Products and NAL Glass Products.
1.31 "Patents" shall mean all patents and patent applications
(including registered designs) (whether published or unpublished) issued or
filed on or before the Closing (including any divisions, continuations, or
reissues thereof) whether or not patents are issued on such applications and
whether such applications are modified, withdrawn, or resubmitted, and all
rights of enforcement thereof, including all rights to sue or recover for the
infringement thereof.
1.32 "Person" (singular or plural) means an association, an
individual, a partnership, a trust or any other entity or organization,
including a governmental entity.
1.33 "Photoflash Trademarks" shall mean those Trademarks
throughout the world used as of the Closing with respect to photoflash products
and to the knowledge of the parties as set forth in Schedule I.
1.34 "Power Sources" shall have the meaning set forth in the 1983
Agreements.
1.35 "Relating mainly" shall in relation to a Patent or Invention
Disclosure be determined by the business and site where the inventor whose
invention is the basis of such Invention Disclosure or Patent was situated at
the relevant dates and if there is more than one inventor (i.e. there are joint
or co-inventors) at different sites or such inventor was present at the
relevant dates at several different sites or involved in different businesses,
then "relating mainly"
<PAGE> 6
6
shall be determined by the predominant subject matter of the patent claims for
said Patent or with respect to an Invention Disclosure the predominant subject
matter of the invention.
1.36 "Subsidiary" shall mean, with respect to any Person, any other
Person, any other Person in which such Person has a direct or indirect equity
or voting ownership interest in excess of 50%. The term "Subsidiary" includes
both present Subsidiaries and Persons who become Subsidiaries after the date
hereof, except that a Person shall be regarded as a Subsidiary only for as long
as it remains in such relationship.
1.37 "Sylvania Canada" means GTE Sylvania Canada Limited, a Canadian
corporation, a wholly owned Subsidiary of GTE International Inc. prior to the
Closing.
1.38 "Trademarks" shall mean all registered and unregistered
trademarks, trade names, icons and logos and registrations and applications
therefor, whether they are or are no longer in use or abandoned, all common
law trademarks, and all rights to sue or recover for the infringement thereof.
1.39 "XO International Patents" shall mean those Patents and Invention
Disclosures relating mainly to XO electronic ballast technology ownership of
which was sold, assigned and transferred by XO INDUSTRIES, INC. to GTE PRODUCTS
CORPORATION in December 1989, said "XO" International Patents" being to the
knowledge of the parties set forth on Schedule FF (Patents) and DD (Invention
Disclosures).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF GTE TO IL AND NAL
---------------------------------------------------
2.1 In making and agreeing to the International Property Allocation, IL
and NAL are relying upon the representations and warranties of GTE and the
Sellers in the IL and NAL GTE Agreements and the information respectively
provided to each of them by GTE.
22. (a) In this Section, "Group I Intellectual Property" shall mean
Intellectual Property allocated to either NAL or IL or a Subsidiary thereof
pursuant to the Intellectual Property Allocation, which following the Closing
shall be owned and used exclusively by NAL or its Affiliates or IL and its
Affiliates, respectively. "Group II Intellectual Property" shall mean
Intellectual Property subject to the Intellectual Property Allocation which
<PAGE> 7
7
following the Closing shall be owned by NAL or its Affiliates or by IL and its
Affiliates, respectively, but also used pursuant to license by the other party
following the Closing. Schedules J & K set forth the allocation of Group I
and Group II Intellectual Property carried out by the parties to date.
(b) To the extent that pursuant to the Intellectual Property
Allocation to be carried out on or prior to the Closing by Sellers pursuant to
Section 3.3 hereof, NAL or its Affiliates or IL and its Affiliates shall be
assigned Group I Intellectual Property, each of NAL and IL hereby assign and
transfer to each other, effective as of the Closing, any rights of action or
indemnification either may have with respect to such Intellectual Property
against or with respect to GTE, including any rights of action or
indemnification with respect to breach of representations or warranties under
the NAL AND IL GTE Agreements ("GTE Rights").
(c) In the event IL and NAL or their Affiliates assign and
transfer to each other any Group I Intellectual Property pursuant to this
Agreement, they each respectively agree to assign and transfer to each other as
a part of the assignment and transfer of the respective Intellectual Property
items, any GTE rights.
(d) With respect to any Group II Intellectual Property, in
the event of any claim against GTE by NAL or IL or their successors and assigns
with respect to such Intellectual Property, the owner of the GTE Rights with
respect to such Intellectual Property agrees to cooperate promptly and fully
with the claimant in pursuing a claim against GTE, including, as may be agreed,
assigning in full upon request the right to proceed against GTE in relation to
such claim, joining as a claimant or agreeing that action may be taken in that
party's name. Where the parties are unable to agree on joint action, or agree
not to proceed jointly, either party may proceed with its claim independently of
the other party, and the right to pursue such a claim against GTE shall be
deemed assigned to such extent pursuant to this Agreement. In support of the
foregoing, the parties agree to execute any reasonably necessary or helpful
papers and provide any reasonably necessary helpful information, promptly upon
request.
(e) Any proceeds collected from GTE with respect to any
claim relating to Group II Intellectual Property shall be allocated between the
parties to this Agreement in accordance with the claims and damages of each.
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ARTICLE III
ALLOCATION PROCEDURES
3.1 Schedules 1.1 to 1.10 of the NAL Intellectual Property Agreement
are incorporated herein by reference as Schedule L.
3.2 Schedules 1.1 to 1.10 of the IL Intellectual Property Agreement
are incorporated herein by reference as Schedule M.
3.3 Between the signing and the Closing of the transactions
described in NAL and IL GTE Agreements, the parties agree to provide joint set
of written instructions to Sellers, consistent with Schedules to, and the terms
and conditions of, this Agreement and the NAL and IL GTE Agreements, together
with such appropriate documents of assignment or transfer as IL and NAL shall
have prepared and jointly agreed upon, to carry out and effectuate the
allocation of the Intellectual Property of the GTE EPG Lighting Business being
purchased by IL and NAL.
3.4 (a) In the event an error is made in any allocations,
assignments or transfers pursuant to this Agreement by either party such that
such assignment or transfer is inconsistent with or contrary to the terms and
conditions of this Agreement, and such error is discovered within one year
after such assignment or transfer has been made, each of the parties agrees,
upon receipt of notice from the other party of such error, to cooperate with
each other and amend or modify such assignment or transfer and execute and
deliver such further instruments as may be reasonably necessary to correct such
error, subject however to any rights, licenses or agreements which may have
been granted to or acquired by any third party therein.
(b) In the event an error has been made in any allocations,
assignments or transfers by reason of any misrepresentations, erroneous or
inaccurate information provided by GTE, and such error is discovered within one
year after the date such allocation, transfer or assignment is made, each of the
parties agrees, upon receipt of notice from the other party of such error to
cooperate with each other in amending this Agreement as may be appropriate to
provide for the allocation of the same and to execute and deliver such further
instruments as may be reasonably necessary to correct such error and address the
concerns of both parties
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and their Subsidiaries and Affiliates with respect to such matter, subject
however to any rights, licenses or agreements which may have been granted or
acquired by any third party therein.
3.5 (a) With respect to the Intellectual Property Allocation
carried out by Sellers under the NAL and IL GTE Agreements pursuant to Section
3.3 and with respect to assignments and transfers made hereunder by the parties,
the parties shall execute and deliver such further certificates, agreements and
other documents and take such other actions as the other party may from time to
time reasonably request to consummate or implement the transactions contemplated
hereby (including providing documents necessary to update chain of title of
registered patents) or to evidence such events or matters.
(b) In addition, in the event that NAL or IL as owner or
licensee thereof should request from the other a document, blue print or other
material embodying Intellectual Property of the EPG Lamp and Lighting Business
as it existed on or prior to the Closing, the other party shall provide such
material as soon as reasonably practicable following such request, subject to
payment of costs by NAL or IL, as the case may be, pursuant to the procedure set
forth in paragraph 5.4 of the Amended and Restated Research and Development and
Engineering Support Agreement dated as of August 6, 1992 between IL and Osram
("R&D Agreement").
ARTICLE IV
ALLOCATION OF "SYLVANIA" TRADEMARK
4.1 At the Closing, NAL or its Affiliate shall own all right, title
and interest with respect to the "SYLVANIA" Trademark in the U.S.A., Canada,
Mexico, and Puerto Rico with respect to all products or services. Schedule P is
to the parties' knowledge a list of the "SYLVANIA" Trademark registrations
allocated to NAL pursuant to this Section 4.1.
4.2 At the Closing, IL or its Affiliate shall own all right, title
and interest with respect to the "SYLVANIA" Trademark worldwide except for the
U.S.A., Canada, Mexico, and Puerto Rico with respect to all products or
services. Schedule Q is to the parties' knowledge a list of the "SYLVANIA"
Trademark registrations allocated to IL pursuant to this Section 4.2.
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4.3 To the extent there are any "SYLVANIA" Trademark rights, licenses or
agreements relating to the countries respectively specified in Sections 4.1 and
4.2, including with respect to any joint ventures, the parties agree that the
rights, benefits and obligations of such licenses or agreements shall to the
extent possible be exclusively held and performed by each of them severally,
with respect to the countries specified in Sections 4.1 and 4.2 respectively;
(i.e. NAL shall hold, control and perform those pertaining to the U.S.A.,
Canada, Mexico, and Puerto exclusively, and IL shall hold, control and perform
those pertaining to the rest of the world), and each agrees to use its best
efforts to perform such further acts and deliver such further documents as may
be necessary to accomplish the same. Schedule R sets forth items which the
parties have agreed to handle in a specific manner.
4.3 There shall be no renewal or extensions of licenses beyond the
initial three year term with respect to Argentina "SYLVANIA" Trademarks without
the consent of NAL, IL and its successors or assigns agree that NAL may enforce
said trademark license agreement if IL or its successors or assigns elect not
to bring legal proceedings to enforce the same.
ARTICLE V
ALLOCATION OF
ALL TRADEMARKS OTHER THAN THE "SYLVANIA" TRADEMARK
5.1 At the Closing, NAL or its Affiliate shall own all right, title and
interest in an to all U.S.A. and Canadian Trademarks other than the "SYLVANIA"
Trademark which are used in respect of Lamp and Lighting Products in the
U.S.A., Puerto Rico and Canada, except as follows (Schedule S is a list to the
parties' knowledge of all Trademarks allocated to NAL pursuant to the
foregoing):
(a) All right, title and interest in and to the IL Fixture Trademarks
worldwide shall belong to IL or its Affiliate;
(b) All right, title and interest in and to the PHOTOFLASH Trademarks and
CLAUDE Trademarks worldwide shall belong to IL or its Affiliate;
(c) All right, title and interest in and to any Trademarks other than the
"SYLVANIA" Trademark owned by any joint venture included under the IL or NAL
GTE Agreements.
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respectively shall continue to belong to such joint venture ("Joint Venture
Trademarks") and such Joint Venture Trademarks are not included amongst the
respective Trademark allocations made in this Intellectual Property Allocation
Agreement. Schedule T is a list of those instances to the parties' knowledge
where joint ventures own Trademarks to be used by NAL or IL following the
Closing. IL shall use best efforts to obtain for NAL a license under any Joint
Venture Trademarks used by NAL as of the Closing.
5.2 At the Closing, IL or its Affiliate shall own all right, title and
interest in and to all non-U.S.A. and non-Canadian Trademarks other than the
"SYLVANIA" Trademark, which are used in the Lamp and Lighting Products business
outside the U.S.A. and Canada, except as follows (Schedule U is a list of those
Trademarks to the parties' knowledge allocated to IL pursuant to this Section
5.2):
(a) All right, title and interest in and to the International Motor
Vehicle Lamp and Lighting Products Trademarks and International NAL lamp and
Lighting Products Trademarks and International NAL World Products Trademarks,
shall belong to NAL or its Affiliate (Schedule V is a list of those Trademarks
to the parties' knowledge allocated to NAL pursuant to this Section 5.2(a)).
(b) All right, title and interest in and to any Trademark rights which
are limited to Puerto Rico and not derived from United States rights shall
belong to NAL or its Affiliate.
5.3 To the extent that there are any Trademark rights, licenses or
agreements relating to categories of Trademarks allocated to one or other party
under this Section, including with respect to any joint venture, the parties
agree that the rights, benefits and obligations of such licenses or agreements
shall to the extent possible be exclusively held and performed by each of them
severally, with respect to such categories, and each agrees to use its best
efforts to perform such further acts and deliver such further documents as a
may be necessary to accomplish the same. Schedule R sets forth items which the
parties have agreed to handle in a specific manner.
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ARTICLE VI
ALLOCATION OF
OTHER INTELLECTUAL PROPERTY
6.1. IL AND NAL agree that at the Closing:
(a) NAL or its Affiliate shall hold and own all right, title and
interest in and to all U.S.A. and Canadian Patents (including any U.S.A. and
Canadian patents which issue on Invention Disclosures) for Lamp and Lighting
Products, except as follows (Schedule W is a list to the knowledge of the
parties of those Patents what are U.S.A. and Canadian Patents allocated to NAL
pursuant to the foregoing):
(i) All right, title and interest in and to Patents and Invention
Disclosures (including any patents which issue on such invention Disclosures)
relating mainly to Fixture Products not manufactured by NAL in the U.S.A. or
Canada on or before the Closing Date shall belong worldwide to IL or its
Affiliate (Schedule X is a list of those Patents to the knowledge of the parties
allocated to IL pursuant to this paragraph):
(ii) All right, title and interest in and to Patents and Invention
Disclosures (including any patents which issue on such Invention Disclosures)
relating mainly to photoflash products shall belong worldwide to IL or its
Affiliate (Schedule Y is a list of those Patents to the knowledge of the
parties allocated to IL pursuant to this paragraph);
(iii) All right, title and interest in an to Patents and Invention
Disclosures (including any patents which issue on such Invention Disclosures)
issued on inventions made by or otherwise owned by Claude S.A. worldwide for
Lamp and Lighting Products shall belong to IL or its Affiliate (Schedule Z is a
list of those patents to the knowledge of the parties allocated to IL pursuant
to this paragraph);
(iv) All right, title and interest in and to the Globottles and
Starter Patents (including any patents which issue on such Invention
Disclosures) worldwide shall belong to IL or its Affiliate (Schedule EE is a
list of those Patents to the knowledge of the parties allocated to IL pursuant
to this paragraph).
(b) IL or its Affiliate shall hold and own all right, title
and interest in and to all Patents worldwide (including any patents which issue
on Invention Disclosures) (excluding all U.S.A. and Canadian Patents) for Lamp
and
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Lighting Products, except as follows (Schedule AA is a list of those Patents
to the knowledge of the parties allocated to IL pursuant to this paragraph):
(i) All right, title and interest in and to all Patents and Invention
Disclosures (including any patents which issue on such Invention Disclosures)
worldwide relating mainly to Motor Vehicle Lamp and Lighting Products and NAL
World Produces shall belong to NAL (Schedule BB is a list to the knowledge of
the parties of those Patents allocated to NAL pursuant to this Section
6.1(b)(i)).
(ii) All right, title and interest in and to the XO International
Patents (including any patents which issue on such Invention Disclosures)
worldwide shall belong to NAL (Schedule FF is a list of those Patents to
the knowledge of the parties allocated to NAL pursuant to this paragraph).
6.2 (a) To the extent there are any Patent or technology licenses or
agreements with third parties or joint ventures forming part of the GTE EPG
Lighting Business, the parties to this Agreement agree that the rights, benefits
and obligations of such licenses or agreements shall to the extent possible be
allocated to the party to this Agreement whose Patents have been licensed
pursuant to said license or agreement or whose products are affected by such
license or agreement (e.g. NAL shall as licensor or licensee hold, control and
perform those licenses pertaining to the Patents allocated to NAL, and IL as
licensor or licensee shall hold, control and perform those licenses pertaining
to the Patents allocated to IL), and each agrees, at its cost and expense, to
perform such further acts and deliver such further documents as may be necessary
to accomplish the same.
(b) To the extent a Patent or technology license or agreement is to
be allocated to both NAL and IL because it pertains to both parties, the parties
to this Agreement agree (a) to cooperate in obtaining any necessary third party
consents required for allocating the same and (b) to cooperate with each other
to fulfill the obligations under such licenses or agreements during the term
thereof. (See Schedule R.)
(c) If any consents are necessary to allocate a Patent or technology
license or agreement as aforesaid with respect to either or both of NAL or IL,
each will use its best efforts to secure such consents, and in any event, each
will use its best efforts to afford the other and its applicable Affiliates the
rights and benefits of each such license or agreement consistent with this
Agreement.
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6.3 All right, title and interest in and to any Patents and
Invention Disclosures owned by any Joint Venture included under the IL or NAL
Stock Purchase Agreements or Asset Purchase Agreements respectively shall
continue to belong to such Joint Venture ("Joint Venture Patents and Invention
Disclosures") and such Joint Venture Patents and Invention Disclosures are not
included amongst the respective allocations made in this Intellectual Property
Allocation Agreement. Schedule CC is a list of those instances known to the
parties where Joint Ventures own Patents used by NAL or IL. IL shall use best
efforts to obtain for NAL a license under any Joint Venture Patents or
Invention Disclosures used by NAL as of the Closing.
6.4 Copyrights and Know-How existing in the GTE EPG Lighting
Business shall be allocated amongst NAL and IL in the same manner as Patents
are allocated hereunder.
6.5 The Invention Disclosures existing in the GTE EPG Lighting
Business are listed to the knowledge of the parties on Schedule DD. Invention
Disclosures shall be allocated as set forth in Section 6.1 and representatives
of the parties shall meet within six months after the Closing to allocate such
Invention Disclosures; with respect to Invention Disclosures to be allocated on
a geographical basis, NAL shall have the right to file patent applications for
Invention Disclosures by inventor employees of NAL, and IL shall have the
corresponding right for IL inventor employees; all patents secured in the USA
or Canada shall belong to IL; any assignments shall be made upon request of the
party entitled to ownership thereof in a particular country; in the event
either party elects not to apply for, prosecute, secure or maintain such
applications or any foreign corresponding patent applications (IL in the USA or
Canada, NAL outside the USA or Canada), it agrees to notify the other party
which at its own cost and expense, shall have the right to apply for,
prosecute, secure or maintain the same; any such action shall not affect the
ownership or licenses hereunder of such applications or patents issuing
thereon; the party assuming such actions shall be under no obligation to
continue any such actions after such assumption. With respect to all other
patents and patent applications which are not allocated on a geographical
basis, the other party shall not have the right to apply or commence to
prosecute the application unless the invention has been published, and in which
case, the other party shall have the same rights after publication (to apply
for, prosecute, secure or maintain) as apply to Invention Disclosures allocated
on a geographical basis and, in the
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event that IL or NAL shall intend to let any such right lapse, such party shall
notify the other party and permit such other party to continue the prosecution
or maintenance of such right. Any such action shall not affect the ownership
of licenses hereunder of such right. The party assuming such actions shall be
under no obligation to continue any such actions.
6.6 In the event that a third party makes claims of infringement
against NAL and IL relating to use of Intellectual Property allocated under
this Agreement where the claims are substantially similar, then the parties
shall use good faith efforts to offer the opportunity to the other party to
participate in any settlement discussions.
ARTICLE VII
TRADEMARK LICENSES
7.1 NAL agrees that effective as of the Closing, IL shall have a
non-exclusive license under the "SYLVANIA" trademark, to have Lamp and Lighting
Products manufactured in the U.S.A., Puerto Rico and Canada and marked with the
"SYLVANIA" trademark, all such lamps to be for distribution, sale and use
outside of the U.S.A., Puerto Rico and Canada.
7.2 NAL agrees that effective as of the Closing, IL shall have an
exclusive license under the "SYLVANIA" trademark in Mexico (a) to make,
distribute, sell, and use in Mexico all products and services forming part of
the GTE EPG Lighting Business; and (b) to make, distribute, sell, and use in
Mexico all products and services other than those forming part of the GTE EPG
Lighting Business. Such license shall be subject to that certain Trademark
License Termination Agreement between GTE International, Inc. and FOCOS S.A.
dated October 23, 1992, and to the rights of NAL pursuant to paragraphs 7.3,
7.4 and 7.5 hereof.
7.3 IL agrees that effective as of the Closing, NAL shall have a
non-exclusive license under the "SYLVANIA" trademark worldwide outside the
U.S.A., Puerto Rico and Canada, to have Lamp and Lighting Products manufactured
outside the U.S.A., Puerto Rico and Canada and marked with the "SYLVANIA"
trademark, all such lamps to be for distribution, sale and use in the U.S.A.,
Puerto Rico and Canada.
7.4 IL agrees that effective at the Closing Date, NAL shall have an
exclusive license under the "SYLVANIA" Trademark worldwide to use said
"SYLVANIA" Trademark in respect of Motor Vehicle Lamp and Lighting Products.
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7.5 IL agrees that effective at the Closing Date, NAL shall have an
exclusive license under the "SYLVANIA" trademark worldwide to use the
"SYLVANIA" trademark in respect of NAL World Products, provided, however, IL
reserves and NAL grants to IL a license and right to continue the non-exclusive
use of the "SYLVANIA" trademark worldwide outside the U.S.A. and Canada for
those types of products manufactured by GTE Precision Materials (Barentin) on
or before the Closing.
7.6 (a) NAL agrees that effective as of the Closing, IL shall have a
worldwide, non-exclusive license to use the International NAL World Products
Trademarks used by GTE Precision materials (Barentin) for the type of product
and in the same manner as used prior to the Closing, other than the "SYLVANIA"
Trademark in the United States and Canada.
(b) IL agrees that effective as of the Closing, NAL shall have a
non-exclusive license in Canada under the IL Fixture Trademarks for the type of
product and in the same manner as used prior to the Closing by the NAL
Companies in Canada.
7.7 All trademark licenses and rights granted under this Article VII
shall be royalty free, irrevocable, and subject to the following terms and
conditions:
(a) All products or services bearing the licensed trademark (except those
under 7.1 and 7.3) shall, at minimum, be of such quality standards as were
observed by IL or NAL respectively as of the Closing Date, except that the
quality standards applicable to those products and services under paragraph
7.2(b) shall be those of a world-class business providing such products or
services. The licensor of the trademark shall have the right once each calendar
year to examine reasonable quantities submitted by licensee to licensor as
samples of the products of licensee to licensor as samples of the products of
licensee bearing such licensed trademarks or otherwise review the standard of
services provided by the licensee; in the event licensee fails to meet such
quality standards, licensee shall have up to six months to correct the same and
to comply with such standards. The licensee shall indemnify the licensor against
any product liability claim arising out of use of the trademarks licensed
hereunder.
(b) In the event of any breach of said trademark license, said license
shall not be terminable for breach without the consent and agreement of
license, and licensee
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may not be required to cease use of such licensed trademark unless it consents
and agrees to cease such use, but the licensor may pursue such other rights and
remedies as licensor may have against licensee including for damages and
specific performance.
(c) The licenses granted hereunder may be sublicensed by a party to its
Subsidiaries. Except as provided herein, the licenses granted hereunder may not
be sublicensed in whole or in part by a party or its sublicensees, assignees, or
transferees. Any sublicense executed after the Effective Date contrary to the
terms and conditions hereof shall be null and void and of no force or effect,
except as may otherwise be provided in Schedule R.
(d) The licenses granted hereunder may be assigned and transferred by a
licensee together with and as a part of the sale or transfer of all of that
party's right, title, and interest in the whole or any part of that party's
business to the extent such part uses such licensed Trademarks. Any assignee or
transferee shall be bound by all of the terms and conditions hereof; as a part
of such transactions, such licensee may retain rights or licenses to use the
Trademarks in connection with those businesses not transferred or sold to its
assignee or transferee. To implement the foregoing provisions of this subsection
(d), the licensee shall request that the licensor grant, and the licensor shall
grant, to such transferee/assignee a license upon similar terms and conditions
to those set forth in this license to the extent such part transferred or
assigned uses such licensed Trademarks. Any assignment or transfer, whether in
whole or in part, contrary to the terms and conditions hereof shall be null and
void and of no force or effect.
(e) With respect to sublicenses of the "SYLVANIA" Trademark, the
sublicensee will undertake to use the color for the packaging of products sold
under such Trademark required by its licensor.
(f) Except as permitted hereunder, any sublicensee of NAL shall undertake
in its role as sublicensee of the "SYLVANIA" Trademark, to the fullest extent
permitted by law, not to sell any products bearing the "SYLVANIA" Trademark in
any country in which IL is the registered owner of the "SYLVANIA" Trademark (or
to Mexico except for NAL World Products and Motor Vehicle Lamp and Lighting
Products) or to sell any products bearing the "SYLVANIA" Trademark to parties in
relation to which NAL knows or has reasonable grounds for belief that such
products will be exported directly or indirectly to countries in which IL is the
registered owner
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of the "SYLVANIA" Trademark (or to Mexico except for NAL World Products and
Motor Vehicle Lamp and Lighting Products).
(g) Except as permitted hereunder, any sublicensee of IL shall
undertake in its role as sublicensee of the "SYLVANIA" Trademark, to the fullest
extent permitted by law, not to sell any products bearing the "SYLVANIA"
Trademark in any country in which NAL is the registered owner of the "SYLVANIA"
Trademark (other than Mexico) or to sell any products bearing the "SYLVANIA"
Trademark to parties in relation to which IL knows or has reasonable grounds for
belief that such products will be exported directly or indirectly to countries
(other than Mexico) in which NAL is the registered owner of the "SYLVANIA"
Trademark.
7.8 (a) Within three years after Closing at latest, IL will change
the color of the packaging for products sold under "SYLVANIA" Trademark to a
color or colors mutually agreed upon with NAL. IL and NAL will also mutually
agree to details of the appropriate amendments.
(b) Except as permitted hereunder, NAL undertakes, to the fullest
extent permitted by law, not to sell any products bearing the "SYLVANIA"
Trademark in any country in which IL is the registered owner of the "SYLVANIA"
Trademark to parties in relation to which NAL knows or has reasonable grounds
for belief that such products will be exported directly or indirectly to
countries in which IL is the registered owner of the "SYLVANIA" Trademark.
(c) Except as permitted hereunder, IL undertakes, to the fullest
extent permitted by law, not to sell any products bearing the "SYLVANIA"
Trademark in any country in which NAL is the registered owner of the "SYLVANIA"
Trademark (other than Mexico) or to sell any Products bearing the "SYLVANIA"
Trademark to parties in relation to which IL knows or has reasonable grounds for
belief that such products will be exported directly or indirectly to countries
(other than Mexico) in which NAL is the registered owner of the "SYLVANIA"
Trademark.
(d) To the fullest extent permitted by law, each of NAL and IL
undertakes to make any sale or transfer of its ownership of the "SYLVANIA"
Trademark contingent on the agreement of the transferee with NAL or IL, as
appropriate, to the terms of paragraphs 7.8(b) and (c), including the obligation
of the transferee to impose similar reciprocal obligations on any other party to
which in any further
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transaction the "SYLVANIA" Trademark should be transferred. Upon request, NAL
and IL agree to enter into a reasonable agreement with any such transferee
containing reciprocal obligations as set forth in paragraph 7.8(b) and (c), but
no other unusual or onerous terms.
7.9 (a) The owner of the "SYLVANIA" Trademark shall maintain the
Trademark at its sole expense in each country in which it is the registered
owner of the trademark, except that IL shall maintain the "SYLVANIA" Trademark
at its sole expense in Mexico.
(b) In the event that either party elects in its discretion to let
lapse a registration for the "SYLVANIA" Trademark for which it is responsible
hereunder, it shall provide reasonable notice to the other party who shall have
the option to take over such maintenance (but not the ownership itself).
(c) In the event that the "SYLVANIA" Trademark is infringed by a
third party in Mexico IL shall in its sole discretion take all necessary steps
at its expense to prevent or terminate such infringement, including by way of
legal action, failing which NAL may at its expense take any action it reasonably
believes to be necessary in order to protect its rights in the "SYLVANIA"
Trademark and the parties shall give each other all reasonable assistance in
relation to any such claim (including but not limited to the use of its name or
being joined as a party to proceedings).
(d) IL shall have the exclusive right to apply for registration of
the "SYLVANIA" Trademark in all countries outside the U.S.A., Canada, Mexico and
Puerto Rico and NAL shall have the exclusive right to apply for registration of
the "SYLVANIA" Trademark in the U.S.A., Canada, Mexico and Puerto Rico.
7.10 The licenses provided for in this Article shall on or before the
Closing be set forth in separate license agreements to be executed as of the
Closing, provided that such license agreements shall not contain any further or
different terms beyond terms corresponding to paragraphs 9.2 to 9.14 hereof.
ARTICLE VIII
PATENT LICENSES
8.1 (a) As used in this Article VIII, "Osram Patents" shall mean all
Patents (including registered designs) issued
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or filed by Osram as of the Closing Date, Copyrights of Osram existing as of
the Closing date, and Know-How (including blue prints) of Osram, relating to
Lamps, Lamp Parts, Accessories, Power Sources and Manufacturing Apparatus,
including all Intellectual Property licensed under the 1983 Agreements.
(b) As used in this Article VIII, "GTE Patents" shall mean all
Intellectual Property (excepting Trademarks) whose ownership is acquired by
either IL or NAL from GTE pursuant to the IL and NAL GTE Agreements or pursuant
to the Intellectual Property Allocation. The XO International Patents are
included in the "GTE Patents" and licensed to IL for use outside the USA and
Canada pursuant to paragraph 8.4(d). To the extent that patents issue on
Invention Disclosures included in the GTE Patents, such patents shall be
subject to the licenses provided for in Section 8.4.
8.2 Osram shall effective as of the Closing terminate the 1983
Agreements with effect from such date, with respect to IL and its Affiliates,
but at Osram's option, not with respect to Osram and its Affiliates. In
confirmation of the rights retained by Osram following the termination of the
1983 Agreements, IL hereby grants to Osram, effective as of the Closing, a
non-exclusive license under the terms and conditions of the 1983 Agreements to
the Intellectual Property (other than Trademarks) whose ownership is acquired
by IL from GTE pursuant to the IL GTE Agreements or pursuant to the
Intellectual Property Allocation hereunder.
8.3 Effective as of the Closing, Osram hereby grants to IL, an
irrevocable, non-exclusive, royalty free license under the Osram Patents, for
the remaining life of the Osram Patents, on the following terms and conditions:
(a) IL may make, have made, use, sell, or otherwise dispose of
Lamps, Lamp Parts, Accessories, and Power Sources (excluding any right to make,
have made, use, sell, or otherwise dispose of Lamps, Lamp Parts, Accessories
and Power Sources as Motor Vehicle Lamp and Lighting Products or as Exclusive
NAL World Products), outside of the U.S.A. and Canada, and may make, have made
and use within IL or its Subsidiaries Manufacturing Apparatus outside of the
U.S.A. and Canada. IL may also make, have made, use, sell or otherwise dispose
of Fixtures, starters, globottles and photoflash products anywhere in the world
including the USA and Canada and make, have made, and use within IL and its
Subsidiaries Manufacturing Apparatus for the purpose of IL manufacturing such
products in the USA and Canada. The license to Copyrights and Know-How
includes the right to copy, adapt, develop, create derivative works or modify.
Upon request, Osram will, pursuant to the procedures of
<PAGE> 21
21
Article 5 of the R&D Agreement, provide all Technical Information (as defined
therein and including all drawings and blue prints) produced in respect of
Manufacturing Apparatus developed by or for Osram Group (as defined therein).
Such reference to the R&D Agreement shall not limit any rights granted under
this Agreement.
(b) The license of Osram Patents granted hereunder may be
sublicensed by IL to its Subsidiaries, to the buyer/transferee as a part of the
purchase/transfer of IL's business to the extent it is using such licensed Osram
Patents; such buyer/transferee may sublicense its license hereunder to its
Subsidiaries; sublicensees of rights hereunder shall agree in writing to be
bound by the terms and conditions of this license and said sublicense; except
as provided herein, the license granted hereunder may not be sublicensed in
whole or in part by the licensee or its sublicensees, assignees, or
transferees. Any sublicense contrary to the terms and conditions hereof shall
be null and void and of no force or effect.
(c) The license of Osram Patents granted hereunder may be assigned and
transferred together with and as a part of the sale or transfer of all of IL's
right, title, and interest in the whole or any part of IL's business to the
extent such part uses such licensed Osram Patents. Any assignee or transferee
shall be bound by all of the terms and conditions hereof; as a part of such
transactions, IL may retain rights or licenses to use the Osram Patents in
connection with those businesses not transferred or sold to its assignee or
transferee. IL may as an alternative to the foregoing sentence of this section
(c), request that Osram grant, and Osram shall grant, to such transferee/
assignee of the business a license upon similar terms and conditions to those
set forth in this license to the extent such part transferred or assigned uses
such Osram Patents. Any assignment or transfer, whether in whole or in part,
contrary to the terms and conditions hereof shall be null and void and of no
force or effect.
(d) In the event of any breach of said license, said license shall
not be terminable for breach without the consent and agreement of licensee, and
licensee may not be required to cease infringing use of the Osram Patents
unless it consents and agrees to cease such use, but Osram may pursue such
other rights and remedies as Osram may have against licensee including for
damages and specific performance.
<PAGE> 22
22
(e) IL agrees to receive and maintain in confidence all Osram
confidential information and shall not disclose or make the same available to
any Persons other than its employees or permitted sub-licensees or transferees
except as provided in this license.
The obligations with respect to confidential information hereunder
shall not extend to information (a) which has been made generally available to
the public through no breach of the confidentiality obligations under this
Section (including that which is disclosed by any product made available to the
public by Osram or IL), (b) which has been received from a third party who is
under no confidentiality obligation to the disclosing party or licensor
hereunder, (c) which has been independently developed without access to or use
of any confidential information of the disclosing party or licensor, (d) that
information required by law to be disclosed to a governmental entity pursuant
to investigative or jurisdiction where such governmental agency or authority
compels or requires such disclosure (provided, however, proprietary notices of
disclosing party's proprietary rights therein shall be placed in or on such
information and disclosing party shall be advised in writing of such
proceedings and requirement of disclosure), and (e) information which is
disclosed to a third party, not being a Lamp Competitor, whose identity has
been notified to Osram and who has executed a confidentiality undertaking in a
form reasonably acceptable to Osram, to enable IL to have Manufacturing
Apparatus or spare parts made for IL.
8.4 IL and NAP, effective on the Closing, hereby grant to each other
irrevocable, royalty free, perpetual licenses (or with respect to any statutory
registration rights, licenses for the remaining life thereof) under the GTE
Patents which it may respectively acquire ownership of, as follows:
(a) IL grants to NAL an exclusive license under those GTE Patents
owned by IL outside the U.S.A. and Canada for products sold as Motor Vehicle
Lamp Products to the extent such GTE Patents may pertain to any of the same.
(b) IL grants to NAL an exclusive license under those GTE Patents
owned by IL outside the U.S.A. and Canada for Exclusive NAL World Products, to
the extent such GTE Patents may pertain to any of the same.
<PAGE> 23
23
(c) IL grants to NAL a sole license (meaning that the licensor may
not, except as specifically permitted herein in Schedule R, license parties
other than its Subsidiaries within the field licensed to the licensee) under
those GTE Patents owned by IL outside the U.S.A. and Canada for NAL World
Products other than Exclusive NAL World Products, to the extent such GTE Patents
may pertain to any of the same.
(d) NAL grants to IL an exclusive license under those GTE Patents
owned by NAL outside the U.S.A. and Canada, for those categories of products
sold by the businesses being purchased by IL, to the extent such GTE Patents
pertain to any of the same, except for products sold as Motor Vehicle Lamp
Products and Exclusive NAL World Products and except that the license to IL for
NAL World Products other than Exclusive NAL World Products shall be limited to
parallel the rights of IL under paragraph 8.4(c).
(e) NAL grants to IL an exclusive license under those GTE Patents
owned by NAL within the United States and Canada for Fixture Products of the
types sold by IL within the United States and Canada as of the Closing (other
than Fixture Products of the types also manufactured by NAL in the United
States and Canada prior to Closing as to which the license shall be sole) to
the extent such GTE Patents may pertain to any of the same.
(f) NAL grants to IL an exclusive license under those GTE Patents
owned by NAL within the United States and Canada for photoflash products and a
non-exclusive license for those types of globottles and starters manufactured
by IL at the Closing and sold into the U.S.A. and Canada to the extent such GTE
Patents may pertain to any of the same.
(g) IL grants to NAL an exclusive license under those GTE Patents
other than Claude Patents owned by IL within the United States and Canada for
those categories of products sold by the businesses being purchased by NAL, to
the extent such GTE Patents may pertain to any of the same, except for
photoflash products and Fixtures of the types sold by IL within the United
States and Canada as of the Closing and not manufactured by NAL in the United
States and Canada, and except for globottles and starters, and except that the
license to NAL for other Fixtures shall be limited to parallel the rights of
NAL under paragraph 8.4(e).
(h) IL grants to NAL a non-exclusive license to make (but not to
have made), use or sell products within the United States and Canada under the
Globottle and Starter
<PAGE> 24
24
Patents other than photoflash products and Fixtures of the types sold by IL
within the United States and Canada as of the Closing and not manufactured by
NAL in the United States and Canada, to the extent such GTE Patents may pertain
to any of the same.
(i) The licenses granted hereunder may be sublicensed by the licensee
to its Subsidiaries, to the buyer/transferee as a part of the purchase/transfer
of the licensee's business to the extent using the licensed Patents: such
buyer/transferee may sublicense its license hereunder to its Subsidiaries;
sublicensees of rights hereunder shall agree in writing to be bound by the terms
and conditions of this license and said sublicense; except as provided herein,
the licenses granted hereunder may not be sublicensed in whole or in part by the
licensee or its sublicensees, assignees, or transferees. Any sublicense
contrary to the terms and conditions hereof shall be null and void and of no
force or effect.
(j) The licenses granted hereunder may be assigned and transferred
together with and as a part of the sale or transfer of all of the licensee's
right, title, and interest in the whole or any part of the licensee's business
to the extent such part uses such licensed Patents. Any assignee or transferee
shall be bound by all of the terms and conditions hereof; as a part of such
transactions, the licensee may retain rights or licenses to use the Patents in
connection with those businesses not transferred or sold to its assignee or
transferee. The licensee may as an alternative to the foregoing sentence of
this Section (j), request that the licensor grant, and the licensor shall grant,
to such transferee/assignee of the business a license upon similar terms and
conditions to those set forth in this license to the extent such part
transferred or assigned uses such licensed Patents. Any assignment or transfer,
whether in whole or in part, contrary to the terms and conditions hereof shall
be null and void and of no force or effect.
(k) In the event of any breach of said license, said license shall
not be terminable for breach without the consent and agreement of licensee, and
licensee may not be required to cease infringing use of the licensed patent
unless it consents and agrees to cease such use, but the licensor may pursue
such other rights and remedies as licensor may have against licensee including
for damages and specific performance.
(l) Licensee agrees to receive and maintain in confidence all
confidential information licensed under this
<PAGE> 25
25
section and in relation to which a written notice of confidentiality has been
received from the licensor and shall not disclose or make the same available to
any Persons except its employees or permitted sublicensees or transferees
except as provided in this Section.
The obligations with respect to confidential information
hereunder shall not extend to information (a) which has been made generally
available to the public through no breach of the confidentiality obligations in
this section (including that which is disclosed by any product made available to
the public by the licensor or licensee), (b) which have been received from a
third party who is under no confidentiality obligation to the disclosing party
or licensor hereunder, and (c) which has been independently developed without
access to or use of any confidential information of the disclosing party or
licensor, and (d) that information required by law to be disclosed to a
governmental entity pursuant to investigative or judicial proceedings over
which such entity has proper jurisdiction where such governmental agency or
authority compels or requires such disclosure (provided however, proprietary
notices of disclosing party's proprietary rights therein shall be placed in or
on such information and the disclosing party shall be advised in writing of
such proceedings and requirement of disclosure).
(m) In the event that a patent licensed under this Section 8.4 is
infringed by a third party in any country, the holder of exclusive rights in
such patent shall in its sole discretion and at its expense take all necessary
steps to prevent or terminate such infringement, including by way of legal
action, failing which the other party may take any action at its expense it
reasonably believes to be necessary in order to protect its rights in the
patent licensed hereunder and the parties shall give each other all reasonable
assistance in relation to any such claim (including but not limited to the use
of its name or being joined as a party to proceedings).
(n) Without limiting the foregoing:
(i) IL acknowledges that the Patents set forth on Schedule GG,
to be allocated to IL, are subject to certain contingent license rights of
Matsushita Electric Works, Ltd. under an Agreement dated November 29, 1989 (the
"MEW Agreement") and IL hereby grants to NAL, effective as of the Closing,
sufficient worldwide rights and licenses under such Patents and any applicable
Invention Disclosures on Schedule DD to enable NAL fully to fulfill the intents
and purposes
<PAGE> 26
26
and to perform under the MEW Agreement and the related July 25, 1991 Letter
Agreement, including Articles 4. (1), (2) and (3) thereof. Allocation of any
royalty received by NAL shall be negotiated in good faith.
(ii) IL acknowledges that the Patents set forth on Schedule HH,
to be allocated to IL, are subject to certain reversionary and license rights
to the United States Department of Energy ("DOE") pursuant to DOE Contract No.
DE-AC03-76SF00098 and related subcontracts and IL hereby agrees that at the
Closing it takes title subject to the rights of DOE and the obligations of NAL
to DOE, including as follows: NAL agrees to assign forthwith all rights in the
assigned Patents and any applicable Invention Disclosures and any patents
applied for or issuing thereon to DOE in the event of the DOE requiring a
reversion of rights to it. IL agrees that it shall require all licensees and
transferees of said Patents and Inventions Disclosures to be similarly bound.
(iii) In the event that IL shall exploit any rights under the XO
International Patents, then IL shall be liable to NAL for a proportional share
(based on sales by IL as compared to the sales by NAL under the XO International
Patents) of any payments due to XO Industries, Inc. under that certain
Technology Purchase and Product Development Option Agreement dated December 3,
1987 as subsequently amended on December 7, 1989 or to OSCCO Ventures pursuant
to that certain Royalty Agreement dated December 3, 1987 (collectively, the "XO
Agreements") commencing with the date of first sale by IL. IL shall make any
such payments to NAL accompanied by reports as specified in said XO Agreements
at least 15 days prior to such date as payments are due to XO or OSSCO to
enable NAL to make timely payment and comply with its obligations under the XO
Agreements.
(8.5) In the event that, pursuant to the 1983 Agreements, Osram may
have provided a patentable invention to any of the IL Companies, IL shall not
apply for a patent on such Osram patentable invention.
ARTICLE IX
MISCELLANEOUS GENERAL PROVISIONS
--------------------------------
9.1 This Agreement between IL and NAL sets forth the entire
understanding and agreement between IL and NAL with respect to Intellectual
Property Allocation matters.
<PAGE> 27
27
9.2 Except as otherwise expressly provided herein, each
party shall bear its own expenses (including all fees, costs and expenses of
its attorneys, consultants, investment bankers, accountants, advisers, or other
agents or representatives), incident to or incurred in connection with the
preparation, negotiation, execution and delivery of this Agreement and the
performance of its obligations hereunder and thereunder, including all sales,
value-added, transfer fees or taxes, all recording fees and charges, fees for
notary and any other costs and expenses related to the performance of its
obligations with respect to the license or transfer of any Intellectual
Property.
9.3 This Agreement, all amendments hereof and waivers and
consents hereunder and the legal relations between the parties shall, to the
extent the particular matter is subject to state law, be governed by and
interpreted and construed in accordance with the laws of the State of New York
applicable to contracts made and performed in such State and without regard to
conflicts of law doctrines (such choice of law being made pursuant to Section
5-1401 of the General Obligation Law of the State of New York). United States
Federal law shall govern any particular subject matter controlled thereby.
9.4 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
arbitration of the International Chamber of Commerce by an arbitrator appointed
in accordance with the rules who shall be entitled to award preliminary and
final injunctive relief, specific performance and 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.
9.5 The descriptive headings of the Articles, Sections and
subsections of this Agreement are for convenience only and do not constitute a
part of this Agreement. The words "include", "includes" and "including" shall
be deemed to be followed by "without limitation" whether or not they are
followed by such word or words of like import. Except when language of another
document or agreement is specifically incorporated by reference, the language
of another document or agreement shall not be used to interpret the language of
this Agreement, which shall stand alone.
9.6 This Agreement and any amendment hereto or any other
agreement (or document) delivered pursuant hereto may be executed in one or
more counterparts and by different parties
<PAGE> 28
28
in separate counterparts, each of which shall be considered an original. All of
such counterparts shall constitute one and the same agreement (or other
document) and shall become effective (unless otherwise provided therein) when
one or more counterparts have been signed by each party and delivered to the
other party.
9.7 This Agreement shall be binding on the Subsidiaries of
the parties. Each party agrees to cause Affiliates to comply with any
obligations hereunder relating to such Affiliates. Any transfer of Intellectual
Property allocated hereunder shall be subject to the obligations of the parties
to each other hereunder.
9.8 Except where expressly provided otherwise as, for
example, by limiting a right of termination, all rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available under applicable Law. No failure on the part of
any party to exercise or delay in exercising any right hereunder shall be
deemed a waiver thereof, nor shall any single or partial exercise preclude any
further or other exercise of such or any other right.
9.9 If any provision of this Agreement is finally determined
to be invalid, illegal, or unenforceable by any court or other Governmental
entity in any jurisdiction or to any extent, (1) such provision shall only be
ineffective as to such jurisdiction and only to the extent of such invalidity,
illegality or unenforceability and (2) the remaining provisions of this
Agreement to the extent permitted by applicable Law shall remain in full force
and effect. In the event of any such determination, the parties agree to
negotiate in good faith to modify this Agreement to fulfill as closely as
possible the original intents and purposes hereof. To the extent permitted by
law, the parties hereby to the same extent waive any provision of law that
renders any provision hereof prohibited or unenforceable in any respect.
9.10 This Agreement may be amended only by agreement in
writing of all parties. No waiver of any provision nor consent to any except to
the terms of this Agreement or any agreement contemplated hereby shall be
effective unless in writing and signed by the party to be bound and then only
with respect to the specific purposes, extent and instance so provided.
9.11 Each Schedule attached or delivered pursuant to the
terms of this instrument (except for Schedules L to O) shall
<PAGE> 29
29
constitute a part of this Agreement; provided, however that in the event of any
conflict between such Schedule or Exhibit and this instrument, this instrument
shall control.
9.12 Any notice or other communication hereunder must be given in
writing and (a) delivered in person, (b) transmitted by telex, telefax, or
telecommunications mechanism, provided that any notice so given is also mailed
as provided in clause (c), (c) mailed by certified or registered air mail
(postage prepaid), return receipt requested, or (d) sent by Express Mail,
Federal Express or other express delivery service to the parties and at the
addresses specified herein or to such other address or to such other person as
either party shall have last designated by such notice to the other party.
Each such notice or other communication shall be effective (i) if given by
telecommunication, when transmitted to the applicable number so specified
herein and an appropriate answer back or other confirmation of receipt is
received (ii) if given by mail, seven days after such communication is deposited
in the mails with first class postage prepaid, addressed as aforesaid, or (iii)
if given by any other means, when actually received at such address. Any
notice or other communication hereunder shall be delivered as follows:
If to NAL or OSRAM addressed to:
c/o Siemens Corporation
1301 Avenue of the Americas
New York, New York 10019
Attention: Vice President and General Counsel
Telecopier No. (212) 258-4490
With a copy to:
OSRAM GmbH
Hellabrunner StraBe 1
D-8000 Munich 90
Federal Republic of Germany
Attention: Geschaftsfuhrer
(with a copy to the General Counsel)
Telecopier No. 011-49-89-6213-2019
If to IL, addressed to:
EDIL International Lighting B.V.
Appollolaan 171
1077 AS, Amsterdam
P.O. Box 7301
Amsterdam 10007 JH
The Netherlands
Attention: Mr. C. Barbas
Telex: 15469
Telecopier No. 31 20 676 9326
<PAGE> 30
30
With a copy to:
Citicorp Venture Capital Limited
Citibank House
7th Floor
335 Strand, London WC2R ILS
England
Telecopier No. 071-438-1419
9.13 This Agreement may be assigned and transferred by IL together
with and as a part of the sale or transfer of all of IL's right, title, and
interest in the whole or any part of IL's business; any assignee or transferee
shall be bound by all of the terms and conditions hereof; as a part of such
transactions, IL may retain rights under this Agreement in connection with
those businesses not transferred or sold to its assignee or transferee. IL may
as an alternative to the foregoing provisions of this Section, request that
Osram and NAL enter into with such transferee/assignee of IL a new agreement
upon similar terms and conditions to those set forth in this Agreement, as may
be applicable, and Osram and NAL will enter into such a new agreement.
9.14 Each party shall do and execute or procure to be done and
executed all necessary acts, deeds, documents and things to give effect to this
Agreement.
9.15 If either party is prevented, hindered or delayed from or in
performing any of its obligations under this Agreement (other than an
obligation to make payment) by a Force Majeure Event then:
(a) that party's obligations under this Agreement shall be
suspended for so long as the Force Majeure Event continues and
to the extent that party is so prevented, hindered or delayed;
(b) as soon as reasonably possible after commencement of the Force
Majeure Event that party shall notify the other party in writing
of the occurrence of the Force Majeure Event the date of
commencement of the Force Majeure Event and the effects of the
Force Majeure Event on its ability to perform its obligations
under this Agreement.
(c) that party shall use its best efforts to mitigate the effects
of the Force Majeure Event upon the performance of its
obligations under this Agreement; and
<PAGE> 31
31
(d) as soon as reasonably possible after the cessation of the Force
Majeure Event that party shall notify the other party in writing
of the cessation of the Force Majeure Event and shall as soon as
practicable resume performance of its obligations under this
Agreement.
(e) For the purposes of this Paragraph 9.15, "Force Majeure Event"
means any event beyond the reasonable control of a party (and
which is unavoidable notwithstanding the reasonable care of that
party) including, without limitation, acts of God, war, riot,
civil commotion, malicious damage, compliance with any law or
governmental order, rule or regulation.
9.16 To the extent that full Schedules shall not be appended to this
Agreement as of the signing, the parties shall prepare and attach Schedules as
soon as possible thereafter, but in any event no later than ten (10) working
days thereafter.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the Effective Date.
Signed by /s/
-----------------------------
Name:
-----------------------------
for and on behalf of OSRAM GmbH
in the presence of: /s/
-------------------
Name:
-----------------------------
Signed by /s/
-----------------------------
Name:
-----------------------------
for and on behalf of EDIL INTERNATIONAL
LIGHTING B.V. in the presence of:
/s/
-----------------------------
Name:
-----------------------------
Signed by /s/
-----------------------------
Name:
-----------------------------
for and on behalf of
OSRAM ACQUISITION CORPORATION
in the presence of:
/s/
-----------------------------
Name:
-----------------------------
<PAGE> 32
ALLOCATION INSTRUCTIONS
These instructions are given as of January 29, 1993 in connection
with the allocation of intellectual property contemplated by (i) the NAL
Intellectual Property Agreement dated as of August 6, 1992 (as amended, the
"NAL Intellectual Property Agreement") among GTE Corporation ("GTE"), GTE
Products of Connecticut Corporation, Siemens Corporation ("Siemens") and OSRAM
Acquisition Corporation and (ii) the Amended and Restated IL Intellectual
Property Agreement dated as of August 6, 1992 (the "IL Intellectual Property
Agreement") among GTE, GTE International Incorporated and EDIL International
Lighting B.V. ("EDIL"). Capitalized terms used herein without definition shall
have the meanings set forth in the NAL Intellectual Property Agreement and the
IL Intellectual Property Agreement.
Siemens and EDIL hereby instruct GTE and its Affiliates to execute
the assignments provided to GTE and its Affiliates immediately prior to the
Initial Closing. These instruction supersede any prior instructions to the
extent they are inconsistent with or contrary to these instructions. The
Intellectual Property Allocation shall be completed immediately after the
Initial Closing under the IL Stock Purchase Agreement, but prior to the Closing
under the NAL Stock Purchase Agreement.
Siemens and EDIL, each on behalf of itself and its Affiliates, hereby
agree and acknowledge that, upon execution of the assignments provided to GTE
and its Affiliates GTE and its Affiliates shall have complied in all respects
with the instructions provided herein and that the instructions provided herein
are the only instructions given by such entities to GTE and its Affiliates in
connection with the Intellectual Property Allocation.
SIEMENS CORPORATION
By: /s/ Gregory S. Bentley
-------------------------------
Its: Attorney-in-fact
EDIL INTERNATIONAL LIGHTING B.V.
By: /s/
-------------------------------
Its: Authorized Signatory
<PAGE> 33
CONFORMED COPY
DATED 23 December 1994
- --------------------------------------------------------------------------------
(1) SYLVANIA LIGHTING INTERNATIONAL B.V.
(2) OSRAM SYLVANIA INC
- and -
(3) OSRAM GmbH
--------------------------------------------
VARIATION AGREEMENT
--------------------------------------------
- --------------------------------------------------------------------------------
Dibb Lupton Broomhead
125 London Wall
LONDON
EC2Y 5AE
Tel: 0171 600 0202
Fax: 0171 600 5680
<PAGE> 34
THIS VARIATION AGREEMENT made and entered into on the 23 day of December 1994
by and between:
(1) SYLVANIA LIGHTING INTERNATIONAL B.V. (formerly EDIL International Lighting
B.V.) a private limited liability company (beslotenvennootschap met
beperkte aansprakelijkheid) incorporated under the laws of the Netherlands
and whose registered offices are at Oudweg 155, 2031 CC Haarlem, The
Netherlands (the "Company");
(2) OSRAM SYLVANIA INC. (formerly Osram Acquisition Corporation) a corporation
organised and existing under the laws of the State of Delaware, with an
office at 100 Endicott Street, Danvers, Massachusetts 01923, USA; and
(3) OSRAM GmbH a company organised under the laws of Germany with a principal
place of business at Hellabrunner Strasse 1, D-8000, Munchen 90, Germany.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. The parties to this Variation Agreement hereby agree to amend Clause 7.1 of
Article VII of the Amended and Restated Intellectual Property Allocation
and Licence Agreement dated 6th August 1992 as indicated below by adding
the underlined wording in italics:
"7.1 NAL agrees that effective as of the closing, IL shall have a
non-exclusive licence under the "SYLVANIA" trade mark, to have Lamp
and Lighting Products manufactured in the USA, Puerto Rico, Canada
and Mexico and marked with the "SYLVANIA" trade mark, all such lamps
to be for distribution, and use outside of the USA, Puerto Rico,
Canada and Mexico".
2. This Agreement is governed by, and shall be interpreted and construed in
accordance with the laws of the State of New York applicable to contracts
made and performed in such State and without regard to conflicts of law
doctrines. United States Federal law shall govern any particular subject
matter controlled thereby.
3. 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 arbitration of
the International Chamber of Commerce by an arbitrator appointed in
accordance with the rules who shall be entitled to award preliminary and
final injunctive relief, specific performance and damages. Any arbitration
shall take place in Paris, France and shall be conducted in the English
language. Judgement upon the award rendered may be entered in any court
having jurisdiction thereof.
2
<PAGE> 35
Executed as a deed under seal by )
SYLVANIA LIGHTING INTERNATIONAL B.V. )
acting by )
in the presence of: )
Signature of Witness: /s/ H. Branol
Name of Witness: H. Branol-Secretary
Address: SLI-20-rte cle Pre-Bois
CH-1215 Geneva 15
Occupation: Secretary
Executed as a deed under seal by )
OSRAM SYLVANIA INC. )
acting by )
in the presence of: )
Signature of Witness: /s/ Judith Callahan
Name of Witness: Judith Callahan
Address: _____________ Street
Danvers, MA 01923
Occupation: Secretary
Executed as a deed under seal by )
OSRAM GmbH )
acting by )
in the presence of: )
Signature of Witness: /s/
Name of Witness:
Address: Munich, Hellabrunner
Occupation: General Counsel
3
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
State or Jurisdiction Type of Percent
Subsidiary or Partnership of Incorporation Interest* Owned Owned by
------------------------- ---------------- --------- ----- --------
<S> <C> <C> <C> <C>
Chicago Miniature Lamp (Canada) Inc. Ontario C 100% CML
IDI Internacional S.A. Costa Rica C 100% CML
Badalex Limited England C 100% CML
Chicago Miniature Lamp
Europe Limited England C 100% Badalex
CML Fiberoptics, Inc. Massachusetts C 100% CML
Alba Speziallampen Holding
GmbH ("Alba Holding") Germany LLC 100% CML
Power Lighting Products, Inc. Delaware C 100% CML
Gustav Bruckner GmbH Germany C 100% CML
Chicago Miniature Lamp
Sylvania Lighting International Inc.
("CML/SLI") Delaware C 100% CML
Sylvania Lighting International, B.V. Netherlands C 100% CML/SLI
Schott-CML Fiberoptics, Inc. Delaware LLC 51% CML
</TABLE>
* C=Corporation, LLC=Limited Liability Company, LP=Limited Partnership
Interest, GP=General Partnership Interest
<PAGE> 1
Exhibit 23.1(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Condensed Consolidated Financial Data" to the use of our report dated
January 9, 1998, except for the 1998 stock split as described in Note 2, as to
which the date is February 11, 1998 with respect to the consolidated financial
statements and schedule of 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 the Registration
Statement (Form S-1) and related Prospectus of Chicago Miniature Lamp, Inc. for
the registration of 12,506,250 shares of its common stock.
/s/ Ernst & Young LLP
Chicago, Illinois
April 1, 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 the
Registration Statement (Form S-1) and related Prospectus of Chicago Miniature
Lamp, Inc. for the registration of 12,506,250 shares of its common stock.
/s/ Hards Pearson
Chartered Accountants
Barrie, Ontario, Canada.
April 1, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-02-1996
<PERIOD-END> NOV-30-1997
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<SECURITIES> 0
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<ALLOWANCES> (7,889)
<INVENTORY> 124,086
<CURRENT-ASSETS> 350,002
<PP&E> 281,680
<DEPRECIATION> (12,030)
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<CURRENT-LIABILITIES> 232,396
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0
0
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<CGS> 231,933
<TOTAL-COSTS> 302,597
<OTHER-EXPENSES> (2,326)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,156
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<NET-INCOME> 20,941
<EPS-PRIMARY> .73
<EPS-DILUTED> .73
</TABLE>
